Better still, the steep drop in the price of natural gas has driven America’s drillers to hunt for oil instead. Rigs are migrating from gassy places like the Haynesville Shale, in Louisiana, to spots where oil is trapped in tiny rock pores, such as the Permian Basin and Eagle Ford Shale in Texas, the Bakken formation of North Dakota and the Mississippian Lime, which sits astride the border between Oklahoma and Kansas. Applying the same techniques to such “tight oil” as to gas-laden shales, they have managed to increase America’s oil production by a third over the past four years, to 7m b/d. The government expects it to grow by more than 1m b/d over the next two years. The output of the Bakken Shale alone has risen from 100,000 b/d in 2008 to over 700,000 now. By the end of this year, BP predicts, America will overtake Russia and Saudi Arabia to become the world’s biggest producer of liquid fuel, meaning oil and biofuels.
The newfound oil brings just as much of a bonanza to the places where it is extracted as the shale gas does. Flights to previously obscure airports in North Dakota—Dickinson, Minot and Williston—are full, as are all hotels within striking distance of the Bakken. Property prices have shot up. The oil industry now accounts for 15% of the local economy, according to IHS, and has brought 72,000 jobs to a state with fewer than 700,000 people.
Despite its huge local impact, America’s shale-oil boom has pushed up global oil production by just a percentage point or two, not enough to reduce the price much. However, it has resulted in a big drop in America’s import bill. IHS calculates that unconventional oil reduced the trade deficit in 2012 by $70 billion, or about 10%.
All told, says IHS, unconventional oil and gas accounted for $238 billion in economic activity, 1.7m jobs and $62 billion in taxes in 2012. That includes the exploration and extraction itself, the supply chains they rely on and the extra spending by all those newly employed oilmen. But it leaves out the second-order effects of cheaper gas, electricity and chemicals. Last year the American Chemistry Council, an industry group, forecast that over the next couple of years cheap gas would spur some $72 billion in new investments in eight gas-hungry industries alone. That, in turn, would lead to a further $342 billion in new economic activity in 2015-20, along with the creation of 1.2m new jobs. The different levels of government, for their part, would rake in an extra $26 billion a year in new taxes.