The Economic Impact of Fracking

Despite the controversy surrounding fracking, no one can deny its impact on the US economy.  The New Statesman pointed out that this new energy self-sufficiency had driven down energy costs and increased consumer spending as a result.  Vox also demonstrates that substantial numbers of jobs have been created in states where drilling for shale gas takes place, not only in the industry itself, but also in manufacturing which has seen an increase due to the availability of cheap fuel.  With the expansion of shale gas exploration here in the UK, the House of Lords commissioned a report to see if we would experience the same economic growth.

The report by the Economic Affairs Commission did highlight the benefits of producing more gas in the UK and being less reliant on imports from Europe.  Recent political unrest between Russia and the Ukraine underlined the dangers of dependence on Russian LNG (liquefied natural gas) as a fuel source.  Increased self-sufficiency would also be beneficial because of the way global gas prices are kept high due to the high demand from Asia so the price of imported gas is not likely to go down any time soon.  Therefore, British businesses would benefit hugely from a cheaper and more stable supply of fuel.

Cheaper fuel would also help boost energy intensive industries, such as ceramics manufacturers, glass makers, metal workers and the chemical industry, which already employ over 250,000 people.  Other jobs would also be created in the exploration and production of shale gas itself as well as within local suppliers and service providers.  The highest estimate of job creation is around 74,000 jobs with a more modest figure being between 16,000 and 32,000.  If the wide use of shale gas had the same economic stimulation here that it had in the US then it is conceivable that a great deal more jobs would be created.

However, the Economic Affairs Committee report states that fracking would not have the same impact on fuel prices as it had in the US due to the higher production costs here in the UK.  The New Statesman also suggests that it could not have the same impact here because we simply do not have the room to carry it out at a similar level to the US and our costs are greater because of the problems of fracking near to urban areas.  Even in the US, shale gas is a limited resource so the current boom will potentially be short lived if an alternative is not found.

Therefore, unfortunately for the British economy, it does not appear that fracking is the silver bullet that will solve all our problems.  Clearly, there are benefits to exploiting this energy source but another will need to be found to make Britain more self-sufficient and create the sort of economic boost we have seen in the US.