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This 'Revolution' Should Be Televised This 'Revolution' Should Be Televised

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This 'Revolution' Should Be Televised

The economics of the shale revolution are affecting entire swaths of the economy in the form of more jobs, higher wages and increased productivity everywhere from advanced manufacturing plants to Mel's All-Nite Diner.

Gil Scott-Heron's iconic '70s anti-anthem "The Revolution Will Not Be Televised" is a scathing critique on the disengaging, drive-by nature of broadcast news that often misses the deeper story.

Now 40 years later, Scott-Heron's words still ring true as coverage of a faltering U.S. recovery has largely underplayed the so-called "shale revolution." Headline news rarely reports on the economic revolution surging through entire swaths of the U.S. economy in the form of more jobs, higher wages and increased productivity everywhere from advanced manufacturing plants to Mel's All-Nite Diner.

 

The boom in oil and natural gas production is so great that the U.S. Energy Information Administration (EIA) estimates that the nation will be the world's top producer of oil and natural gas in 2013, bypassing Russia and Saudi Arabia.

And The Jobs Keep Coming

It's been analyzed, theorized, even demonized in some environmental quarters, but without a doubt the shale revolution is a bona fide economic success story, certified by the unflinching authority of numbers over time.

 

While the total private sector job market grew about 1 percent, or 1 million jobs, from 2007 through the end of 2012, oil and gas industry employment jumped 40 percent by adding 162,000 jobs, according to figures recently released by the EIA.

In total, the shale revolution is really an economic revolution that's creating jobs, driving innovation and bringing manufacturing back to the U.S., says Daniel Yergin, vice chairman of the global research firm IHS. "Altogether it's having a very major impact on the U.S. energy picture and indeed on the U.S. economy," Yergin says.

The Department of Labor tracks oil and gas sector employment in three categories: drilling, extraction and support. The job growth since 2007, according to EIA figures, has been staggering:

  • Drilling comprised more than 90,000 jobs by end of 2012, up 7.3 percent, or 6,600 jobs.
  • Extraction, which includes exploration and all production work up to the point of shipment, increased to 193,000 jobs by the end of 2012, up 27.4 percent, or 53,000 jobs.
  • Support, the largest sector in the oil and gas industry, which includes activities for exploration, excavation and well construction, jumped to 286,000 jobs, up 35.6 percent, or 102,000 jobs.

Meanwhile, a study from IHS Global Insight that traced all jobs associated with the shale revolution—not just those directly related to drilling or exploration—says today the industry supports some 1.7 million jobs. And most of those jobs have been created in the face of the worst economic downturn since the Great Depression. The study says more than 3 million jobs could be traced to the oil and gas industry by 2020.

Everyone Wins

The positive impact is even extending to states where no exploration or extraction is taking place.

"It is notable that, owing to the long supply chains, the job impacts are being felt across the U.S., including in states with no shale gas or tight oil activity," Yergin told the House Energy and Commerce Subcommittee on Energy and Power earlier this year. "For instance, New York State, with a ban presently in effect on shale gas development, nevertheless has benefitted with 44,000 jobs. Illinois, debating how to go forward, already registers 39,000 jobs."

If there is a best case history for the shale revolution at the state level, it is North Dakota. Owing to the prosperous development of the Bakken shale play, the state's real GDP per capita rose nearly 11 percent in 2012 compared to 2011, more than three times that of Texas, the second biggest gainer, according to figures released in June by the Bureau of Economic Analysis. Meanwhile, the national growth rate during that time was less than 2 percent.

North Dakota's rise to the top is remarkable—the state ranked 38th in GDP per capita in 2001. After a steady climb beginning in 2004, in 2008 the state surpassed the national average for real GDP per capita. By 2012, its real GDP per capita was $55,250, more than 29 percent above the national average, according to the EIA.

The state now has a billion-dollar budget surplus thanks to the increased tax base.

The poster child for this North Dakota windfall is the boomtown of Williston, which sits atop the largest shale oil and gas reserve in the country. Unemployment is less than 1 percent. And because the town is flooded with industry workers, there aren't enough beds to hold them all.

"We can't get enough employees here," says Tom Rolfstad, Williston's executive director for economic development. At any one time, there are 2,000 to 2,500 job openings in the town. "We can't build enough housing here. We've grown to the point where it's not a matter of just getting jobs for the oil fields but we need to provide for all the spin-off jobs that go with that," he said. "So that includes things like more doctors and dentists, chiropractors and teachers, policemen and the whole thing," Rolfstad said. "Basically our town has doubled in size and it's looking like it's going to double again."

And it could double again and again. If the experts are right, there are enough oil and gas reserves in the U.S. to keep the industry profitable for the next 100 years, meaning the shale revolution's ripple effects will continue, televised or not, to be felt across the U.S. economy for generations to come.