American Elephants

Once Again The Private Sector Delivers More Help for the Poor by The Elephant's Child

I was a little startled when the power company noted that I didn’t owe anything at all last month, and this month’s bill was noticeably smaller. Even the Obama administration has noticed that the boom in natural gas drilling has led to more high-wage jobs, and more secure energy supplies (our “addiction” to “foreign oil” is lessening?) and perhaps they have even noticed lower manufacturing costs. A modern economy runs on energy. When that energy is expensive — everything costs more. What may not be recognized is that the benefits from fracking and new drilling technologies are the much-needed windfall to American consumers — especially the poor.

A study from Mercator Energy, a Colorado-based energy broker, quantifies the multibillion dollar annual savings to American households through lower utility bills from the fall in the price of natural gas.

From 2003-08, before the fracking revolution took hold, the price of natural gas averaged about $7.20 per million BTUs. By 2012, after the new drilling operations had erupted from North Dakota to West Texas to Pennsylvania, the increase in natural gas production had cut the price to $2.80 per million BTUs. This is a 61% price decline, which means lower home-heating and lower electricity bills. The windfall to all U.S. natural gas consumers — industrial and residential — was closer to $110 billion.

The income group helped most by all this wealth are the poor. Data from the annual report of the federal Low Income Home Energy Assistance Program (Liheap) show that poor households spend more of their income on home energy (10.4%) than non-poor households (2.6%). Roughly 40 million households, or 36% of U.S. households are eligible for help. Lower natural gas price have reduced the utility bills of poor families by about $10 billion a year. Or, put another way, fracking has been a more effective anti-poverty program than is the federal government’s Liheap. Lower gas prices help nearly all poor households; Liheap helps fewer than one in four.

A new report from IHS Global Insight estimates that fracking has added the equivalent of $1.200 to real household disposable income on average in 2012. Wages have increased from a surge in industrial activity. And the windfall from increased oil and gas will continue to grow. The manufacturing renaissance from cheaper energy supplies is a classic American story of innovation, human ingenuity, risk-taking and capital investment. Not government subsidies, and not a single one of the 47 federal job-training programs.

You would think that liberal egalitarians would celebrate this bonanza for the poor. Not likely. Fidelity to their green religion trumps real-world facts every time. The Sierra Club continues to oppose fracking (and the Keystone XL)  and are using lawsuits, protests and  political lobbying to stop it. There is no special qualification to be “an environmentalist,” you must just profess a fondness for nature, or trees, or wolves and polar bears— you don’t need to know anything.

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