Environmental Engineering Reference
In-Depth Information
Experiment II: Changes in US oil and gas with expansion in shale re-
sources. We also assume no growth in crude oil exports, as exports are
prohibited under current US policy.
In these two experiments we assumed that labour and capital are not fully
employed and their supplies go up due to higher wages and rental rates. To
implement these shocks we assumed that the new fracking technology ex-
pands access to more resources at no added cost, which means the new
technology shifts out the effective natural gas and crude oil supply curves. In
other words, the technology makes more oil and gas available without much
of an increase in cost. We defined closures which expand/contract oil and
gas resources to achieve the production targets in each time period. In these
experiments we make no changes in the tax/subsidy rates, including trade
barriers except for crude oil. Current US law does not permit crude oil ex-
ports, except for a small amount to Canada. In the second experiment, we
fixed the US exports of crude oil due to this law. To isolate the impacts of the
new fracking technology, we assumed no exogenous shocks in economic
factors, which may affect economic growth at the global scale.
The expansion in shale resources has raised an important debate re-
garding US trade policy on natural gas exports. Natural gas exports to non-
free trade destinations require DOE approval. Some experts argue that the
US should allow exports of gas and oil, while others believe that restricting
exports of these commodities will be more beneficial for the US economy. In
response to this debate we devised another experiment, which restricts
natural gas exports in the presence of expansion in shale gas production.
The third experiment is:
Experiment III: Changes in US oil and gas with expansion in shale re-
sources, with no change in crude oil or natural gas exports. Petroleum
product exports are free to expand.
Finally, in each experiment a five-step process was used to simulate the
impacts of changes in oil and gas over time according to the percentage
changes in supplies of these energy products as presented in Figure 2. For
example, we developed the following five simulations for the first experi-
ment. In the first step a closure was used to change supplies of oil and gas by
19.2% and
18.1%, respectively, for the period 2007-12. Then the up-
dated base data obtained from the first step, in combination with a closure,
was used to expand supplies of oil and gas by 10.1% and
1%, respectively,
for the period 2012-17. In the third step the up-dated databases of step two
in combination with
8.4% (for oil) and 0.05% (for gas) shocks were im-
plemented for the period 2017-22. In the fourth step the up-dated database
of step three in combination with
13.2% (for oil) and 2.1% (for gas) shocks
were implemented for the period 2022-27. In the last step, the up-dated
database of step four in combination with
0.9% (for oil) and 0.4% (for gas)
shocks were used for the period 2027-35. This process was repeated in the
