How Domestic Energy Production in the US will Stimulate Economic Growth

The Q2:2012 economic reports are in and-to use a technical term-the results suck!  GDP growth has slowed to 1.5%, unemployment rates remain stubbornly high at 8.2% over average nationwide but the damage to youth, black and Hispanic and those with less than college educations are horrible.  Clearly we need an economic shot in the arm.

How could there possibly be any good news on the horizon?

The good news is the big shift in energy is a complete reversal of fortunes for North America and the US economy in particular. Less than a decade ago, the conventional wisdom was America was running out of energy with ski slope-like depletion rates from conventional  oil and gas sources and the prospect of building a fleet of LNG terminals to import high priced natural gas from the same volatile and often unfriendly places that provide our imported oil.

But a funny thing happened on our way to the economic poor house and a world in climate crisis.  The inconvenient truth is a combination of disruptive innovation technology in the form of horizontal drilling and hydraulic fracturing, the ingenuity and persistence of wildcatters like Mitchell Energy and others who put it to work, and that innate ability of America to reinvent itself just when we need it most has resulted in a complete reversal of both our energy and our economic fortunes.

The inconvenient truth is low priced natural gas is doing more to clean our environment by reducing coal emissions than the sum of all the intrusive EPA regulations.  Natural gas produces an immediate 40% savings in emissions compared to coal.  There is no technical risk, no Solyndra-like deals required, no new Federal subsidies.  It's faster, cleaner and a lot cheaper than US EPA.

It's the economy stupid--and we decided not to give up on the American dream!

The growth of domestic energy production from new technology and America's renewed resolve is changing everything.  The election is still all about the economy and whether the country is going in the right or wrong direction.  But the growth potential for domestic energy production changes everything.

America's recoverable energy resources could produce as much as $7 trillion of economic value rippling through our struggling economy according to a recent study by the Manhattan Institute.  That economic shot in the arm could generate perhaps $2 trillion in revenue for federal, state and local governments over the next 20 years. Domestic energy growth in places like North Dakota, Pennsylvania, Texas and elsewhere are showing results today producing jobs and unlocking hoarded cash sitting on the sidelines waiting for a better political, regulator and economic climate for investment.

Another inconvenient truth is that Americans broadly support a clean, healthy environment.  We get it, we do!

But we have come to the conclusion that it is not necessary to choose between a clean environment and a sustainable economy.  We support clean air and clean water but we increasingly believe our environmental laws have been hijacked by both business and environmental special interests.  They lack common sense, fail to require agencies to consider the economic consequences of their actions, and fail to reasonably balance competing interests equitably.  Congress created this mess and tolerates waves of onerous regulation that are hugely expensive,  create uncertainty and that may not serve the public interest.

Since the Carter Administration America's de facto energy policy has been premised on a perception of peak oil, energy shortage and imports.  The inconvenient truth is the reversal of fortunes from the growth of domestic energy production in shales has debunked that theory.  Since our politicians cannot agree on a more realistic set of national energy policies-the market is deciding for them.

It's still the economy stupid-but the markets are giving us domestic energy production growth and it is making a material difference.  The real question is whether politicians will jump on the domestic energy growth bandwagon or stand in the way of completing our reversal of our economic misfortunes and getting back to growth.

By. Gary L. Hunt