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Sustainable Futures

Retail Horizons: Will fracking constrain business growth?

<p>Energy affects many aspects of trade. Fracking has created a bubble. What would happen if it burst? And how likely is that?</p>

This article is the sixth in a 12-part series about the future of U.S. retail for the Forum for the Future-led 2014 Retail Horizons project in partnership with Retail Industry Leaders Association. For more about the project and the toolkit available in October, read the first post, which also contains a table of contents for the series.

How we produce the energy we need, how much it costs and how we use it will all have profound consequences for the future of retail business growth and the transition to a sustainable economy. Among other things, these factors strongly will affect supply chains, manufacturing and consumer confidence.

Although the energy system is too vast and complex to quickly summarize, a peek at one aspect of it — fracking for oil and gas — hints at the myriad ways in which changes underway could affect the future of retail and sustainability.

Driven by new horizontal drilling and hydraulic fracturing technologies, the production of natural gas and oil within the United States has seen huge growth. In just a few short years, the U.S. has gone from being a net oil importer to a net oil exporter, something that seemed inconceivable a decade ago.

At a moment when conventional oil supplies were feared to be peaking, conflict in the Middle East threatens to disrupt production and China is competing with the West for resources, this unexpected windfall has helped prevent a surge in fuel and electricity prices.

The consequences are that long and complex supply chains remain feasible, energy-intensive commodities such as aluminum are plentiful and consumer confidence has been rising. Beyond the fracking boom towns in places such as Williston, N.D., the new energy supply has been driving manufacturing job growth in long-depressed Rust Belt cities such as Youngstown, Ohio.

However, fracking is highly controversial and its future is uncertain. Fracking has been shown to contaminate groundwater and cause earthquakes. Fracking operations also leak methane, a potent greenhouse gas, and the scale of these "fugitive emissions" may be far greater than previously thought. Finally, although boosters have claimed that fracking could supply U.S. energy needs for 100 years, there is increasing evidence that the recent boom could be a bubble about to burst. The U.S. Energy Information Agency recently admitted that the recoverable oil in the Monterey shale formation in California is probably 96 percent lower than previously estimated.

Should the fracking bubble pop, we could expect to see a shortening of supply chains, rising commodity costs and a decline in consumer confidence and spending. It is impossible to depict this future with certainty, however, which is why the Retail Horizons project developed a set of four scenarios to explore how these and other factors will influence the future of retail.

Top image of sunset on an oil rig by Stephen Coburn via Shutterstock.

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