Expensive Energy Driving Extraction Boom

To add a little bit to what Paul Krugman has to say about scale, natural resources, and North Dakota, take a look at the chart above of oil and gas extraction as a share of all employment. It shows that despite the Obama administration’s commitment to Kenyan anti-colonialism, employment in the oil and natural gas extraction business has boomed under his administration. It also shows a couple of other things. One is that employment in this sector booms when energy prices are high (supply and demand, you see) and doesn’t actually show any substantial political linkage.

But the other thing it shows is that oil and gas extraction are not a major part of the American employment picture and weren’t even at their peak in the Dallas era. It’s just a really big country and people are predominantly doing things for other people (teaching kids, washing floors, prepping taxes, making sandwiches, trying to make sick people feel better) and to some extent working in stores or driving things around in trucks. It’s true that oil has a large role to play in the American balance of trade, and if it were the case that we were facing a balance of payments crisis—something that may well happen someday—then oil would be a bigger deal than these numbers account for. But we’re not facing a balance of payments crisis. We’re facing a “lots of able-bodied people with nothing to do” crisis that oil and gas exploration can only ameliorate in a very minor way.