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School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

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16 East 34th Street, 4th floor--------------------Stuart Basefsky

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Congressional Budget Office (CBO)

 

THE ECONOMIC AND BUDGETARY EFFECTS OF PRODUCING OIL AND NATURAL GAS FROM SHALE [9 December 2014]

http://www.cbo.gov/publication/49815?

or

http://www.cbo.gov/sites/default/files/cbofiles/attachments/49815-Effects_of_Shale_Production.pdf

[full-text, 48 pages]

 

[excerpt]

Recent advances in combining two drilling techniques, hydraulic fracturing and horizontal drilling, have allowed access to large deposits of shale resources—that is, crude oil and natural gas trapped in shale and certain other dense rock formations. As a result, the cost of that "tight oil" and "shale gas" has become competitive with the cost of oil and gas extracted from other sources. Virtually nonexistent a decade ago, the development of shale resources has boomed in the United States, producing about 3.5 million barrels of tight oil per day and about 9.5 trillion cubic feet (Tcf) of shale gas per year. Those amounts equal about 30 percent of U.S. production of liquid fuels (which include crude oil, biofuels, and natural gas liquids) and 40 percent of U.S. production of natural gas. Shale development has also affected the federal budget, chiefly by increasing tax revenues.

 

The production of tight oil and shale gas will continue to grow over the next 10 years—by about 30 percent and about 60 percent, respectively, according to a recent projection by the Energy Information Administration (EIA). Another EIA estimate shows that the amount of tight oil and shale gas in the United States that could be extracted with today’s technology would satisfy domestic oil consumption at current rates for approximately 8 years and domestic gas consumption for 25.

 

Contents

CBO

Summary 1

How Will Shale Development Affect Energy Markets? 1

How Will Shale Development Affect Economic Output? 2

How Will Shale Development Affect the Federal Budget? 2

What Policy Options Would Affect Shale Development? 2

Hydraulic Fracturing and Shale Resources 3

Effects on Energy Markets 4

Trends in the Markets for Shale Gas and Tight Oil 5

Policy Options Related to Exports and Their Effects on Domestic Prices 7

Uncertainty in the Projections 12

Effects on Economic Output 14

In the Next Few Years 14

In the Longer Term 16

BOX. WHY THE ECONOMIC EFFECTS OF SHALE DEVELOPMENT WILL BE LARGER IN THE NEAR TERM 17

Effects on the Federal Budget 18

Tax Revenues 19

Payments for Federally Owned Resources 19

Appendix A: Effects on the Environment 23

Appendix B: The Basis of CBO’s Estimates of Longer-Term Effects on Economic Output 31

List of Tables and Figures 43

About This Document 44

 

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