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North Dakota’s Oil Boom: A New Era for America?

What recession?

Any ramifications still emanating from the economic downturn do not apply to North Dakota. The nation’s least visited state has proven itself to be the nation’s most successful state in almost every economic measure.

The North Dakota oil boom, spurring from new forms of drilling in the Bakken Shale, has essentially completely shielded the state from the recent economic recession. North Dakota’s unemployment rate continues to hover around a nation-low 3 percent, compared to a 9 percent national average.  In fact, the unemployment rate has not topped 5 percent since the eighties.  Similarly, the state’s increases of 7.1 percent in real GDP and 6.9 percent in personal income in 2010 led the country.  The population and overall employment levels in North Dakota have also reached all time highs, reversing periods of decline in the past.  This prosperity has helped the North Dakota government build up a 1 billion dollar budget surplus and has led to the emergence of a bubble-resistant housing market.  All of these remarkable achievements stem from North Dakota’s oil boom.

After perfecting a new drilling technique involving hydraulic fracturing and horizontal drilling, oil drillers have found a way to extract oil from the previously inaccessible Bakken Shale, an oil reserve with what some think has over 20 billion barrels of recoverable oil.  Previously quiet small towns such as Williston, Tioga, and Stanley have been transformed into bustling cities with exponentially higher amounts of people, activity, and even crime.  The atmosphere of these cities is reminiscent of the gold rush in the Wild West.  The jobs are demanding and the location and climate of North Dakota are far from ideal, but workers continue to be drawn in by the salaries that average over 100,000 dollars a year.  Stories of young students dropping out of college or workers more than doubling their salary continue to proliferate.  The output of oil in North Dakota over the past several years has increased from just a dribble to over 450,000 barrels a day.  The oil boom is just getting started – the North Dakota Pipeline Authority predicts a doubling of rail-terminal capacity within the next year.  Many anticipate that North Dakota will soon surpass California and Alaska to claim the number two spot in oil production in America.  The oil in the Bakken Shale has additionally jump-started the rest of the area’s economy:  reports say that workers at local McDonald’s are being offered $300 signing bonuses. Expect to only continue to hear more about North Dakota in the coming years as oil production increases even further.

What does the success of oil drilling in the Bakken Shale mean for US energy production?  The North Dakota oil boom has led to the first upturn in US oil output since the 1980’s.  Since 2005, America has decreased its percent of imported oil from 60 to 47 percent.  With similar booms under way or expected in areas such as Alberta and Texas, the idea of increased North American energy dependence is becoming more and more plausible.  Certainly the US will continue to feel the effects of the volatility of the worldwide markets, but increases in domestic production will greatly mitigate them.  With more local oil, money will stay in North America and the US can greatly decrease its reliance on foreign countries and organizations such as OPEC.  The success of North Dakota warrants a discussion on domestic energy exploration.  New techniques in oil drilling, such as those used in North Dakota, have the potential to be introduced into places throughout the US.   The longer America’s dismal economy stays dormant, the more pressure there will be to exploit these energy options.  Opening up more US land or offshore areas to energy exploration could serve as a perfect stimulus package for the struggling US economy.

Environmental concerns are the principal issue preventing the many options for additional increases in domestic oil production.  The catastrophic BP oil spill is a glaring reminder of the enormous amount of damage these types of activities can have on the environment.  Environmental agencies continue to protest further drilling, including that in North Dakota.  Not only are these increases in oil production currently polluting the environment, but they are also decreasing incentives to do something about this pollution.  As America increases its production of oil, energy is becoming more available and foreign dependence is becoming less of an issue.  The motivations to find alternate forms of energy may begin to decrease also.  Underneath a new energy era focused on the transition to clean energy, an era aimed to prolong the fossil fuel age is underway and gaining strength.  Environmental agencies fear this, and will not allow increases in drilling without putting up a fight.

The proven success from the oil boom in North Dakota thus emphasizes the common dilemma between the economy and the environment.  With the 2012 elections fast approaching, changes in American oil policy may be in store.  Front-runner republican hopefuls, such as Mitt Romney, Rick Perry, Michele Bachmann, and Herman Cain, have all expressed their interests in increasing domestic oil drilling.  If one of these candidates is elected president in 2012, a battle between the environmental agencies and the president is bound to occur.  North Dakota has proven the giant economic benefits of domestic oil drilling, but at what cost is this to the environment?  Depending on the future president and state of the economy, a large change in America’s energy policy is possible in the future.  Will North Dakota continue to quietly reap the awards from the oil boom alone, or will the state’s example of oil drilling success create a ripple effect throughout the rest of the country?

 

Picture Credits: North Dakota Oil and Gas

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2 Responses

  1. Interesting article. I think we’re moving towards increasing reliance on “tight oil” like the Bakken. no two ways about it. That’s a bit anxiety producing, considering the environmental impact. But it’s a bit of a forgone conclusion, I think. Oil runs our civilization.

  2. I think the state is inevitably going to reap the benefits of the boom, right up until the Bakken is depleted. But I think it remains to be seen whether other oil shale formations are going to be as productive as the Bakken. The Monterey shale in California, for instance, looks like a disappointment compared to the Bakken. So, it will remain to be seen how that goes.

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