Global Accountability Series 2010
The recent growth in U.S. oil and natural gas production has been a boon to both our economy and the environment. From new jobs and higher tax revenues to lower energy costs and reduced greenhouse gas emissions, there is no question the shale energy renaissance has greatly improved America’s energy outlook.
Recently, however, some candidates for elected office have pledged to ban the very technology that has enabled this boom - hydraulic fracturing (HF), or fracking. This raises an important question: what would happen to American jobs and the economy if hydraulic fracturing was banned? In this report, the Global Energy Institute has undertaken the modeling and analysis to answer that question.
Simply put, a ban on fracking in the United States would be catastrophic for our economy.
Our analysis shows that if such a ban were imposed in 2021, by 2025 it would eliminate 19 million jobs and reduce U.S. Gross Domestic Product (GDP) by $7.1 trillion. Job losses in major energy producing states would be immediate and severe; in Texas alone, more than three million jobs would be lost. Tax revenue at the local, state, and federal levels would decline by nearly a combined $1.9 trillion, as the ban cuts off a critical source of funding for schools, first responders, infrastructure, and other critical public services.
Energy prices would also skyrocket under a fracking ban. Natural gas prices would leap by 324 percent, causing household energy bills to more than quadruple. By 2025, motorists would pay twice as much at the pump for gasoline as oil prices spike to $130 per barrel. The report also details the impacts that a ban would have on seven states, including five that are major energy producers - Colorado, New Mexico, Ohio, Pennsylvania, and Texas.
Not surprisingly, the results would devastate each of those energy states’ economies. But a fracking ban’s impacts would be felt well beyond energy producing regions, so the report also examines the impacts of a ban on the economies of Michigan and Wisconsin, which are large manufacturing states. There, too, the results are significant. For example, cost-of-living impacts to residential consumers in Wisconsin and
Michigan would grow by approximately $4,700 and $5,100 respectively between 2021 and 2025.
Under a fracking ban, less domestic energy production also means less energy security, as the United States once again returns to a heavy dependence on imported oil and natural gas. This would quickly reverse America’s rise as a major oil and natural gas exporter, an achievement that has reduced our trade deficit while helping our allies and trading partners enhance their energy security, reduce emissions, and ensure the energy they purchase is produced under one of the most stringent environmental regulatory regimes in the world.
Additionally, increased prices for natural gas would undermine the progress we have made in reducing greenhouse gas emissions. Since 2005, the increased use of natural gas has helped reduce U.S. carbon dioxide emissions by more than 2.8 billion metric tons1 roughly the equivalent of annual emissions from Australia, Brazil, Canada, France, Germany, and the United Kingdom combined.
In short, America’s energy revolution is delivering enormous rewards for jobs, the economy, and the environment. We must recognize these achievements and expand the benefits of U.S. shale to even more American families, while ensuring that progress achieved to date is not suddenly reversed by an ill-advised ban on hydraulic fracturing.
19 MILLION JOBS LOST
Starting in 2021, a ban would cost the economy 4 million jobs in 2021 alone, and 19 million jobs by 2025.
GASOLINE PRICES DOUBLE
Consumers would pay 37 percent more for petroleum products such as gasoline and diesel in 2021, with prices continuing to rise through 2025, when they would be roughly double what they are today. This is largely driven by skyrocketing oil prices that will exceed $130 per barrel in 2025.
NATURAL GAS PRICES INCREASE 324 PERCENT
The price for U.S. natural gas - currently the largest source of power generation in the country - would surge, increasing costs for American families, businesses, and power generators. Our analysis finds that natural gas prices would be $12.30 per million British thermal unit (MMBtu) in 2025, an increase of 324 percent over the baseline or the Business As Usual (BAU) scenario.
HOUSEHOLD POWER PRICES QUADRUPLE
U.S. households would pay over four times more for their electricity in 2025, driven in large part by rising natural gas prices.
HIGHER OVERALL COST OF LIVING
Through 2025, consumers would pay $5,661 more per capita in higher prices for energy and other goods and services. Over the same period, nationwide household incomes would fall by $3.7 trillion, leaving consumers to pay higher bills with less income.
NEARLY $1.9 TRILLION IN LOST TAX REVENUE
Local, state and Federal tax revenues would decline by nearly $1.9 trillion through 2025.
$7.1 TRILLION LOSS OF GDP
GDP would immediately decline by $523 billion in 2021 relative to a world where the shale revolution is allowed to continue. This decline in GDP escalates to $2.3 trillion in lost GDP in 2025 - a loss of 11 percent of our 2018 GDP ($20.5 trillion). Through 2025, GDP would decline by $7.1 trillion.
ENERGY AND MANUFACTURING DEVASTATED
In this report, we take a closer look at five states with large energy economies, including Ohio, Pennsylvania, Colorado, Texas, and New Mexico, and two other states with significant manufacturing sectors, Michigan and Wisconsin. Below is a snapshot that a ban on hydraulic fracturing would have on these states in 2025 due to higher prices for petroleum products, natural gas, and electricity.
INCREASED IMPORTS AND REDUCED ENERGY SECURITY
A ban on hydraulic fracturing would be a geopolitical setback for the United States, which would return to reliance on international suppliers of oil and natural gas, including Russia and members of OPEC, giving these countries greater clout in international energy markets. Higher global prices because of reduced U.S. production would benefit our economic and geopolitical competitors and cede valuable market share to countries like Venezuela, all at a time when demand for oil and natural gas is set to grow considerably around the world, according to the International Energy Agency (IEA).
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This analysis is supported by these studies: here and here.