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Unconventional wisdom: economic analysis of US shale gas and implications for the EU

Studies N°02/2014. Iddri, 2014. 36 p.

Cette étude propose une évaluation de la « révolution » du gaz de schiste aux États-Unis, notamment en termes de prix de l'énergie et d'impacts macroéconomiques, et questionne la réplicabilité de cette révolution et de ses impacts en Europe.

>> Cette publication existe également en version courte : Policy Brief N°05/14.

Points clés [en anglais] :

  • THE UNCONVENTIONAL OIL AND GAS REVOLUTION: IMPACTS ON THE US ECONOMY

Despite very low and ultimately unsustainable short-term prices of natural gas, the unconventional oil and gas revolution has had a minimal impact on the US macro-economy. We provide an upper—optimistic—estimate of its long-term effect on the level of US GDP (not its long-term annual growth rate) at about 0.84% between 2012 and 2035. Compared to an annual growth rate of 1.4%, this long-term increase is small. And we estimate its short-term stimulus effects at 0.88% of GDP during the 2007/8 to 2012 downturn. The unconventional oil and gas revolution has also had a minimal impact on US manufacturing, confined to gas-intensive sectors, which we calculate as making up about 1.2% of US GDP. There is thus no evidence that shale gas is driving an overall manufacturing renaissance in the US.

  • THE UNCONVENTIONAL OIL AND GAS REVOLUTION: IMPACTS ON THE US ENERGY MIX

Absent further policies, the US shale revolution will not lead to a significant, sustained decarbonisation of the US energy mix nor will it assure US energy security. A reference scenario based on current policies sees US emissions stagnant at current levels out to 2040, clearly insufficient for a reasonable US contribution to global climate change mitigation. Oil imports continue to rise in monetary terms. While it can promote some coal to gas switching in the short term if additional policies are enacted, there is also the risk that the unconventional oil and gas revolution further locks the US into an energy- and emissions-intensive capital stock.

  • IMPLICATIONS FOR THE EU ECONOMY AND CLIMATE POLICIES

It is unlikely that the EU will repeat the US experience in terms of the scale of unconventional oil and gas production. Uncertainty exists around the exact size of exploitable EU shale gas reserves; a median scenario would see the EU producing about 3-10% of its gas demand from shale gas by 2030-2035. The EU’s fossil fuel import dependency will therefore continue to increase and its fossil fuel prices will remain largely determined by international markets. Shale production would not have significant macroeconomic or competitiveness impacts for Europe in the period to 2030- 2035. In terms of energy, climate and competitiveness challenges, shale gas could potentially be a complement to a broad EU energy strategy for some countries heavily dependent on coal or Russian gas, but it is certainly not a substitute for the current strategic orientations of EU energy policy