If the Oil Industry Said the Moon Was Made of Green Cheese, Would the New York Times Pass the Statement Along to Readers without Comment?

The answer seems to be “yes.”  After all, the New York Times told readers that

The companies estimate that the boom [from new shale oil drilling] will create more than two million new jobs, directly or indirectly, and bring tens of billions of dollars to the states where the fields are located, which include traditional oil sites like Texas and Oklahoma, industrial stalwarts like Ohio and Michigan and even farm states like Kansas.

The way that increased oil supplies lead to more jobs is by bringing down the price of oil.  The article suggests that if environmental issues are ignored, the new drilling could increase U.S. output by approximately 1 million barrels a day.  This would be an increase in world supply of roughly 1 percent.  Given standard estimates of the elasticity of supply and demand for oil, this would be expected to lower world oil prices by around 2.5 percent.

A 2.5 percent decline in the price of oil could be expected to generate about 40,000-50,000 additional jobs, less than 1/20th of the low-end job estimate given by the oil industry.  It is not surprising that the oil industry would make up ridiculous numbers about the economic benefits of its drilling if it can expect them to be reported without comment by major news outlets.

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C.  He is the author of several books, including False Profits: Recovering from the Bubble Economy.  This article was first published in CEPR’s Beat the Press blog on 28 May 2011 under a Creative Commons license.

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