You’re Getting Black Friday Deals Everyday on Oil and Natural Gas Thanks to Fracking
Many people will be heading to the mall today or scouring online to score sweet deals on the latest goods and services as part of the annual Black Friday tradition, but one thing people probably don’t realize is that they have been getting Black-Friday quality deals on oil and natural gas for the last several years thanks to hydraulic fracturing, also known as “fracking,”
This technology revolutionized the energy industry and transformed the United States of America into the single-largest producer of oil and natural gas in the world seemingly overnight. Using fracking to produce oil and natural gas has caused prices to plummet, which has translated into massive savings for Minnesota families and businesses.
In fact, a report released in October 2019 by the White House Council of Economic Advisors (CEA) estimates increased oil and natural gas production from fracking saves American families $203 billion annually on gasoline and electricity bills. This breaks down to $2,500 in savings per family per year.
Eighty percent of the $2,500 annual household savings comes from the reduction in price of natural gas, which has helped lower electricity costs by 45 percent since 2007. The other 20 percent of savings comes from lower costs for gasoline and heating fuels.
For low-income families, who spend the largest share of their income on energy costs, these savings are very significant. For those families in the lowest income quintile, it represents a savings of 6.8 percent of their total income. For the highest income quintile, it still represents a 1.3 percent savings.
According to the report:
“In other words, lower energy prices are like a progressive tax cut that helps the poorest households the most. The variation in savings stems heavily from differences in spending on electricity: according to the 2018 Consumer Expenditure Survey, the bottom 20 percent of households account for 8.6 percent of expenditures in general but 14.1 percent of electricity expenditures.”
We see some of these benefits in Minnesota because lower natural gas prices have been a boon to the 66 percent of households who stay warm by burning natural gas. After peaking at around $10 per million btu in 2008 (apologies that the text box obscures the 2008 line on the graph), natural gas prices plummeted due to increases in natural gas production in the Barnett Shale in Texas, and the Marcellus Shale in Pennsylvania, West Virginia, and Ohio.
But unlike many parts of the nation, electricity prices are trending ever-upward. This is the result of shutting down our affordable, reliable coal plants and investing more than $15 billion in wind, solar, and transmission lines. As a result, Minnesota electricity bills have reached new record highs, and the average family in the Xcel Energy service territory can expect their electric bill to increase bill to increase by nearly $200 per year in the next three years.
Fracking is delivering real benefits to real consumers today in the form of reducing the stress that energy bills put on their budgets and their families.