NBER Paper Estimates Shale Gas Savings of $3.1-$4.3 Trillion for US Consumers

The Story

A new National Bureau of Economic Research working paper by Lucas W. Davis calculates how much shale gas has saved U.S. natural gas consumers. The paper notes that as of the mid-2000s, U.S. natural gas production had been flat for a decade and the U.S. was importing liquefied natural gas with plans to import more. Advances in hydraulic fracturing and horizontal drilling then caused U.S. natural gas production to increase significantly, making the country the world’s largest exporter. Using price differences between the United States, Europe and Japan, the paper estimates that U.S. natural gas consumers saved $3.1 to $4.3 trillion between 2007 and 2025, equivalent to $164–$227 billion annually. The paper reports that access to low-price U.S. natural gas was particularly valuable during major supply shocks such as the war in Ukraine, and that the benefits were experienced broadly across sectors and states.

Key Facts

• As of the mid-2000s, U.S. natural gas production had been flat for a decade.
• At that time, the U.S. was importing liquefied natural gas (LNG) and had plans to import more.
• Advances in hydraulic fracturing and horizontal drilling caused U.S. natural gas production to increase significantly.
• The U.S. went from being a net importer of natural gas to the world’s largest exporter.
• The paper calculates that U.S. natural gas consumers saved $3.1–$4.3 trillion between 2007 and 2025.
• This is equivalent to $164–$227 billion annually.
• Access to low-price U.S. natural gas was particularly valuable during major supply shocks such as the war in Ukraine.
• The benefits of shale gas have been experienced broadly across sectors and states.
• The paper is a new NBER working paper by Lucas W. Davis.

Conflicting Reports

No conflicting reports identified in the source article.

Still Unclear

No open questions identified in the source article.

Misconceptions

No widespread misconceptions addressed in the source article.

Key Figures

• Lucas W. Davis, author of the NBER working paper

Sources: marginalrevolution.com