What If Hydraulic Fracturing was Banned?

November 4, 2016

A report from The Institute for 21st Century Energy (11/04/2016)

Since 2012, the United States has been the world’s largest producer of oil and natural gas, a result of technological breakthroughs that allowed American innovators to develop hydrocarbons from shale and other tight rock formations underground.

These breakthroughs, including the combination of hydraulic fracturing with horizontal drilling, have also reduced energy costs for American families, resulting in lower prices at the pump and lower home heating bills, among other savings. This renaissance in domestic energy production has also been a crucial source of jobs for American workers. U.S. oil and gas employment surged almost 40 percent since the Great Depression while other U.S. non-farm employment only has grown about 3 percent.

This progress is under attack, however, as public figures, environmental activists, and politicians have called for bans or restrictions on hydraulic fracturing. In fact, the campaign against fracking has already achieved wins in various cities and counties, as well as the states of Vermont and New York. Many people recognize that local fracking bans would reduce local oil and natural gas production, but how much would a national ban harm the entire economy?

This report seeks to answer that question, exploring how a theoretical fracking ban in the United States – beginning on January 1, 2017 and running through the end of 2022 – would impact jobs, energy prices, incomes, domestic manufacturing, and American energy security.

WHAT IF FRACKING WAS BANNED IN THE U.S., STARTING NEXT YEAR?

A fracking ban would be a disaster for the U.S. economy, exceeding the economic harm caused by the financial crisis, the housing bust, and the Great Recession – combined.

Those concurrent events cost the United States around 8 million jobs. A ban on fracturing would destroy more than 14 million jobs, all while raising costs for families and considerably reducing American energy security.

Here are a few of the key impacts:

• THE UNITED STATES WOULD LOSE 14.8 MILLION JOBS.  If hydraulic fracturing was banned starting next year, 3.9 million jobs would evaporate in 2017 alone, rising from there to claim 14.8 million jobs by 2022.
• GASOLINE PRICES WOULD ALMOST DOUBLE. We find that consumers would have to pay 53 percent more for petroleum products such as gasoline and diesel in 2017, with prices continuing to rise through 2022, when they would be roughly double what they are today.
• NATURAL GAS PRICES WOULD SKYROCKET  TO OVER $12 PER MMBTU.  Natural gas prices would surge owing to vast swaths of shale suddenly being rendered off limits. This drives prices up for U.S. consumers, industry, and power generators – our analysis
  finds that natural gas prices would be 400 percent higher than what they would be otherwise by 2022.
• U.S. ELECTRICITY PRICES WOULD NEARLY DOUBLE.  Our modeling shows that U.S. households would pay almost 100 percent more for their electricity in 2022, driven in large part by rising natural gas prices.
• COST-OF-LIVING WOULD GO UP BY NEARLY $4,000 A YEAR, WHILE HOUSEHOLD INCOMES WOULD DROP BY $873 BILLION.  Consumers would be forced to pay higher prices both for the energy they consume and the products and services they buy. Our analysis indicates that the average out-of-pocket, cost-of-living increase for U.S. families would approach $4,000 by 2022.
• THE U.S. WOULD SURRENDER ITS STATUS AS A GLOBAL ENERGY SUPERPOWER. The U.S. would be at the mercy of major international suppliers of oil and natural gas, including Russia and members of OPEC. Global price impacts from reduced supplies would benefit countries like Venezuela, at the expense of the U.S. 
• U.S. GDP WOULD BE REDUCED BY $1.6 TRILLION.  In 2017, GDP declines by $442 billion relative to the base case (a 2.5 percent decline from 2015 figures). This decline in GDP gradually escalates to $1.6 trillion in “missing” GDP by 2022.
• OHIO, PENNSYLVANIA, COLORADO, AND TEXAS WOULD BE AMONG THE HARDEST HIT BY A BAN.  In this report, we take a closer look at Ohio, Pennsylvania, Colorado, and Texas – four states with a large energy economy and significant manufacturing sectors. Under a fracking ban, Ohio loses 397,000 jobs; Pennsylvania loses 466,000 jobs; Colorado loses 215,000 jobs; and Texas loses 1.49 million jobs. The cost-of-living for the average family rises $3,500 per year in Colorado and Pennsylvania, $4,000 per year in Ohio, and over $4,600 per year in Texas.

See more at The Institute for 21st Century Energy or go directly to the report (58 page PDF).