Thanks to the shale boom, markets already perceive the trade balance optimizing, energy prices are cheaper than they would otherwise be and we've even cut carbon emissions. And we are only getting started, according Tyler Cowen, New York Times best-selling author and one of the most influential economists of the decade.
While we aren't likely to get past the American public's irrationality over gas prices at the pump and their confusion about why this hasn't translated into lower gas prices, that doesn't change the fact that our shale boom is only just beginning to affect the global economy. The only question is who will be the next to latch on to this revolution.
Cowen gives us the long view in his most recent book, " Average is Over: Powering America Beyond the Age of Great Stagnation ", and in an exclusive interview with Oilprice.com, he discusses:
- Why energy-intensive investment is our real future
- Why peak oil isn't an issue for at least 3 decades
- Why Syria is impossible to predict
- Why US gas exports are a win-win situation
- How the US shale boom has benefited the economy
- How the shale boom is just getting started
- What the general public doesn't get about gas prices
- Why we can't do much to stop energy market manipulation
- Who's right about climate change? Wait and see…
Interview by James Stafford of Oilprice.com
James Stafford: You have written at length about "Great Stagnation" and its relation to technology and natural resources. How do we trace the "Great Stagnation", and are we seeing the end of our unexploited natural resources?
Tyler Cowen: The Great Stagnation first shows up in the data in 1973, when income growth slows and productivity growth falters. It's hard to avoid the conclusion that this has something to do with the end of the age of cheap energy. In my view sustainable economic growth is more dependent on energy than the share of the energy sector in GDP would indicate. Energy-intensive investments are more likely to build for our future, compared to the productivity mess known as our service sector.
I do not, however, think we are seeing the end of unexploited natural resources – just look at fracking. But every now and then we take a pause before extraction technologies race ahead once again. We've been living in that pause for much of the last 40 years--a scary thought.
James Stafford: Should we still be talking about "Peak Oil"?
Tyler Cowen: I don't see "peak fossil fuel" being a binding constraint over most of the next 30 years. That said, new supplies take a while to come to market, and the global economy is still constrained by oil supply scarcity. This was evident during the price spike dating from the time of chaos in Libya. There just wasn't enough oil for the global economy to manage a higher growth rate, and only now is the US economy moving beyond that constraint. India still faces it.
James Stafford: There are rival theories concerning what a potential US direct intervention in Syria would do to oil prices. How do you see this playing out?
Tyler Cowen: It would depend what we do and when we do it, and in any case I don't see this as an easy matter to predict. Perhaps the best prediction is that the situation festers and we don't have a direct US intervention at all.
James Stafford: Does the conflict in Libya provide us with insight into what would happen to oil prices in the event of a US intervention in Syria?
Tyler Cowen: As mentioned above, the price experience and the growth slowdown from the Libyan crisis is far from encouraging. As for Syria, China would very much like to see a peaceful resolution of this entire situation and they do not care per se who comes out on top. Since the US and China want in broad terms the same thing from this conflict, there is a good chance that can happen.
James Stafford: As the debate continues over whether the US should export unlimited natural gas or keep it at home, what would be better for the US economy over the long-run, and why?
Tyler Cowen: Trade benefits both nations. And it will encourage the supply of gas all the more in the longer run. This is a win-win, and I see no good reason to restrict exports.