Environmental Engineering Reference
In-Depth Information
second and third experiments with the percentage changes corresponding to
the case with expansion in shale oil and gas as shown in Figure 2.
6 Simulation Results
The expansion in oil and gas directly and indirectly affects the US economy
and improves its position in the global energy market. The simulation re-
sults obtained from the implemented experiments highlight some import-
ant consequences that are outlined in the following analyses.
6.1 Production
In the absence of expansion in shale oil and gas, US oil and gas production
are expected to decrease over time. The simulation results obtained from the
first experiment show that in this case almost all sectors, except for the coal
industry, will have output falling during the period 2007-35 (see the last
column of the top panel of Table 1). However, as shown in Table 1, the rate of
reduction varies across sectors over time. Some sectors may experience
temporary increases in their output in 2012-17 when US oil production is
expected to increase even without new shale resources (see the second
numerical column in the first panel of Table 1). In general, in the absence of
shale oil and gas, the non-energy sectors (except crops) are expected to lose
around 0.5% (for energy-intensive industries) to 1.5% (for services) of their
output during the period 2007-35. Reduction in energy sources does not
affect crop production in this case because of the weak link between energy
production and prices and agriculture.
When expansion of shale oil and gas resources is included in the
simulation (Experiment II), oil and gas supplies increase by 25.8% and 52%,
respectively, during the period 2007-35, and that leads to expansion in
production of almost all sectors (except coal) over time. As shown in the last
column of the bottom panel of Table 1, the non-energy sectors (except for
crops) will experience expansion in their outputs ranging from 0.7% (for
energy-intensive industries) to 2.4% (for services) during the period 2007-35.
When exports of gas are limited, expansion in shale oil and gas pushes
sectoral outputs to higher levels compared to the case of no trade restriction
on gas. This shows that limiting exports of gas results in gains for the US
economy in terms of expansion in production.
Among energy sources, the supply of coal behaves differently. Unlike other
energy items, the supply of coal increases (by 1.2%) in Experiment I and
decreases in Experiments II (by
2.1%) and III (by
5.6%) during the period
2007-35. In the first experiment, the expansion in coal production/
consumption happens due to the net of substitution and expansion effects.
When supplies of oil and gas decrease, as shown in Table 1, the levels of
economic activity and employment turn down, and that reduces demand for
all energy items (including coal). This is a negative expansion effect for coal.
However, in this case the supply of coal expands in response to shortages in
