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The impacts of the unconventional oil and gas revolution

Hydrocarbon Engineering,

A new study from IHS has found that the economic and employment contributions form US unconventional oil and gas production are now being felt throughout the US economy. The benefits have increased household incomes, boosted trade and are contributing to a new increase in US competitiveness in the world economy.

Unconventional oil and gas activities in the US have increased the disposable income of US households by an average of US$ 1200, from savings in lower energy costs. By 2015 the savings are expected to reach US$ 2000 and by 2025, US$ 3500. The US trade position will also continue to improve due to the unconventional developments due to the significant reduction in energy import levels and increased global competitiveness of US based energy intensive industries. The US trade deficit is also expected to reduce due to a rise in domestic production and manufacturing that will displace imports, as well as provide industries with a favourable export position.

The study

The study ‘America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy – Volume 3: A Manufacturing Renaissance’ builds upon previous reports that research that have researched the economic contributions of unconventional oil and gas activity. The new study widens the scope of previous reports to include the full value chain (up, mid and downstream and energy related chemicals) and the overall macroeconomic contributions to the US manufacturing sector and broader economy.

Other areas with benefits

Energy related chemicals and other energy intensive industries such as petroleum refining, aluminium, glass, cement and the food industry are also benefitting from secure supplies of low cost energy from unconventional production according to the study. More than 70% of the cost of producing energy related chemicals is the cost of raw materials and energy feedstocks. The chemical industry accounted for US$ 198 billion of US merchandise exports last year, compared to US$ 152 billion 2007. This increase trend is expected to continue as energy intensive industries benefit from lower energy prices, lower electricity prices and increased demand for products as growth in investment spurs domestic consumption.

Other key findings

  •       The entire unconventional oil and gas value chain and energy related chemicals will contribute US$ 284 billion in value added contributions to GDP in 2012, a figure that will increase nearly US$ 533 billion annually in 2025.
  •       The full value chain of industrial activity and employment associated with unconventional oil and gas contributed more than US$ 74 billion in federal and state government revenues in 2012.
  •       The study projects that between 2012 and 2025, there will be a cumulative investment of US$ 346 billion across the mid and downstream energy and energy related values chain.
  •       Employment contributions from the mid and downstream sector are at their greatest in the near term as expansions and other capital expenditures are made to increase capacity connecting the resource base with the end user.

Adapted from a press release by Claira Lloyd.

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