The Impact of Fracking on the Global Economy

Fracking, or hydraulic fracturing, is a technique used to extract oil and natural gas from rock formations. This method has had profound effects on the global economy, both in the short and long term.

Short and Medium Term Economic Impact

In the short to medium term, fracking positively impacts the global economy by increasing the supply of a widely used commodity, petroleum. This commodity is an essential input in multiple industries, from transportation to manufacturing. By increasing the supply of oil, fracking undermines the pricing power of cartels such as OPEC. OPEC's influence led to significant economic turmoil, especially in oil-consuming countries, particularly developing nations, during the 1970s and 1980s.

Fracking not only undercuts the economic power of OPEC but also provides an opportunity for a gradual transition towards renewable energy sources. By saving petroleum for high-utility products such as plastics, natural gas can take on more of the energy load, which is crucial for the advancement of renewable technologies.

The Medium to Long Term Costs and Challenges

While fracking has significant economic benefits, it also comes with substantial long-term costs. One of the most significant concerns is the high water usage associated with the fracking process. Estimates suggest that up to 11 barrels of water are needed for every single barrel of unrefined oil produced. If these costs were more evident, the economic and environmental drawbacks of fracking might become more apparent.

The water used in the fracking process is often perceived as a free good, leading to what is described as a tragedy of the commons. This means that future generations may face severe consequences of the water scarcity and pollution caused by the extraction process. The costs of addressing these issues could be enormous, impacting not only the environment but also the economy.

Efficiency and Reliance on Petroleum

Fracking is a designed process aimed at making oil wells more efficient, thereby increasing the supply of petroleum products to the end user. Without fracking, more oil wells would need to be drilled, and less oil would be recovered. This is a straightforward economic argument, even without being a bean counter.

While the environmental and human costs of fracking are debatable, it is clear that there are significant impacts, though they may not be immediately noticeable. History has shown that we can address and clean up environmental issues, as evidenced by the successful efforts to repair the ozone layer.

The reduction in the cost of oil and natural gas has significant implications for industries and agriculture. It lowers the cost of industrial and agricultural efforts, dramatically raising the standard of living for people around the world.

In conclusion, while the short-term economic benefits of fracking are undeniable, the long-term environmental and economic costs cannot be ignored. The world is faced with the choice of whether to embrace this technology for its immediate advantages or to consider more sustainable alternatives to ensure long-term global stability.