Economic Impact of Fracking in the Texas Region

Shale gas was first extracted in U.S. in 1821 from shallow fractures. Today, shale gas extracted with modern hydraulic fracturing techniques is the fastest growing contributor to the country's total primary energy deposits.

According to the Energy Information Administration, the state of Texas is the largest producer of shale gas in the country, with the majority produced coming from the Eagle Ford, Barnett, and Haynesville formations.

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During the height of the shale gas boom in 2002 to 2012, Texas gained over 64,000 jobs. In 2014, indirect economic gains from the Texas oil and natural gas industry resulted in nearly 2 million jobs in related sectors, and the three major Texas shale formations have contributed to more than $300 billion in the state's economic activity.

In addition, a study by the University of Texas at San Antonio Institute for Economic Development projects that a 20 county region in Central and South Texas will support 127,000 direct jobs by 2022.

Most of the country’s skilled drilling workers, as well as executives, researchers, and experts at shale gas extraction reside in Texas. In 2014, the state's oil and natural gas industry paid more than $15 billion in royalties and state and local taxes, providing Texas with the means to fund infrastructure, education, economic development initiatives, children's health insurance, and other projects and public services that contribute to the stability of the state.

Image source: rigzone.com

Current low energy prices are also giving an economic boost, contrary to naysayers. Many international industrial companies, such as Taiwan's Formosa Plastics and Austria's Voestalpine, have set up or are planning to move some of their facilities to Texas. Cheap shale gas prices help narrow the production gap between North America and heavily industrialized countries like China, and government incentives and grants attract investors.

Primera Energy LLC, founded by Brian Alfaro, engages in oil exploration and production in the Barnett and Eagle Ford shale formations. For more discussions on the economic effects of the shale industry, like this Facebook page.

How Will the U.S.–Iran Nuclear Agreement Affect World Oil Markets?

Not too long ago, analysts had to allay fears that the tense relations between Iran and the United States would cause a sudden spike in the price of petroleum. Now, the U.S. and world oil markets are faced with an unusual reversal of the scenario.

Image source: WashingtonPost.com

The continued growth of supply, which has produced a glut in world petroleum markets, drags into more uncertain future with the landmark agreement between the United States and Iran regarding the latter's nuclear policy. With the loosening of international restrictions surrounding Iran's oil exports to the United States and the European Union, the oil industry faces a new challenge that could have several repercussions on the oversupplied petroleum market.

It will be a matter of months before Iranian oil fully penetrates the world market as it did before, the effects of which would largely be dependent on how long the supply glut continues until then, and whether Iran's production would increase not long after.

On the other hand, there remain a few who are convinced that the arrival of oil from Iran would not significantly affect the price of oil. Iran's present production would not have a sustained impact on benchmark crude oil price as it represents only a third of the world's daily consumption. Likewise, an increase in production from the country could trigger a chain reaction that could cause prices to drop significantly.

Image source:  TheIranProject.com

Long-term investors, on the other hand, could see no cause for worry about the prices. Although the expected increase in demand in the season is not considered spectacular, there remains hope, based on previous trends, that gasoline prices (and, by extension, petroleum) would eventually stabilize as demand increases.

Brian Alfaro is the founder and president of Primera Energy LLC, a company based in San Antonio that runs operations in the Eagle Ford Shale and Barnett Shale. Visit this website for more on his company and its guiding principles.