Frei: The answer to this question would likely be hotly contested in an open forum; however, I believe that it could have an overall positive impact on the U.S. economy. The main question is, how much of an impact could it have?
The oil and gas industry accounts for about 1 percent of the United States’ $15 trillion GDP so it can be argued that even the massive growth forecasts of oil and natural gas production may not swing the economic recovery/growth needle in a major way. Furthermore, the manufacturing industry employs approximately 9 percent of the domestic non-farm labor shed; thus the potential job-creation impact of cheaper energy may also not be enough to make up the job losses that have resulted due to years of offshoring and economic recessions.
I do believe, however, that growth in the oil and gas industry can become the catalyst to jump-start the economy and lead to new opportunities or re-births across all categories of industry. For example, it could lead to new foreign direct investment (FDI). The United States has generally been considered to be the most stable country in the world for FDI and becoming less dependent on foreign oil should certainly reinforce this consensus.
What specific new business opportunities are being created by the oil and gas boom?
Frei: Due to the oil and gas industry’s complex supply chain, the opportunities are significant. A direct opportunity has been the influx of oil- and gas-related business into communities that had never been a part of that industry in the past. These communities are struggling to provide the necessary housing and other support-related services; for example, some communities have had to add real estate for housing, and retail businesses have had to hire more staff to serve the new customer base. Some entry-level wages in the oil- and gas-related industry can reach up to $65,000 per year, even for workers that do not have an advanced degree.
Other select opportunities are impacting the transportation industry, heavy manufacturing, and engineering among many others. The transportation industry opportunities can be attributed to the fact that the infrastructure to collect the unconventional oil and gas over a wide region across the country is providing new opportunities for rail lines, trucking, pipelines, and barges. Cheaper energy primarily due to natural gas is helping justify investments in existing and new heavy manufacturing industries. The steel and chemicals industries are thus prime candidates for growth as they are generally large energy consumers. And engineering occupations in every aspect of the energy supply chain stand to benefit, as every industry — whether directly or indirectly tied to the oil and gas industry — will look for ways to use technological advancements to gain an edge over its competitors.
What geographic areas of the United States stand to benefit the most from new energy industry endeavors?
Frei: The areas of the United States that are experiencing direct and immediate benefits are arguably the communities that are near the thousands of wells that have sprung up over the last few years — in particular, communities near the Bakken reserve in North Dakota and Montana as well as the Eagle Ford reserves in Texas; however, there are many other communities scattered across much of the central and eastern United States that are benefiting as well.
There are also indirect and long-term benefits of the oil and gas industry that could result in a comprehensive U.S. benefit because of the expansive supply chain that links the oil and gas industry.
What challenges are still ahead for the U.S. energy industry?
Frei: This is a tough question to answer. There seems to be a huge amount of discussion about this topic in the media; advocates portray the promise of energy independence as the solution to all of the United States’ problems, while critics portray it as the end of the United States as the world’s powerhouse.
Although it is difficult to predict specific challenges for the energy industry, I would start by grouping the challenges into what I think to be four important categories for discussion: (1) geopolitical, (2) economic, (3) regulatory, and (4) environmental.
I think most people would agree with the statement that U.S. foreign policy has historically been influenced by its dependency on foreign energy, specifically, oil. The United States has led the effort of promoting security in strategic regions of the world to ensure the world’s energy supply and infrastructure remained stable. Historically, as the world’s largest consumer of energy, the United States certainly needed to be in the lead. Now that the possibility of becoming less energy-dependent and ultimately independent is feasible, how will this affect U.S. foreign policy? Will the U.S. lose interest in the Middle East? Will the U.S. be inclined to take proactive military efforts into energy resource-rich countries if they begin to self-destruct in the future? Will the U.S. lose its leverage if it is no longer the biggest buyer of energy in the world? Will the U.S. continue to provide resources to police the world’s energy supply chain?
On the economic front, the shale oil and gas discoveries are not limited to the United States. Major unconventional oil and gas reserves have been discovered all over the world; in fact, I have read reports that state China has the greatest shale gas reserves in the world. The world’s shale oil and gas reserve discoveries should theoretically translate into cheaper energy prices worldwide; after all, oil and gas are world commodities. So will countries that depend primarily on oil production as part of their GDP be forced to make up for a lower price of oil by producing more volume? How will shale impact the price of West Texas Intermediate (WTI) or Brent crude, which have been the benchmarks for investors in oil equities for decades? Cheap energy means cheap energy to manufacturing behemoth China, so would China not gain even more from this than the United States?
Next, government regulation of any kind is generally intended to protect the greater good; however, regulation often evolves into unnecessary financial or other types of barriers that impact the growth or survival of an industry. Because of the thousands of shale wells that have been put into place in the last few years, the debate of whether to change existing regulation of the industry is certainly under observation at the federal and state levels.
Finally, the potential environmental impact of shale oil and gas fracking is something that is difficult to fully understand today. My research has shown that the consensus is that the benefits seem to outweigh the negatives; however, just like there have been numerous environmental disasters associated with extracting conventional oil and gas, there will certainly be issues with extracting shale (unconventional) oil and gas in the future.
Having said that, explain the term “green culture.”
Frei: I think defining “green culture” in a way that is accepted by most people is not an easy thing to do. I think the definition would be comparable to asking someone how religious they are, i.e., do they follow the religion verbatim, draw their own interpretation, or do they only follow the things that are convenient? I think following a green culture is similar in that you could think “living off the land” is the right thing to do or recycling your paper and plastic is good enough.
To me, green culture means being aware of the short and long-term impacts that one’s everyday personal and professional life has on the environment and then making reasonable efforts to minimize said impacts.