Natural Gas: Putting the Pedal to the Metal

09 18, 2012 by Businessweek

The coming U.S. energy boom, spearheaded by new technologies that have enabled us to recover vast amounts of previously inaccessible oil and natural gas from rock formations, will be important for several reasons, not least the nation’s competitive advantage in the global economy.

The United States has both huge deposits of natural gas and a huge head start on virtually everyone else in developing novel technologies that permit its recovery. Some countries may be able to catch up technologically, but that will likely take a decade. Others, such as Japan—where activists have blamed the Fukushima nuclear disaster on “fracking”—may never take advantage of the new technologies.

Our gain. Their loss.

Assuming the critics are wrong and that these untapped resources can be recovered with minimal environmental damage, this could be a game changer with a multiplier effect as America’s natural gas advantage enables U.S. utilities to convert abundant, low-cost gas into lower-cost electricity to power our factories.

Natural gas also has uses as an ingredient in producing fabrics, fertilizers, and plastics, among other things. Scientists at Honeywell (HON), for example, reportedly have developed a one-step process that turns natural gas into a plastics raw material.

Together, cheaper energy and lower-cost raw materials add up to lower-cost manufactured goods, ranging from agricultural chemicals to carpets and toys, which we can sell both domestically and overseas, creating U.S. jobs.

Currently, most domestic natural gas production, according to 2011 U.S. Energy Information Administration data, comes from traditional energy producing areas: Texas (29%), Louisiana (13%), Wyoming (9%), the Gulf of Mexico (8%), and Oklahoma (8%). As fracking gains wider acceptance, other states will be able to join in the bounty, including Kentucky, New York, Ohio, Pennsylvania, Tennessee, and West Virginia.

Already, U.S. inventories of natural gas in storage are at all-time highs, reaching a record 3,852 billion cubic feet during the week ending Nov. 18, 2011.

At the cutting edge of the energy boom is North Dakota, which has produced more jobs than people to fill them—and more workers than places for them to live.

As the late natural resources economist Julian Simon pointed out three decades ago in response to doom-and-gloom predictions of life-threatening resource shortages, the key to society’s advancement and well-being has always been technological progress.

Just as many Americans had given up on the idea of energy independence, along comes this game-changer—a new technology that not only should allow us to become self-sufficient in meeting our energy needs, but will enable us to become a net energy exporter. Best of all, the cheap energy will give us a competitive advantage for the foreseeable future.