The Fracking Renaissance
by Jason Scheurer 11 Dec 2013, 3:56 PM PDT
There is a boom coming from the private sector that looks to rewrite the American story for the next generation.
It is possibly the life preserver this country needs as it attempts to correct itself from decades of expanding debts. These two forces together will upend the labor markets of the world. America is becoming a manufacturing and energy powerhouse once again due to this combination punch of robots and the unlocking of untapped resources.
This story has been in the works for a while, but the technologies are now beginning to hit escape velocity. When we combine cheap and domestic energy sources with the latest in robotic automation, the balance of trade will shift back to our shores, creating a re-shoring renaissance. The rise of these technologies has been chugging along, but until recently, the critical cost point was not breached.
The potential lay dormant to the casual observer. Their power is much like a seed in your garden – the ingredients are all there to make the mightiest redwood from the smallest of seeds if the conditions are favorable. With a tree, it is the combination of water, sunlight, and nutrients that facilitate its growth. In the case of our domestic manufacturing base, it is the cheap energy derived from horizontal drilling and fracking combined with the marriage of computing power and high-mobility engineering.
Over the last decade, we have all learned what happens when businesses using low-priced wages are able to have access to western markets. We have witnessed the rise of a once poor nation, China, as it replaced Japan as the world’s second largest economy. Jobs that we once did from home have moved to the other side of the world due to the startling cost advantages associated with manufacturing over there. Luckily for us, the winds of change are now reversing, as American know-how is being applied to overcome the lure of $1.74-an-hour wages. When priced against automation and low cost inputs, the equation of where to locate manufacturing centers begins to shift back home.
Most people know a little about fracking and horizontal drilling from hyped movies like Gasland, in which someone lights his kitchen tap water on fire to create a false sense of panic and sell tickets. Sure, there are always concerns with the adoption of new technologies, but these environmental hurdles can be overcome as long as the cost differential is wide enough. Natural gas, which costs less than $4.00/MMBtu in the U.S., is more than $10.00/MMBtu in much of Europe. It is in the teens in Asia. We are not talking a few percentage points here; we are talking price differentials so large that it will upend the energy markets of the last half-century. America may be the new Saudi Arabia.
When combining this cheap power and feedstock source with low-cost automation empowered by specialized optics, highly accurate sensors, and improved mobility, the re-shoring of America will begin to gather steam.Stepping back, it really doesn’t make a lot of sense to ship materials halfway across the globe only to then ship them back
. Close contact with suppliers has always been one of manufacturing’s greatest obstacles because response time is so critical in the modern and increasingly customized marketplace. The combination of these forces makes domestic production the best choice as long as the price is right. Going forward, that price is going down more and more. The result is that America will begin seeing the return of lost manufacturing to our shores from places like China.
This re-shoring, of course, will have its detractors. Seeing the replacement of some workers with robots and drilling pads in once-empty fields across the country is bound to scare the public. Media will play into these misplaced fears, but what’s really scary is America’s economic vulnerability if we don’t move in this direction.
Implementing and leveraging these competitive advantages in a worldwide marketplace is a national security issue far greater than the need for another aircraft carrier or forward positioning of American soldiers on foreign lands to support two-bit oil-producing dictators. The cost savings alone from the reduction in need to maintain a massively expensive military force, as well as the price savings in the average Joe’s food and electric bill, may free up the economy just enough to begin the critical healing process of balancing the federal budget. The recycling of money from neighbor to neighbor, rather than from American to foreigner, will help lower unemployment and lessen our dependence on welfare programs.
Sure, there may be other technological miracles around the corner, but today these are the two best ways to help turn things around and get the country back on a firm footing. The Terminator will soon be here, but rather than being on a mission to exterminate humanity, he will more likely be making my next car, which will be powered by American gas and maintained by my neighbor.