Impact of Resources on the Economy

Resources have a huge impact on local economies, and usually have a significant impact on the national economy.  If there’s enough value in extracting a resource, it can completely rearrange the economy, as we’re seeing in regions of the US that are undergoing a shale-oil or shale-gas boom.  On the other side of that coin, though, is the fact that if there’s sufficient lack of a necessary resource, it can result in a serious crash in the economy – everything slows to a crawl as people scramble for fuel, water, food, etc.

America’s resource issues – particularly our growing lack of water, the sensitivity of our energy markets to fluctuating world prices, and our dependence on other nations for certain critical industrial materials – all have negative impacts on the economy.  A restricted supply of water in parts of the US has constrained the growth of local economies, or diverted money from more productive investments to expensive water infrastructure.  Instability in the oil markets has resulted in a series of price shocks to consumers at the gas pump, and depressed local economies in some parts of the nation when oil prices rose there hasn’t been a significant economic impact – we’ve got plenty of energy.  Critical materials shortages haven’t hit us very hard, fortunately, although China’s belligerent use of its REE monopoly gave manufacturers a scare in 2009.

The problem is defining how large these negative impacts are.  For those immediately affected by them, they can be disastrous – for instance, the Midwest drought of 2012 was second only to Hurricane Sandy that year in damage done by a single weather event, causing $20 billion in damages.  However, most resource shortages or price fluctuations have, individually, had relatively minor impacts on the American economy as a whole.  Taken together, however, these destabilizing factors represent a significant negative drag – considerably less than that caused by some other problems, but nonetheless real.

To an extent, we’ve been living with these problems for a while, now.  Oil price fluctuations are nothing new, after all, and droughts in the Midwest aren’t exactly super-rare.  The critical factor in our resource issues remains the need to deal with changes in our resource demand and supply situations – such as the possibility of increasingly common droughts, constrictions in the supply of specific minerals, or some sort of interruption of our energy supply.  We are less prepared than we should be for these possibilities, and that lack of preparation could turn what is now a minor problem into a truly major one, under the wrong circumstances.


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