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The Arithmetic of Shale Gas

19 Pages Posted: 16 Jun 2012 Last revised: 26 Jun 2012

Robert M. Ames

Yale Graduates Energy Study Group

Anthony Corridore

Lafarge Corp.; Yale Graduates Energy Study Group

Joel Nathan Ephross

Duane Morris LLP

Edward Hirs

University of Houston - Department of Economics; Yale Graduates Energy Study Group; Hillhouse Resources, LLC

Paul W. MacAvoy

Yale School of Management (Deceased); Yale University, Yale Graduates Energy Study Group (Deceased)

Richard Tavelli

Yale Graduates Energy Study Group

Date Written: June 15, 2012

Abstract

Academic and professional assessments of shale gas (also known as frac gas) from vast shale formations in the US have focused on the social costs of shale gas development. Using the economic tools of traditional cost benefit analysis, we demonstrate that for one given year, 2010, the consumer surplus from shale gas is in excess of $100 billion to the US economy. The benefit to the US economy of replacing 1.0 million bbls per day of oil consumption with the BTU equivalent of natural gas is in excess of $25 billion.

Keywords: shale gas, energy independence, fracgas, fracking, cost benefit analysis, natural gas, crude oil, energy security, consumer surplus

JEL Classification: Q4, Q3, L95, D00, D6

Suggested Citation

Ames, Robert M. and Corridore, Anthony and Ephross, Joel Nathan and Hirs, Edward and MacAvoy, Paul W. and Tavelli, Richard, The Arithmetic of Shale Gas (June 15, 2012). Available at SSRN: https://ssrn.com/abstract=2085027 or http://dx.doi.org/10.2139/ssrn.2085027

Robert M. Ames

Yale Graduates Energy Study Group

New Haven, CT 06520
United States

Anthony Corridore

Lafarge Corp. ( email )

United States

Yale Graduates Energy Study Group

New Haven, CT 06520
United States

Joel Nathan Ephross

Duane Morris LLP ( email )

United States
713-402-3920 (Phone)

Edward Hirs (Contact Author)

University of Houston - Department of Economics ( email )

Houston, TX 77204-5882
United States
713-961-9661 (Phone)

Yale Graduates Energy Study Group

New Haven, CT 06520
United States

Hillhouse Resources, LLC

4265 San Felipe Ste 1100
Houston, TX 77027
United States

Paul W. MacAvoy

Yale School of Management (Deceased)

Yale University, Yale Graduates Energy Study Group (Deceased)

Richard Tavelli

Yale Graduates Energy Study Group ( email )

New Haven, CT 06520
United States

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