Shale Helping Consumers Just in Time for the Holidays

Clean-burning natural gas is putting money back into consumers’ wallets across the nation this holiday season. As a new report by the Boston Consulting Group (BCG) explains, thanks to hydraulic fracturing and the increased supply of natural gas in the market, the average U.S. household is saving between $425 and $725 each year.

And that’s just the beginning: the average American consumer could be saving as much as $1,200 per year by 2020 — savings that amount to a nearly 10 percent boost in U.S. disposable income. According to Justin Rose, a co-author of the study:

“Our research shows that cheap natural gas is already having a bigger impact on family budgets than many Americans think. Those benefits should grow in the years ahead as more of the cost savings from low gas prices are passed along to the end consumer.” (emphasis added)

Michael Zinser, a BCG partner who co-leads the firm’s manufacturing practice, also highlighted that “the benefits of these energy-cost savings could rise significantly over the medium term.”

BCG estimates that 30 to 50 percent of the cost-savings from natural gas use are passed along to consumers. That translates to a three to five percent boost to consumer discretionary spending. Considering that the average U.S. household spends roughly $9,000 a year on energy-related costs, the savings make a tangible impact, especially during the holidays and cold winter months.

Just take Pennsylvania – home of one of the most productive shale plays in the United States – where residents are experiencing record-low utility bills. As the Times Tribune reports:

Those who heat their homes with natural gas will continue to enjoy low prices thanks to production of shale gas, like the Marcellus Shale that underlies much of Pennsylvania. Natural gas prices will be down 11 percent from last winter and is down 19 percent from winter 2008-2009, Dr. Felmy said, citing information from the federal Energy Information Administration. The typical household heating with natural gas will pay an average of $669 this season.” (emphasis added)

BCG’s conclusions join a catalog of studies that find American consumers are benefiting from natural gas. Look no further than the IHS CERA report from September of this year, which found that shale development has already increased average household incomes by roughly $1,200, due mostly to the lower energy costs made possibly by abundant natural gas.

Further, Mercator Energy recently reported that low-income Americans last year saved approximately $10 billion, or about three times the value of the federal Low Income Home Energy Assistance Program (LIHEAP). Once again, that was due directly to the current shale boom.

Communities surrounding shale plays are also experiencing enormous influxes of local tax revenue, as well as massive new industry investment.  In Carroll County, Ohio, the county’s sales tax generated an additional $1 million in 2012 and is on pace for another increase of $500,000 by the end of 2013.

Needless to say, with an extra $425 to $725 in our pockets this year, natural gas production has certainly given us another reason to celebrate.

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