Economic viability of the shale gas boom in the US - Literature review Example

economy, environment as well as political status in the future. Natural gas is known of reducing air pollution as a result of using coal by 30 percent (Energy Information Administration 2009 and Energy Information Administration (US) 2009). As a result of this, majority of the people believe that the use of natural gas will aid reduce pollution of air by fossil fuels such as coal and oil. The production and utilization of domestic fuels will have a significant impact on the economy of any state by creating job opportunities as well as increasing income through royalty payments (Energy Information Administration (US) 2011 and Schlumberger 2011).

Additionally, the use of natural gas will enable the U.S. utilize the money used to be spent on fuel imports on other valuable goods (Energy Information Administration (US) 2010 and Energy Information Administration (US) 2011b). Although there are many shale gas reserves in the U.S., the most important is Marcellus Shale (Bloomberg 2011). Marcellus Shale is located in Pennsylvania as well as Upstate New York. It has gained significant attention because of its closeness to most populated areas, its huge deposit size, and the amount of recoverable gas it has.

Some of the factors that affect the productivity of the Marcellus Shale include “the drop in natural gas prices, overproduction claims, a decade of rising costs and apparent production declines in the shale gas wells” (Energy Information Administration 2012b). Economic analysis of this circumstance will enable the examination of the profitability of the shale gas well in the Marcellus Shale through looking at production as well as variables (Schoen 2011). The results gotten will then aid in evaluating whether producers are in a position to profitably extract natural gas despite the current market conditions.

Profitability will then be measured by calculating crucial metrics such as internal rate of return of the chosen