NCPA - National Center for Policy Analysis

A Shale Gas Revolution?

January 9, 2012

Shale gas -- a relatively new and unexplored source of natural gas -- is cheaper and involves fewer emissions than traditional coal or oil.  But recent environmental concerns, combined with shale gas' important role in the global economy, have prompted various groups to investigate the resource and its potential impacts.  In a recent study, Massachusetts Institute of Technology researchers study the market impacts that shale exploitation has in the long run.

  • Currently, shale gas constitutes one quarter of the domestic natural gas supply.
  • The researchers found that without shale, gas prices would rise by about five times the current levels by 2050, and that electricity rates would also increase.
  • Conversely, with shale, prices for gas would only double in that same time frame.
  • The shale input also reduces electricity price growth by 5 percent in 2030 and 10 percent in 2045, compared to a scenario without shale gas.

Shale gas does not have to be a unique energy form in order to accomplish the above-mentioned goals: it merely increases the aggregate gas supply and therefore extends the reliable life of that resource.  However, shale does have several idiosyncratic advantages that further increase its attractiveness to American developers.

  • For every $4 we pay for energy from natural gas, we pay $25 for oil, according to the U.S. Energy Information Administration.
  • According to a report from IHS Global Insight, the industry has the potential to create 870,000 jobs within the United States.
  • Because domestic gas prices are cheaper than normal rates abroad, the further development of domestic gas resources creates a real opportunity to increase exports.

Source: Vicki Ekstrom, "A Shale Gas Revolution?" Massachusetts Institute of Technology, January 3, 2012.

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