The Economics of Shale Gas Development

In the past decade, innovations in hydraulic fracturing and horizontal drilling have fueled a boom in the production of natural gas (as well as oil) from geological formations—primarily deep shales—in which hydrocarbon production was previously unprofitable. Impacts on US fossil fuel production and...

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Bibliographic Details
Published in:Annual review of resource economics 2015-01, Vol.7 (1), p.269-289
Main Authors: Mason, Charles F, Muehlenbachs, Lucija A, Olmstead, Sheila M
Format: Article
Language:English
Subjects:
Drilling
economic benefits
Economic impact
environmental impacts
Externality
Fossil fuels
Hydraulic fracturing
Natural gas
negative externalities
Oil shale
positive externalities
Resource Economics
Studies
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Summary:In the past decade, innovations in hydraulic fracturing and horizontal drilling have fueled a boom in the production of natural gas (as well as oil) from geological formations—primarily deep shales—in which hydrocarbon production was previously unprofitable. Impacts on US fossil fuel production and the US economy more broadly have been transformative, even in the first decade. The boom has been accompanied by concerns about negative externalities, including impacts to air, water, and quality of life in producing regions. We describe the economic benefits of the shale gas boom, including direct market impacts and positive externalities, providing back-of-the-envelope estimates of their magnitude. This article also summarizes the current science and economics literatures on negative externalities. We conclude that the likely scope of economic benefits is extraordinarily large and that continued research on the magnitude of negative externalities is necessary to inform risk-mitigating policies.
ISSN:1941-1340
1941-1359
DOI:10.1146/annurev-resource-100814-125023