The Arithmetic of Shale Gas
19 Pages Posted: 16 Jun 2012 Last revised: 26 Jun 2012
Date Written: June 15, 2012
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
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