Alright – so drilling isn’t the main idea I’m diving at. But Sarah Palin’s famous catch phrase excellently captures the relevance of energy production to income mobility and economic growth. Specifically, as economies continue to recover, energy demand is expected to increase. The energy sector will accordingly see an increased demand for labor. Importantly, this labor demand will primarily be for high-wage jobs (as energy production requires a lot of skilled labor). As more people get these high-wage jobs, aggregate demand increases. In this way, the energy sector represents a positive feedback loop through which policymakers can fuel economic recovery. By promoting careers in the energy sector, governments can fuel aggregate demand, increasing the need for energy sector jobs and initiating a very beneficial cycle.
According to the International Energy Agency (IEA), worldwide oil demand is expected to grow 1.4% faster in 2014 than in 2013. Similar growth rates are expected to apply to the United States, which has already seen a huge boom in oil demand and production; in 2013, the crude oil market grew by 15% in the United States, representing the biggest growth in crude oil demand in any country for the last two decades. So where is all this new demand coming from? According to the IEA, this demand growth is driven by economic recovery worldwide. As businesses start to rev up production, energy demand is skyrocketing.
For American citizens, this increasing demand for oil represents a fantastic opportunity for economic mobility. In their annual rankings of millionaires throughout the United States, Phoenix Marketing International identified North Dakota as the state with the highest growth in millionaires relative to population size. In 2013 alone, South Dakota jumped 14 spots, from 43rd to 29th. Granted, the North Dakotan millionaire is not your typical “West Egg” entrepreneur, as a lavish lifestyle in North Dakota consists of a new truck and a vacation instead of a new yacht and some caviar. Nevertheless, as policymakers try to address the issue of income mobility, South Dakota’s remarkable growth rate is a statistic worth analyzing.
According to Phoenix Marketing International, North Dakota’s remarkable growth stems from the state’s booming shale industry. The growth in shale oil and fracking has not only allowed North Dakota to have the highest growth in millionaires, but also the country’s lowest unemployment rate. Thanks to an increase in disposable incomes throughout North Dakota, the shale industry has led to a boom in retail stores and restaurants, driving the states’ unemployment rate down to 2.6%, which is an entire percentage point lower than any other state in America!
Furthermore, North Dakota is not the only place to benefit from a growing energy industry. After North Dakota, Louisiana had some of the most impressive millionaire growth in 2013, and in Houston, growth in in High-Net-Worth-Individuals reached 9.6% in 2011, outperforming every other city in the USA.
Given the tremendous impact that increased energy production has had in places like North Dakota and Houston, it seems logical for policymakers to examine the energy sector as a conduit for economic recovery. As the world economy recovers form the Great Recession, energy demand increases; as the energy sector grows to meet this demand, income mobility increases, demonstrated by the growth in millionaires and High-Net-Worth-Individiuals in middle America. Importantly, this type of growth is exactly what America needs. At at time when income inequality and limited income mobility seem to plague the United States, energy production stands out as a way to strengthen the middle class and increase the accessibility of the American Dream.