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According to data from the Energy Information Administration, the combined production of US crude oil and natural gas peaked in the early 1970s at nearly 45 quadrillion BTUs, and then gradually declined over the next 33 years to below 32 quadrillion BTUs by 2005 (see chart above). And then America’s energy sector was rejuvenated with revolutionary drilling technologies (hydraulic fracturing and horizontal drilling) that unlocked previously inaccessible oceans of oil and gas that were trapped inside shale rock deep below the Earth’s surface. As a result of America’s shale revolution, domestic production of oil and gas surged by 36.5% between 2005 and 2013, and completely reversed the three-decade decline in production in only 8 years to 44 quadrillion BTUs this year (estimated based on production through May). At the current pace of increases in the production of domestic shale resources, America is on track to produce more oil and gas in 2014 – in excess of 45 quadrillion BTUs – than in any previous year in US history.
Many of the economic benefits of America’s shale revolution (direct and indirect well-paying jobs, royalty payments to private landowners, increased state tax revenues, lower energy costs, etc.) have been reported here and elsewhere, but a new study by IHS Consulting provides new details on just how significant the benefits have been to the US economy from the growth of unconventional shale oil and gas production. Here’s an overview from the IHS report “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy“:
The economic and employment contributions from US unconventional oil and gas production are now being felt throughout the US economy, increasing household incomes, boosting trade and contributing to a new increase in US competitiveness in the world economy.
The benefits of this unconventional oil and natural gas revolution are also reaching more than 120 million American households across the country whose incomes and consumption are rising. In 2012, average real disposable income per household increased by more than $1,200 as a result of the unconventional revolution—an aggregate financial boost to all US households of $163 billion. Real disposable income will continue to increase through the end of the forecast period, with the unconventional revolution’s annual contribution to the average household growing to just over $2,700 in 2020 and to more than $3,500 by 2025.
The unconventional oil and natural gas value chain and energy-related chemicals activity together supported more than 2.1 million jobs in 2012. Midstream and downstream energy and energy-related chemicals activity accounted for nearly 377,000 of these jobs. By 2025, the unconventional oil and natural gas value chain and energy-related chemicals activity will support almost 3.9 million jobs, of which nearly 376,000 will derive from midstream and downstream energy and energy-related chemicals activity.
More than 460,000 combined manufacturing jobs (3.7 percent of all manufacturing jobs) will be supported in 2020, rising to nearly 515,000 (4.2 percent of total manufacturing jobs) in 2025. The manufacturing sector will become increasingly connected to unconventional development as a primary source to create and sustain jobs over the course of the study period. Manufacturing jobs will represent one out of every eight jobs supported by unconventional oil and gas development during that time.
These impacts are particularly significant when it is examined against the backdrop of a historically slow economic recovery and stubbornly high unemployment. The positive forces associated with unconventional oil and natural gas activity, and the second-order gains by economic sectors that benefit from the unconventional revolution, will help the US economy to make progress in the face of steady economic headwinds.
Here are some news reports today about the IHS study:
From the WSJ: “Households Gained $1,200 Thanks to Surging U.S. Oil Production.”
From Jimmy P: “More evidence the shale revolution probably got Obama reelected.“
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