A Note on Oil and Gas Production from Shale and Long-Run U.S. Economic Growth

Arora, Vipin (2014): A Note on Oil and Gas Production from Shale and Long-Run U.S. Economic Growth.

Abstract

The short-term economic benefits of oil and gas production from shale for the U.S. economy have been widely discussed, but the long-term effects remain unclear. These long-run impacts likely depend upon the degree to which such oil and gas production can impact growth in capital per worker or technological progress throughout the economy. Oil or gas production from shale can lead to economic growth through economy-wide increases in capital per worker directly through investment in the oil and gas extraction sector and along the supply chain. Alternatively, the availability of low cost natural gas in large quantities may lead to replacement or additions to capital stock outside of oil and gas extraction and related industries.

Oil and gas production can lead to economy-wide technology gains directly through the application of technologies used in extraction and related activities in other sectors. There is much greater upside and uncertainty, however, surrounding if such production can lead to technological growth in other sectors indirectly. Are there currently important and productive technologies not being used or applied that become plausible because of lower-cost natural gas? Will there be transformative technologies developed for use with lower-cost natural gas that currently do not exist? And might each of these individually lead to other technologies that currently do not exist?

• Item Type: MPRA Paper
• Language: English
• Keywords: Productivity; shale; economic growth; oil and gas
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q33 - Resource Booms; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

Arora, Vipin and Jozef Lieskovsky, “Natural Gas and U.S. Economic Activity,” The Energy Journal, Forthcoming

Fernald, John “Productivity and Potential Output Before, During, and After the Great Recession,” Federal Reserve Bank of San Francisco Working Paper 2012-18, 2012.

Fleck, Susan, Steven Rosenthal, Matthew Russell, Erich H. Strassner, and Lisa Usher, “A Prototype BEA/BLS Industry-Level Production Account for the United States,” mimeo, 2012.

Shackleton, Robert, “Total Factor Productivity Growth in Historical Perspective,” U.S. Congressional Budget Office Working Paper 2013-01, March 2013, for more on U.S. TFP growth since 1870.

Steindel, Charles and Kevin J. Stiroh, “Productivity: What is it and Why Do We Care About it?” Federal Reserve Bank of New York Staff Report 122, 2001.