The study, The Economic and Employment Contributions of Shale Gas in the United States, is reportedly 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 North America. IHS Vice President John Larson, the lead author of the study said, "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. 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 governments
- 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
According to a release, 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 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. Larson said, "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. The benefits of that savings reverberate through the wider economy."
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. ... indicated that, "The results represent a conservative estimate."
Speaking at the "West Virginia: Energy Powering Economic Development" summit called by WV Governor Earl Ray Tomblin, on December 6, American Chemistry Council President and CEO Cal Dooley reinforced the economic and employment opportunities from shale gas development. Dooley said, "While many experts have focused on the jobs and revenues that could come from exploration and production of natural gas from the Marcellus Shale, the manufacturing story is just beginning to be told. Shale gas could generate thousands of new jobs in the chemical industry and its supply chain. It's one of the most promising developments for new manufacturing jobs in at least a decade."
He said, "Affordable, abundant shale gas is creating a global competitive advantage for the domestic petrochemical industry. After years of high, volatile natural gas prices that helped lead to the loss of 140,000 chemical jobs, the industry is expanding once again. Chemical manufacturers make a key product, ethylene, from the ethane found in shale gas, giving U.S. companies a significant edge over Western European competitors using a more expensive, oil-based feedstock. New chemical business can spur growth in supplier sectors, help produce more materials for export, and create jobs." Dooley noted. A recent ACC study found that the $3.2 billion investment in a major ethylene production complex in West Virginia would generate 12,000 jobs in chemical and supplier industries, $729 million in wages and $95 million in state tax revenue. Nationally, a 25 percent increase in ethane production would result in nearly 400,000 new jobs. He said, "Shale gas is a game changer."
Access a release from IHS Global Insight (click here). Access a required registration form to download the complete report (click here). Access the ANGA website for additional information (click here). Access a release from ACC (click here). [#Energy/NatGas]
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