In this political season, the proposal to ban fracking is fast becoming a de facto feature of the Democratic Party platform. But just as elections have consequences, so do policies. That's especially true when it comes to how we power entire economies. If implemented, a ban on a major share of US oil and gas production would wreak economic havoc.
Animating the idea of a ban is, of course, the claim that it would accelerate a transition to clean energy and reduce carbon dioxide emissions. But a US ban would just shift the source of oil and gas production to other nations, notably those within OPEC and Russia, eager to sell more. Meanwhile, millions of Americans who are employed directly and indirectly in the enormous shale oil and gas industry would be out of work. The dozen or so states that are major players in the fracking industry would be hardest hit, some of which happen to be key political states, such as Pennsylvania, Ohio and Colorado.
Ban advocates argue that the millions who lose their jobs could be retrained. As difficult and devastating as those job losses would be, a frack ban would in fact create far greater problems, both for the United States and the world.
Because the United States is now the world's largest producer and a major exporter of both petroleum and natural gas, a fracking ban would constitute the biggest energy disruption in 40 years and trigger a global recession. This isn't speculation. It has happened before.
When OPEC imposed its 1973 oil embargo, world oil prices shot up 400% overnight, triggering a global recession. A similar loss of world oil supply occurred with the 1979 Iranian revolution, which caused a 200% global price spike and another recession. So much energy is now produced from the US shale industry that a fracking ban today would cause an even bigger supply loss to markets than either of those earlier disruptions. Even the expectation of such a ban would destabilize markets.
There is no way renewables could offset that quantity of energy lost to the world, at any price, regardless of bans or subsidies. Recent history shows why that's true. Consider that, over the past decade, America's energy supply from increased shale production rose by some 1,000% — more than the growth of energy supplied by solar and wind combined.
The energy transition to solar and wind is happening in slow motion. It's true that wind and solar have become far less expensive, but those sources together still provide less than 3% of global energy even after two decades of massive subsidies. And in the four years since the Paris Accord, global petroleum use is up over 4 million barrels per day. Natural gas use has seen even greater growth in energy-equivalent amounts.
As for the future, the share of global energy supplied by oil and gas is indeed declining, but very slowly. The Energy Information Agency forecasts that the 54% contribution from oil and gas today will drop to 50% by 2040. That's not much of a decline.
The International Energy Agency also forecasts that the United States is expected to produce over half of the additional oil and natural gas needed by global markets over the next five years. Wind and solar production are expected to grow rapidly too — absent a fracking ban — but the growth in US shale output will add far more energy supply to the world than both wind and solar combined.
Finally, consider the "hidden" trade impact of accelerating solar, wind and battery deployment. Most of those products are manufactured elsewhere, primarily in Asia. While policymakers on both sides of the aisle seek to increase American renewable technology manufacturing, it will take decades before the United States can ramp up significant domestic production. And that won't change the fact that the fabrication of wind/solar/battery hardware requires huge quantities of minerals, virtually all of which are imported from around the world. Until America embraces more mining for minerals like lithium, cobalt, nickel and rare earths, accelerating renewables means replacing hydrocarbon exports with more mineral imports.
On all counts, a fracking ban sounds like a bad deal.
This piece originally appeared in CNN Business
Mark P. Mills is a senior fellow at the Manhattan Institute, a faculty fellow at Northwestern University’s McCormick School of Engineering, and author of the new book, Digital Cathedrals. This piece is based on his latest Issues 2020 issue brief, A Fracking Ban Would Trigger Global Recession. Follow him on Twitter here.
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