Econonomics of Energy and Environmental Policy

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From Boom to Bust? A Critical Look at US Shale Gas Projections

U.S. shale gas production is generally expected to continue its fast rise of the last years. However, a cautious evaluation is needed. Shale gas resources are potentially overestimated and it is uncertain to what extent they can be economically produced. The adverse environmental effects of ever more wells being drilled may lead to a fall in public acceptance and the strengthening of U.S. regulation. The objective of this paper is twofold: first, to provide a critical look at current U.S. shale gas projections and, in a second step, investigate the implications of a less optimistic development by means of numerical simulation. In a world of declining U.S. shale gas production after 2015, natural gas consumption outside the U.S.A. is reduced from its reference path by at least as much as U.S. consumption. Trade flows are redirected, and the recent U.S. debate on allowing exports of Liquefied Natural Gas is moot.
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JEL Codes:Q35: Hydrocarbon Resources, O13: Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products, D02: Institutions: Design, Formation, Operations, and Impact

Keywords: Shale gas, U.S.A., Natural gas trade, Resource potential, Equilibrium modeling

DOI: 10.5547/2160-5890.4.1.pric

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Published in Volume 4, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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