Niall Ferguson says America could be heading toward a new economic “golden age.” It has nothing to do with Washington and everything to do with energy.
Ferguson, a professor of History at Harvard, who is also an author and commentator, believes the production of natural gas and oil from shale formations will be a game changer.
“This is an absolutely huge phenomenon with massive implications for the U.S. economy, and I think most people are still a little bit slow to appreciate just how big this is,” he said. “Conceivably it does mean a new golden age.”
U.S. energy production has been booming in recent years. The International Energy Agency made a jaw-dropping forecast two weeks ago that the U.S. would pass Saudi Arabia as the world's biggest oil producer by the end of this decade – and would achieve near energy independence by the 2030s.
That energy boom, asserts Ferguson, will create a lot of jobs in the United States. The energy sector currently supports 1.7 million American jobs directly or indirectly, according to economic forecaster IHS global Insight. That could rise to 3 million by 2020, it said.
“It's not only in the extraction industry and infrastructure, but more importantly cheap energy is going to create employment in manufacturing. I think you'll see a renaissance in manufacturing,” said Ferguson. “That is being helped by the fact U.S. labor costs have been pretty competitive over the past decade, even as labor costs are going up in China.”
It is also, he said, a big deal for the dollar. “As the U.S. moves towards energy independence and becoming the biggest producer in the world, the dollar can only benefit,” Ferguson said. “Anybody who thought the financial crisis was going to lead to the demise of the dollar as an international currency is wrong – it's quite the opposite.”