The benefits of U.S. shale boom during 2010-2015 extended to the overall economy, adding perhaps 1 percent to U.S. gross domestic product (GDP), according to a study published on Tuesday.
A study paper, titled "GDP Gain Realized in Shale Boom's First 10 Years" published in the Dallas Fed Energy Research, showed that the U.S. shale boom, resulted from technological advances in horizontal drilling and hydraulic fracturing that unlocked new stores of energy, has benefited the nation's oil trade balance and oil-producing regions and led to unusually large employment and output gains.
Co-authors Mine Yucel, a senior vice president and senior research advisor at the Research Department at the Federal Reserve Bank of Dallas, and Michael D. Plante, a senior research economist at the same department, said in the paper that their model indicates that cheaper fuel prices allowed households to consume about 3.6 percent more fuel.
"Households also increased their consumption of other goods because the decline in fuel prices increased their disposable income, leading to a 0.7 percent increase in overall consumption," the co-authors said in the paper.
The decline in fuel prices increased firm fuel use in the energy sector and in non-oil sectors. "Our model shows that lower fuel prices led to higher output in non-oil sectors and higher U.S. aggregate investment. Altogether, these effects led to a GDP increase of 1 percent in 2015 relative to 2010," said the paper.
"Given that the actual increase in U.S. GDP was 10 percent over the period, the shale boom accounted for one-tenth of the overall increase. Although the oil sector makes up less than 1.5 percent of the economy, our results suggest that the shale boom generated significant positive spillovers," it said.
The widespread use of horizontal drilling and hydraulic fracking started in the mid-2000s with natural gas production in the Barnett Shale in North Central Texas. By the start of this decade, the technique had been applied to several shale oil formations, most notably the Permian Basin in West Texas and New Mexico, with remarkable results.
In 2006, before the shale boom, the United States imported about twice the oil it produced. That share has declined to two-thirds now.
As a result, the U.S. petroleum trade balance narrowed from negative 492 billion U.S. dollars in 2005 to negative 136 billion dollars in 2018.
Meanwhile, U.S. exports of petroleum products have steadily risen. In recent years, the United States has become a major exporter of crude oil.