"Shale gas combines a capital-intensive industry with a broad domestic supply chain"
WASHINGTON--(BUSINESS WIRE)--The natural gas "shale gale" that has dramatically transformed the
outlook for U.S. energy supplies is also having profound economic
impacts -- creating jobs, reducing consumer costs of natural gas and
electricity, stimulating economic growth and bolstering federal, state
and local tax revenue, according to a new IHS Global Insight study. The
study found that shale gas production supported more than 600,000 jobs
in 2010, a number that is projected to grow to nearly 870,000 by 2015.
The study, The Economic and Employment Contributions of Shale Gas in
the United States, is the most definitive study to date tracking the
long-term economic impact of U.S. shale gas production. It presents the
economic contributions of shale gas in terms of jobs, economic value and
government revenues through 2035, as well as the broader macroeconomic
impacts on households and businesses. The report is the first of three
on the economic effects of unconventional gas and oil development in
“The rapid growth in shale gas production—currently 34 percent of total
U.S. production—is one of the most significant energy developments in
recent decades and is having a significant impact on the nation's
economy in terms of stimulating job creation and economic growth,” said
IHS Vice President John Larson, the lead author of the study. “This
study further informs the discussion with a greater understanding of the
economic potential from this vast American energy source.”
Among the study's key findings:
Shale gas had grown to 27 percent of U.S. natural gas production by
2010; it is currently 34 percent and will reach 43 percent in 2015 and
more than double by 2035 to 60 percent
In 2010, the shale gas industry supported more than 600,000 jobs; by
2015 the total will likely grow to nearly 870,000 and to more than 1.6
million by 2035
Nearly $1.9 trillion in cumulative capital investments are expected to
be made between 2010 and 2035
Annual capital expenditures, especially strong in the early years,
will grow to $48.1 billion in 2015
The shale gas contribution to the U.S. gross domestic product (GDP)
was more than $76.9 billion in 2010; in 2015 it will be $118.2 billion
and will triple to $231.1 billion in 2035
Over the next 25 years, the shale gas industry will generate more than
$933 billion in tax revenues for local, state and the federal
Savings from lower gas prices, as well as the associated lower prices
for other consumer purchases, equate to an annual average addition of
$926 in disposable income per household between 2012 and 2015, and
increase to more than $2,000 per household in 2035 on an annual basis
The report’s findings reflect the dramatic impact of shale gas
production in the United States. As recently as 2007, it was believed
that the country would soon need to import large volumes of liquefied
natural gas (LNG) for domestic consumption. Instead, shale gas
production has more than doubled the size of the discovered natural gas
resource in North America—enough to satisfy more than 100 years of
consumption at current rates.
A key reason for the shale gas industry’s profound economic impact is
its high “employment multiplier”—the indirect and induced jobs created
to support an industry. For every direct job created in the shale gas
sector, more than three indirect and induced jobs are created, a rate
higher than the financial and construction industries, the report finds.
“Shale gas combines a capital-intensive industry with a broad domestic
supply chain,” Larson said. “The United States is a leader in all parts
of the shale gas industry which means that most of its suppliers are
domestically based, and that means a larger portion of the dollars spent
are supporting domestic jobs in trucking, steel fabrication, aggregates,
heavy equipment manufacturing, hotels, and restaurants, among others.”
The study also found that shale gas and related jobs pay higher wages on
average – currently $23.16 per hour – than those paid to workers in
manufacturing, transportation and education.
The IHS Global Insight study measured the broader impact of lower
natural gas prices, finding that over the 2010-2035 period prices on
average would be at least two times higher absent shale gas production.
This impact is even greater now and over the next few years when prices
would have been two-and-a-half to three times higher. The lower natural
gas prices have resulted in a 10 percent reduction in electricity costs
nationally and that flows through the economy to lead to lower prices
for many other consumer purchases.
Lower gas prices also boost the international competitiveness of
domestic manufacturers, resulting in 2.9 percent higher industrial
production by 2017 and 4.7 percent higher production by 2035.
“Absent the added supply from shale gas production, large volumes of LNG
imports would be required and U.S. consumers would be paying European or
even Asian prices which are two to three times what they are today here
in the U.S.,” Larson said. “The benefits of that savings reverberate
through the wider economy.”
The Economic and Employment Contributions of Shale Gas in the United
States was commissioned by America's Natural Gas Alliance (ANGA).
IHS Global Insight offers an independent assessment and is exclusively
responsible for all of the analysis, content, and conclusions contained
in the study.
In measuring the economic contribution of shale gas, the study fully
"sized" the economic influence of the industry by capturing all the
supply chain and income effects associated with shale gas activity in
the U.S. The results of the production and capital expenditure profile
analysis were integrated into a customized modeling approach developed
by IHS Global Insight. This approach links Input-Output modeling
techniques – similar to those used by the U.S. Department of Commerce
and the Congressional Budget Office– with the dynamic modeling
capabilities of proprietary IHS models to capture the industry's
comprehensive contribution and impact on the economy. The results
represent a conservative estimate as the study:
Constrained future production and capital expenditures by realistic
market demand as well as technical and economic feasibility of
developing shale gas plays.
Did not consider production or investment activities from additional
gas plays that have yet to be discovered.
Independently evaluated each play to reflect regulatory environments
in each region and adjusted production profiles to reflect little or
no development if there was uncertainty as to regulation and access.
Did not consider the economic benefits accruing to the U.S. suppliers
who are supplying the Canadian shale gas industry.
Did not quantify the job creation in industries that would refocus
investment back to the United States (for instance, petrochemicals).
IHS Global Insight established the modern economic forecasting industry
nearly 50 years ago and provides the most comprehensive economic and
financial information available on countries, regions, and industries,
using a unique combination of expertise, models, data, and software
within a common analytical framework. Among those who developed IHS
Global Insight's expertise in this area was Nobel laureate in Economics
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