sharing in governance of extractive industries

Living with changing boom-bust patterns

New research published by CSIRO addresses the changing nature of boom-bust dynamics with an Australian case study of unconventional gas, and is a free download here for the first 50 days.  The paper takes a mixed methods approach, bringing together quantitative forecasts of indirect employment effects for unconventional gas with qualitative analysis of interviews with local business communities seeking to manage flow-on effects to other sectors of the economy.

Econometric modelling was used to forecast changes in indirect employment under different scenarios through to 2034. The quantitative results demonstrate that employment rises in the short to medium term then declines in the longer term across all scenarios.

The qualitative results show that experiences of local businesses did not readily align to traditional long boom/bust patterns and many struggled to manage cyclical effects. For example, local businesses had difficulty when an unforeseen lull in industry activity stretched out for several months before drilling eventually resumed. Taken combined, the qualitative and quantitative results indicate that the ‘bust’ part of unconventional oil and gas development is very much alive and may have been underestimated in recent times. The findings emphasise that to manage unpredictable cyclical effects, there is a need for businesses to be flexible while retaining coping mechanisms for unforeseen circumstances.  

The paper shows that economic effects of gas development can vary considerably, noting that timing plays an important role as to how industry cycles play out and whether busts are relatively small corrections that can be absorbed by local economies or whether they are outside the realms of local resilience. The research also highlights the role of intermediaries who play a critical role in providing trusted advice at a time of information overload and conflicting perspectives. There is an important role for policies to encourage economic flexibility, based on diversification and assistance to local businesses to increase their adaptive responses towards fluctuating periods of prosperity and recession. The full paper is available at: https://doi.org/10.1016/j.erss.2019.101221

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