Researchers from environmental think tank Resources for the Future released a new issue brief last week examining the impact of hydraulic fracturing and shale development on the United States. The brief, titled How the Shale Boom Has Transformed the US Oil and Gas Industry, analyzed drilling and production data from 164,000 wells across the country from 2000 to 2015, concluding that shale development has had a profound impact:
“The shale revolution has dramatically changed the position of the United States as an energy producer, allowing the oil and gas sectors to more easily ramp up production in response to price changes. This has important implications for US policymakers and businesses.”
Stopping short of the United States a “swing producer” – a producer that can ramp up production so quickly that strategic oil reserves are not as necessary to respond to short-term market imbalances – the authors directly acknowledge the vast improvement in production capabilities made possible through shale development. According to the brief, the United States is now an incredible nine times more responsive to oil market price change than it was prior to the widespread introduction of shale development, due to increased number of wells and improved production from each well:
“The somewhat largest estimated drilling responsiveness of unconventional oil wells combined with the larger amount of oil produced per well leads to an estimated price response that is about 6 times great from unconventional oil wells on a per-well basis. Further accounting for the sharp rise in unconventional drilling (compared to conventional drilling) and production per well over time makes this difference even larger, implying a price for US oil supply that is 9 times larger when compared to the pre-shale era.”
Like oil production, the responsiveness of American natural gas production to price changes has also increased thanks to shale development. The authors estimate that the United States is now about 2.7 times more responsive to natural price shocks because of the greater level of natural gas production made possible through shale development. According to the brief:
“This is entirely due to the fact that unconventional wells are about 2.7 times as production as conventional wells, with initial production of approximately 80,000 mcf per month (the 2010-2014 average) compared to 30,000 mcf per month.”
With substantially greater responsiveness to market imbalances such as price shocks, shale development has undoubtedly improved U.S. energy security. Couple the improved ability to shield against market volatility with record high production driving American energy exports, and it’s clear that the United States is poised to be a major player in the global energy market for years to come.