“We think lower natural gas prices are creating a structural economic advantage for the U.S. It’s a new competitive strength for U.S. manufacturers.”
— Chat Reynders, Reynders McVeigh Capital Management
It’s been a while since Washington politicians and bureaucrats were extolling the alleged benefits of rising energy prices and championing policy that would drive them up quicker, all in the name of green jobs and climate virtue. Perhaps slow growth and stubborn unemployment, like the gallows, tend to concentrate the mind.
President Barack Obama would never admit today, as he did four years ago, that electricity rates would “necessarily skyrocket” under his cap-and-trade plan. In fact, he’d probably prefer to hear nary a word about cap-and-trade during the next nine months.
And Energy Secretary Steven Chu will surely not be heard repeating today what he said back in his heady days as an academic, namely that “somehow we have to figure out how to boost the price of gasoline to the levels in Europe.”
But just because they’ve turned silent about boosting energy prices doesn’t mean they’ve abandoned the project or rethought their conviction that higher prices will drive economic well-being — a castor oil theory of growth.
However, as a lengthy report in Wednesday’s Wall Street Journal confirms — and from which I lifted this column’s opening quotation — Obama and Chu have it exactly backwards: It’s lower energy prices that drive economic renaissance.
By now most Coloradans are acquainted with how hydraulic fracturing technology has triggered an explosion of drilling activity, even along the Front Range, that would have been unimaginable a few years ago. Nationally, the Journal cites an estimate of 158,000 direct new drilling jobs over the past five years and probably four times that many indirect jobs “in the supply chain” and as a result of workers spending their new earnings.
More remarkable, however — at least to those who cling to castor oil energy theories — is how this fracking revolution has given Made In America a second chance.
Low gas prices, the Journal reports, are “breathing new life into energy intensive industries such as steel and plastics,” as well as boosted the prospects of petrochemical makers and paper mills. And the Journal’s list doesn’t come close to exhausting the list of beneficiaries, which range from aluminum smelters to farmers who use nitrogen fertilizers (for which natural gas is a feedstock).
Cheap energy isn’t just a boon today, either. It’s always been so.
“Back in 1800, Britain was becoming the richest country in the world with the fastest economic growth and the fastest job creation — the China of its day,” writes Matt Ridley in City AM, a British financial newspaper. “That was not because we had suddenly become cleverer than everybody else at inventing things. It was because we had stumbled upon limitless, dense and above all cheap energy in the form of coal, and harnessed it to mechanize industry, cheaply amplifying the labor productivity of each person so much that he could be paid high wages.”
Just 18 months ago, the Senate finally abandoned its most recent effort to pass a cap-and-trade bill to boost energy prices (after the House had already approved one). But that hasn’t stopped the Environmental Protection Agency from pursuing the same goal through other means.
Nor has it stopped Colorado’s own regulators from pushing policies that hike energy prices, especially that of electricity.
Maybe it’s time for all of these disciples of higher energy bills to step back, survey the ongoing jobs revival stoked by cheap gas, and consider a different direction.
E-mail Vincent Carroll at vcarroll@denverpost.com. Follow him on Twitter @vcarrollDP