Thursday, March 8, 2012

The biggest change on the margin



These two charts represent what is arguably the biggest thing that is changing in the U.S. economy these days. Not only is the price of natural gas declining significantly, but it is getting cheaper relative to crude oil by leaps and bounds. And it's all thanks to new drilling technology (fracking) that has resulted in huge new natural gas discoveries and production in the U.S. It's probably impossible to imagine all the ramifications of this for the U.S. economy, but they are surely going to be very significant. When a relatively clean source of energy becomes suddenly abundant and extremely cheap, it is bound to be disruptive in more ways than one can imagine, and it is bound to result in a stronger economy in ways that we have yet to imagine. If there is any reason to be optimistic about the future of the U.S. economy, this is arguably the best.

5 comments:

Steve K said...

It's a shame that the infrastructure in the United States for the distribution of Nat Gas is so deficient. Obama's $trillion stimulus, and we have nothing to show for it. I understand we could be a net exporter for nat gas.

I read an Italian gas exploration company has found a huge reserve of nat gas of the coast of Mozambique. Mozambique is building a port to allow for the loading of nat gas tankers.

The United States energy policy is shameful.

Cabodog said...

Why is my car still burning gasoline? CNG, CNG, CNG...

Glad to see GM introducing a dual-fuel pickup truck. Hoping we see more of this.

Jake said...

Steve K- I agree with some of your sentiment, but let's think about exporting our newfound energy for another day. If we can utilize a cheap source of energy, let's let the US utilize it first and ween our dependence off of the middle east first.

Dr William J McKibbin said...

No doubt, the emergence of natural gas as an abundant energy resource in the US is perhaps the best news for the US economy in recent years...

Public Library said...

The oil, automobile, and rubber industtries destroyed the electric car/rail industry in the early 1900's.

Don't hold your breath...