Innovation Drives Shale Revolution, Saves U.S. Families Thousands Per Year

A recent report from White House’s Council of Economic Advisers (CEA) estimates the tremendous growth in shale production between 2007 and 2019 has resulted in annual energy savings of about $2,500 for each family of four. Across our nation’s economy, price reductions in consumption and production of oil and natural gas have saved $203 billion annually through lower electricity prices (natural gas) and transportation costs (oil).

CEA’s report entitled “The Value of U.S. Energy Innovation and Policies Supporting the Shale Revolution” pointed to the tremendous growth in shale production between 2007 and 2019, with natural gas increasing eight-fold, while oil production increased nineteen-fold. CEA is an agency within the Executive Office of the President.

“Nearly half of American households rely on natural gas to heat their homes, with an annual cost of just $634. For a household living at the poverty level, the financial savings that come from natural gas can be life-changing,” writes Chad Warmington, President of the Petroleum Alliance of Oklahoma.

“It is widely known that hydraulic fracturing and horizontal drilling have brought about a revolution in American energy development – enabling real energy security for the first time as the U.S. is now a net energy exporter. This unprecedented achievement could not have become reality if not for the combined technologies, which are used in practically every well drilled in the U.S,” Warmington added.

Consumers benefited from a 63 percent reduction in natural gas prices through 2018, leading to an overall 45 percent decline in the wholesale price of electricity, according the CEA. Globally, oil prices declined 10 percent through 2019 due to U.S. innovation and shale exploration.

Lower-income households who spend a greater share of overall income on energy-related bills, will bring a 6.8 percent boost in income savings for the bottom fifth of earners alone.

President Donald Trump, speaking at a recent conference in Pennsylvania, described the shale revolution as “saving energy producers millions of dollars in compliance costs, while maintaining sterling environmental standards.”

But savings also came in reducing greenhouse gas (GHG) emissions between 2005 and 2017, with shale production and consumption lowering GHG emissions by 527 million metric tons per year.

“The Trump Administration’s deregulatory energy policy follows earlier Federal deregulatory policies that helped to spur the shale revolution. By limiting unnecessary constraints on private innovation and investment, the Administration’s policy supports further unleashing of the country’s abundant human and energy resources. It contrasts with policies that expand government control and restrictions on productivity and innovation, which some states have adopted,” CEA wrote.

The authors pointed to New York, a state that banned shale production and has prevented new pipeline construction. These policies have led to an increase in energy prices and greater dependency on outside sources for energy, including Russia. Decisions like these cost consumers billions each year, raising the cost of living by $233 for an average family of four, while also simultaneously reducing the rate of GHG emissions reductions compared to neighboring states, like Pennsylvania, “which has allowed shale production to flourish.”

The shale-driven reduction in GHG emissions of 527 million metric tons is larger than the 2012 fuel standards for light-duty vehicle GHG emissions and Corporate Average Fuel Economy (CAFE) standards through 2025 of 380 million metric tons, as well as Clean Power Plan reductions projected for 2025 of 240 million metric tons, CEA calculated.

“The shale revolution provides a striking example of the potential of private sector energy innovation and the resulting implications for consumers and the environment. In less than a decade, productivity in oil and gas extraction has increased several fold,” CEA authors wrote. “As a result, production costs have fallen, making energy goods and services more affordable for consumers, especially lower-income households. By several measures, the shale revolution has led to greater environmental progress in the United States than in the European Union, which exercises more government control and has more stringent emissions policies.”

CEA’s report urged greater use of natural gas, an increase in reporting of the positive effects at the federal and state levels of higher natural gas production, and modernization of the nation’s electric grid.