New Study Details Economic Boost from Shale Development During Recession

A new working paper published by the National Bureau of Economic Research details how developing natural gas from shale formations has bolstered the U.S. economy. As reported by the Washington Examiner, researchers found that shale development “boosted the U.S. economy by $48 billion per year between 2007-13.”

The paper’s authors, University of Michigan researchers, Catherine Hausman and Ryan Kellogg found that the “shale gas revolution” has had a lasting positive impact throughout the U.S. economy. From the paper:

“Overall, our study finds that a broad set of sectors has benefited from new sources of unconventional natural gas. Households, for instance, have seen much lower utility bills for both natural gas and electricity. Industrial users have also benefited, including rents for some natural gas intensive industries that have not had to pass on the lower gas prices to their customers.”

The Washington Examiner highlights the significant job gains and broad economic benefits from shale development across multiple economic sectors found in the paper:

“Manufacturing sectors that are particularly gas intensive have expanded relative to other manufacturing sectors since the onset of the shale gas boom,” Hausman and Kellogg wrote. Thanks to low natural gas prices, fracking created 24,000-65,000 extra jobs in gas-intensive industries. In industries that are less gas-intensive, fracking still created between 280,000-610,000 jobs. The upper-bound estimate is significantly larger than all the jobs created in California in the last year, according to the Bureau of Labor Statistics.”

This report is the latest to highlight the clear economic benefits of shale development. It follows a recent Brookings Institute-backed paper, which found that residential natural gas consumers have seen benefits upwards of $17 billion per year from increased production. The paper also details how residential and industrial consumers alike have benefited from lower electric rates arising from lower natural gas prices:

“The electric power sector, which in 2013 consumed the largest amount of natural gas, experienced the greatest benefit from the price decline, with an increase in consumer surplus of around $25 billion.”

These latest findings are similar to those of another recent study, from the Manhattan Institute, which noted that the oil and gas sector has been a “bright spot” in the U.S. economy:

“There has, however, been one employment bright spot: jobs in America’s oil & gas sector and related industries. Since 2003, more than 400,000 jobs have been created in the direct production of oil & gas and some 2 million more in indirect employment in industries such as transportation, construction, and information services associated with finding, transporting, and storing fuels from the new shale bounty.”

The Manhattan Institute study also detailed the residual economic benefits from the oil and gas industry. Among the highlights from that report:

“Overall, nearly 1 million Americans work directly in the oil & gas industry, and a total of 10 million jobs are associated with that industry.”

As EID has previously noted, increased domestic energy production made possible by technological advances in horizontal drilling and hydraulic fracturing has wide-ranging positive impacts that ripple throughout our economy.  Increasingly, economic research studying the effects of the “shale revolution” show that oil and gas development has played a key role in growing the U.S. economy out from recessionary levels.



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