A boom is U.S. oil and natural gas production is supposed to lead to lower energy costs and help prompt an economic recovery.
The trouble is that the energy boom — or at least its benefits — might be largely a mirage, writes Steve Yetiv, an author and professor of political science at Old Dominion University, in an op-ed for The New York Times.
Yetiv outlines several reasons why energy boom's benefits will be limited.
Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.
For one thing, oil is sold on global markets. American oil will be sold mainly to foreigners, not Americans, so additional production won't translate into cheaper prices at the gas pump.
That also means that supply disruptions anywhere in the world could impact oil prices at home.
In addition, the Organization of the Petroleum Exporting Countries will probably agree to cut production to keep prices higher.
Plus, the oil boom probably won't stop speculation. In the last few years, speculators pumped tens of billions of dollars into oil futures contracts to make a quick buck, not to obtain oil. Speculators will continue to buy oil futures when they think oil prices will rise, and more American oil on the market might or might not slow them down.
Moreover, a backlash is growing against hydraulic fracturing, or fracking, which is partially responsible for the oil and natural gas boom, as its environmental dangers are publicized.
Sure, the United States is now producing1.6 million more barrels of oil a day than it did in 2008, and its net petroleum imports have dropped, Yetiv concedes.
"But let’s not exaggerate what the energy boom can do for the United States and American consumers," he writes in The Times. "At its current pace, the oil boom probably won't significantly lower prices — though it may temper their rise at times."
Others disagree with Yetiv. Roger Altman, founder of Evercore Partners and a former deputy Treasury secretary, believes the energy boom will help prompt as strong recovery.
Within five years, just the additional oil production could add over 1 percentage point to annual gross domestic product growth and up to 3 million jobs, he predicts in an opinion piece for the Financial Times. Further, falling natural gas prices will reduce the average utility bill by almost $1,000 year and reinvigorate some manufacturing sectors and the petrochemical industry.
Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.
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