Booms, Busts and Booms
Since the first gusher of oil spewed from of the ground above the Spindletop salt dome outside Beaumont, Texas, more than a century ago, the U.S. energy industry has enjoyed its share of booms and busts. After peaking in the early 1970s, U.S. oil and gas production began to decline as thousands of depleted wells were shut down. The U.S. rapidly became dependent on foreign suppliers to fuel its economy.
About a decade ago, advanced oilfield production technologies like hydraulic fracturing, or "fracking," and horizontal drilling began to reverse that trend. Many of the now-bountiful fields being brought back on line were mothballed long ago when the remaining "tight" oil and gas deposits were considered too costly or technically difficult to produce.
"It is a sizeable opportunity," said John Larson, an economist with IHS Global Insight. "It's a game changer."
Interactive map: Where US energy is produced
The economics of production have also played a role in the boom. A tripling in the market price of a barrel of crude over the past decade supports widespread use of costly extraction methods that didn't make sense when energy prices were lower.
Barring an unanticipated setback, so-called "unconventional" oil and gas production is expected to continue to grow over the next two decades. Over that period, the industry is expected to make more than $5 trillion in new capital investment that will support more than 3.5 million jobs by 2035, according to the financial analysis firm IHS Global Insight.
That economic impact of such spending already is spreading, especially to companies that rely heavily on natural gas as a raw material or energy source and investing and hiring.
Steel makers, for example, benefit from both the lower cost of manufacturing and from strong demand for steel pipe used for oil and gas drilling. Companies in the steel rustbelt of Pennsylvania and Ohio are polishing up aging plants to replace coal with cheaper natural gas. Others are setting up shop closer to major gas distribution hubs like Louisiana, where steel giant Nucor is investing $750 million to fire up a new plant later this year.
Chemical, plastics and fertilizer makers, who rely on natural gas both as a raw material and an energy source, have also been expanding production. Last year, Dow Chemical announced a $4 billion investment in facilities, part of some $15 billion in expansion plans announced by Gulf Coast chemical makers. And Vancouver-based Methanex Corp. decided last year to spend $425 million to disassemble an idled methanol plant in Chile and move it lock, stock and pipeline to Louisiana.
In December, economists with UBS bank tallied some $65 billion in announced construction of new plants related to cheaper natural gas, and said another 11 plants had been announced worth billions more.
(Read More: Finding an Edge in the Booming US Energy Market)
As groundbreaking on these projects gets under way, the dividends from the energy boom will flow even further – to construction companies, engineering firms, materials and equipment suppliers and lenders who help finance the projects.
That, in turn, will help shore up state and federal budgets. The added revenue – from income taxes on new jobs created, corporate taxes on added oil and gas profits and state and federal royalty payments – could top $2.5 trillion through 2035, according to IHS Global Insight.
Though prices at the gas pump have remained stubbornly high -- primarily because stepped-up U.S. production makes up relatively small percentage of the global supply, which drives oil prices -- American households are also getting a big break on the lower cost of natural gas and electricity. Larson, the IHS economist, estimated that the energy "dividend" amounts to about $1,000 a year per household and will double by 2035.
"It's a fairly substantial return of wealth to the American consumer," he said.
Increased U.S. oil and natural gas production also promises to help rebalance the long-running trade gaps that have weakened the dollar. If the U.S. moves from a net importer to a net exporter of energy over the next decade, as some experts project, oil will flip from being a source of trade deficits to an important contributor on the positive side of the ledger. With China's energy-hungry economy expected to continue to rely on imported oil, some analysts believe Beijing may soon begin swapping its huge pile of U.S. Treasury bonds for barrels of West Texas crude.