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Who is Bigger and Why Does it Matter? Understanding the Shale Revolution

By Steve Davis, Industrial Development Manager

In 2014, what country produced more oil and natural gas (when combined) than any other in the world?  If you guessed Saudi Arabia or Russia, you would be incorrect. The correct answer is….the United States (as recently reported by BP’s Statistical Review of World Energy). According to this same report, energy companies spent $120 billion last year in the U.S.   Hydrocarbon production is has been growing more rapidly than world demand, and now prices for oil and gas are the lowest they have been for many years.

So, why should we care that the United States is now number one? Sure, we have all enjoyed spending less at the pump and heating our homes. And we feel good about an America no longer dependent upon other countries to meet our energy needs.

You have undoubtedly heard and are now experiencing how the “Shale Revolution” is transforming America and the world. But, why should we care as economic developers?

Well, many of you and your communities have enjoyed the direct benefit of recent capital investment and the jobs created by these energy companies the past few years.  Yes, this growth is slowing rather dramatically in some areas, due to lower commodity prices.  But, these lower prices for natural gas, in particular, are not found all over the world. Prices are significantly higher in Europe and Asia as compared to the U.S.   So, the “Shale Revolution” has provided a competitive advantage to our community’s existing industry, especially for heavy natural gas consumers.  And, recent price declines in propane should also benefit certain companies and agri-business.  Farmers, for instance, frequently use propane for drying their grain.  So, ample supply and low prices provide us with a competitive advantage with our retention efforts.

Obviously, this “Revolution” has some attraction advantages for us as well.  These low natural gas prices should provide us with new “re-shoring” opportunities from Europe and Asia. I would suggest targeting these “big gas users” in your marketing efforts. But, before you begin, make sure you have an understanding of your infrastructure. The location, size, and capacity of your natural gas lines are critical information that these prospects will need in the early phases of their site selection process.

So, yes, bigger is better!  We are #1. So, let’s celebrate with less personal spending on energy and enjoy our competitive advantage with our retention and expansion efforts.

I would love to hear from you regarding any recent success stories related to this “Shale Revolution”. Please contact me at Steven_Davis@csx.com