During a recent visit to Rangely, a small town in northwest Colorado, my colleagues and I met with the administrators of a highly respected Adult education center to speak in regards to the city's economy. As we left the scenic campus, we saw families driving off-road vehicles into the mountains, a preferred activity for this nature-loving community. With a middle household income With an income of over $70,000 and a low price of living, Rangely shows no signs of economic crisis.
But Rangely is facing an existential risk. The town is here due to an oil boom in the course of the Second World War. Today, the oil and gas industry contributes to this over half of the district’s economic output.
Rangely is just not an isolated case within the USA, the world’s largest largest oil producer And natural gas. There are cities across the country that depend upon the oil and gas industry since it creates well-paying jobs and generates public revenue to fund their schools and other essential services.
A robust dependence on a single industry is dangerous, and the oil industry is vulnerable to booms and crisesBut the economies of oil and gas-dependent cities face a novel threat from global efforts to combat the risks of climate change fueled by the burning of oil and natural gas. Any serious technique to curb global warming requires actions which can be implemented over time drastically reduce demand for all fossil fuels.
AP Photo/Brennan Linsley
The first signs of this variation may be seen in last 12 months’s international agreement: “Moving away from fossil fuels“and the spread of electrical vehicles, which begins to suppress petrol and diesel powered cars, trucks and buses.
As an economist who worked within the White House in the course of the Obama administration and early Biden administrationI worked on detailed strategies to cut back greenhouse gas emissions and support economically disadvantaged communities, but we didn't have a plan to organize oil and gas towns like Rangely for future economic challenges.
Why oil and gas cities are ignored
Congress has supported small towns in recent lawsHowever, cities depending on oil and gas have largely been spared from these strategies for 3 essential reasons.
First, there may be a perceived lack of urgency. Attention to a ‘just transition’ within the country’s transition away from fossil fuels is disproportionately flow to coal-dependent communities. US coal production has rejected The energy supply of the long run has been in full swing for 15 years and an additional move away from coal seems imminent and inevitable.
In contrast, US production of oil and natural gas continues to grow. Certainly some oil and gas communities are already struggling. But the far-reaching economic risks of a shift away from oil and gas may prove to be more of an issue for a long time to return.
Second, politicians downplay the risks to grease and gas communities.
Most Republicans usually are not planning for a future decline in oil and gas production in any respect, and that features many local politicians in oil and gas-dependent communities. Most Democratic politicians, for his or her part, prefer to give attention to how climate motion is usually a driver of future economic growth. President Joe Biden likes to say: “When I think about climate change, I think about jobs.”
He is just not improper to spotlight the economic opportunities for climate solutions. But clean energy jobs rarely offer one-to-one alternative for the well-paying jobs within the oil and gas industry and the general public revenues these industries bring to local communities.
Third, economists’ policy tools are ill-suited to the challenges facing the oil and gas industry.
Suggestions to support local economic development often recommend The aim is to implement measures comparable to wage subsidies that concentrate on permanently struggling local economies and have the potential to quickly get more people into work.
For the oil and gas communities which can be generally not struggling today, a distinct recipe is required. In the 15 years before the pandemic, U.S. counties with Oil and gas production experienced average annual GDP growth of two.4% per 12 months, compared with 1.9% nationwide.
Most oil and gas communities don't need stimulus packages that provide immediate relief. What they need are holistic economic development strategies that construct on existing strengths and create latest industries that can enable them to thrive well into the long run.
Solutions for preparing oil and gas cities
Harvard economist Ricardo Hausmann compares the challenge the event of recent economic opportunities, to the sport of Scrabble, where each additional letter allows the formation of further words. He cites the Finnish economy for instance: it developed from harvesting wood, to creating tools for cutting wood, to creating automated cutting machines. From there it developed into sophisticated automated machines, including those utilized by global corporations. just like the telecommunications giant Nokia.
Such economic developments should be tailored to the specificities of every place, but step one is to discover the issue and spend money on solutions.
The Southern Ute Indian Tribe is doing this in southwest Colorado. They use the revenue from oil and gas sales for a Permanent Fundthat promotes financial sustainability by ensuring that the tribe’s assets are consistent with its long-term financial goals, and a Growth Fund which diversifies the tribe's revenue sources by investing in quite a few businesses.
At national level A panel recently proposed by the National Academies the creation of a federally chartered corporation to help communities facing acute economic threats, including future declines in oil and gas supplies. This corporation could provide funds for displaced staff, critical public infrastructure, and programs that ensure access to economic opportunity.
Colorado's State Office for Just Transition has begun to tackle that role. Currently, it is just focused on the transition away from coal, with the goal of helping communities develop latest economic opportunities and helping staff transition into latest jobs. But its mission could expand in the long run. In fact, Rangely is already get some support on account of the closure of nearby coal-fired power plants.
No universal solution
Small, rural towns like Rangely show that regions depending on oil and gas need individual strategies tailored to the strengths and weaknesses of every place. There is not any one-size-fits-all solution.
Our research group that visited Rangely is a component of the Initiative for resilient energy industrieslaunched by universities, research institutes and philanthropic organizations to be certain that policymakers have the data they should help fossil fuel-dependent communities successfully navigate the energy transition.
The best time to construct a more resilient economy is before a crisis hits. Anyone who knows the Bible – or Broadway – knows the story of Joseph, who in his dreams predicted seven years of prosperity for Egypt, followed by seven years of famine. Pharaoh acted on Joseph's vision and used the boom to organize for collapse.
The USA is currently producing oil and gas in abundance. Politicians know that there are risks. But to this point the country has failed to organize the population for the tougher times ahead.
image credit : theconversation.com