The impact of the natural gas revolution in the United States goes far beyond the jobs created or the revenues earned, as millions of consumers worldwide benefit from the reinvigorated sector, noted energy expert Daniel Yergin said Tuesday.

The IHS Inc. vice chairman and chair of the Energy Security Roundtable at the Brookings Institution testified before the House Joint Economic Committee on the economic impact of increased natural gas.

“One is cautious about using the word ‘revolution,’ but given the scale of the change, it is appropriate to describe what is unfolding in the United States in terms of shale gas and tight oil as an unconventional revolution in oil and gas,” Yergin said. “Natural gas production increased 27% between 2007 and 2013.

“Estimates of recoverable natural gas reserves have more than doubled since 2005. U.S. oil production has increased 3.3 million b/d since 2008 — a 66% increase. This increase alone is larger than the output of 11 of 12 OPEC countries.”

The impact of the energy boom is far beyond oil and gas, he told House members. According to IHS research, unconventional drilling activity in 2012 already was supporting more than 2.1 million jobs across a huge supply chain, with 60% of the jobs, 1.3 million, from shale gas activity alone (see Shale Daily, Sept. 5, 2013).

The total number of gas and oil jobs should rise to 3.3 million by 2020, with 1.8 from shale gas, IHS research has found. Unconventional drilling also added $74 billion to federal and state government revenues in 2012, a number that IHS projects will increase to about $125 billion by 2020.

“What is now becoming clear is that the lower costs of energy brought about by this abundant growth in natural gas supply is helping to stimulate a manufacturing renaissance and improving the competitive position of the United States in the global economy and further stimulating job creation in the United States,” Yergin said. “Overall, the unconventional revolution — shale gas and tight oil — has helped to strengthen the U.S. economy and has proved to be an important contributor to the U.S. economic recovery.”

He noted that former Federal Reserve Chairman Ben Bernanke a few months ago described the unconventional revolution as one of the most beneficial developments if not the most beneficial development since 2008 to the U.S. economy (see Daily GPI, March 10). “The unconventional revolution came along at the right time,” said Yergin. “One might well wonder how our economy would look today without it: much higher energy bills, higher unemployment, lower growth.”

It took about 20 years to develop the technological base to unearth tight and shale resources, but since 2008, the escalation within the industry has “unfolded rapidly,” he said.

And most states are sharing in the prize money.

“While various states had begun to home in on the economic development aspects of shale gas and tight oil, it was only in last few years that its significance for the national economy started to come into focus,” Yergin noted. He referred to a series of studies by IHS to assess the economic impact of unconventional resources.

“Strikingly, the economic impacts are not limited to states that produce natural gas and oil. Owing to the long supply chains, the job impacts are being experienced across the United States, including in states without significant shale gas or tight oil activity. In other words, when it comes to unconventional activity, a state does not need to have a major unconventional play within its geographic boundaries to benefit economically from the activity. In fact, more than a quarter of all jobs associated with the unconventional energy revolution are found in states with no appreciable unconventional activity.”

Minnesota, for instance, supplies hydraulic fracturing sand, which in 2012 directly and indirectly supported more than 19,000 jobs in the state and should supply almost 35,000 by 2020. Wisconsin also is a key sands supplier, which in 2012 supported almost 20,000 jobs and generated $330 million in state and local taxes. Illinois’ supply chains added more than 38,600 jobs and generated more than $1 billion in taxes for state and federal coffers in 2012; jobs should jump by more than 66,600 by 2020.

Even states that don’t want drilling are big benefactors of the unconventional revolution.

“In New York, a state that currently bans unconventional activity, 44,000 jobs along with $1 billion in state and local taxes can be attributed to activities supporting the supply-chain associated with shale gas and tight oil in other states across the country in 2012,” said Yergin. “In California, the economic activity associated with unconventional oil and gas produced in other states supported nearly 100,000 jobs in the state in 2012, mostly in the industrial and chemical manufacturing sectors. This number represents 8% of the state’s total manufacturing jobs.”

One reason for the profound economic impact is that unconventional activity “combines a capital-intensive industry with a broad domestic supply chain,” said Yergin.

“The United States is a leader in all aspects of the unconventional industry, which means that most of its suppliers are domestically based, and that means a larger portion of the dollars spent are supporting domestic jobs in trucking, steel fabrication, information technology, aggregates, heavy equipment manufacturing, finance, hotels, housing, and restaurants, among many others.”

Investments are coming from many U.S.-based companies, as well as direct investments by foreign entities, including chemical manufacturers such as Methanex and BASF. Austrian steelmaker Voestalpine plans to invest $715 million to build an iron-ore processing plant in Texas, an investment that should double its total output by 2020, said Yergin. Siemens is spending $350 million in a new gas turbine facility to supply steam turbines and generators.

“Finally, and perhaps most importantly, the unconventional gas revolution increased average household disposable income in 2012 by $1,200 — a number that will grow to $2,700 by 2020,” Yergin said. “Most of this is natural gas related. First, households spend less of their total income on utilities, whether directly for less-expensive natural gas or by lowering the cost of electricity generated with natural gas. Second, savings are passed on from the lower costs of goods and services in the broader economy as producers and retailers enjoy lower energy costs.”

The IHS vice chairman offered a word of caution concerning the overall U.S. economy.

“While U.S. crude oil production has increased dramatically since 2008, the 3.3 million b/d increase has almost exactly balanced the amount of oil currently missing from the world market owing to disruptions in countries like Libya and Iraq and sanctions on Iran. In other words, the increase in U.S. oil production has compensated for loss of oil elsewhere. Without that increase, we would be looking at much higher oil prices than today.”