Shale gas - Essay Example

Shale Gas in the United s Energy is undoubtedly one of the biggest problems that developing and developed nations would like to solve. The overdependence on natural gas saw the near depletion of these deposits. However, the discovery of Shale Gas revolutionized the energy industry in United States. The discovery of Shale gas had major economic implications for the country, both internally and externally. In order to fully understand the benefits that come with shale gas in the United States, it is crucial that the economic implications be considered.

This paper will critically look into the economic implications of the production of Shale gas on the economy of the United States. Balance of Trade The discovery of Shale gas in the United States came at a point where global prices for oil and natural gas was at an all-time high. The price of natural gas increases relative to the increase in price for oil as most of the natural gas produced come from oil reserves. As such, oil mining and processing plant also deal with natural gas. The increase in production of Shale gas led to the increase in production of natural gas.

In 2005, production of natural gas stood at 18 trillion feet per year. By 20013, natural gas production had rocketed to 24 trillion cubic feet per, a 33% increase. This was a result of shale gas production that had increased from 0.5 trillion feet per year in 2005 to 8.7 trillion cubic feet per year in 2013. As a result, this increase in production of shale gas reduced the amount of net oil imports by the US from 11 million barrels of oil per day to 8 million between 2007 and 2013. These savings translate to $100 million for the US government.

This has largely come due to the country being able to sustain a certain percentage of the oil deficit. This serves to reduce the negative balance of trade that the nation is currently experiencing as energy formulates a huge portion of United States’ trade. Gas Prices The increase in production of unconventional gas (tight oil and shale gas) led to the general increase in the supply of locally produced and processed natural gas. This increase in supply of natural gas led to the general decrease in the gas prices.

Local production provided for a cheaper commodity that can be transported in a cost effective manner that has minimal risks. All these factors contributed to the general decrease in natural gas prices within the country. The price decrease has been so significant, where it is currently at one-third of the gas prices in Europe. However, this has not affected the prices of other forms of energy. Generally, consumers have realized a 20% drop in the cost of natural gas supply to their homes, while industries have experienced a 50% drop in the cost of natural gas supply to their plants.

This price decrease is measured from 2008 when energy costs were at their peak. This has not averted the increase in the prices of gasoline and electricity. Production Costs As stated initially, the United States has had a negative balance of trade for a considerably long period of time. This is largely becaue oil produced in the East was much cheaper to purchase, refine and distribute. However, this translated to increased costs due to the transportation needed. However, the discovery of shale gas has caused numerous American oil companies to retract to the US as they seek to capitalize on readily available shale gas, reducing the cost of transportation Employment The successful production of shale gas within the United States has led to the creation of numerous employment opportunities for individuals within the production line and process.

The process of mining, transportation, processing and distribution has created numerous employment opportunities for professionals within the field. It is estimated that the shale production industry has created up to 2 million jobs within the United States since 2008. Shale Gas in the United States There are numerous commodities produced within the American market that are either directly or indirectly affected by the price of gas. These commodities have their prices fluctuate relative to the prevailing natural gas prices.

Owing to these relationship, such commodities have, in the long-run, experienced a reduction in price as cost of production resulting from the use of natural gas, has been significantly reduced. Government Revenue The production of Shale gas has translated to introduction of new revenue streams for the US government. The mining, processing and distribution of shale gas is taxed by the US government, ensuring that a considerable portion of the revenues realized is distributed to the National and State government.

This is important in ensuring that devolution and equitable distribution is realized as envisioned in the constitution. In conclusion, the mining, processing and distribution of shale gas has had considerable economic impact on the United States. Shale gas production has led to the creation of a cheaper natural gas alternative. This reduction in gas prices has led to the general reduction of prices of commodities whose production entails the use of natural gas. Shale gas production has also led to the improvement of the United States’ balance of trade by saving up to $100 million in terms of oil and gas imports.

Furthermore, the production of shale gas has led to the creation of numerous employment opportunities for a growing labor force. Shale gas undoubtedly has had a tremendous impact on the economy of the United States. Works Cited Herkenhoff, Linda. A profile of the oil and gas industry : resources, market forces, geopolitics, and technology. New York: Business Expert Press, 2014. Print. Nash, Katelyn M. Shale gas development. New York: Nova Science Publishers, 2010. Print. Rao, Vikram. Shale gas : the promise and the peril.

Research Triangle Park: RTI Press, 2012. Print. Speight, James G. Shale gas production processes. New York: Gulf Professional, 2013. Print.