Environmental Engineering Reference
In-Depth Information
In the absence of expansion in shale oil and gas, the US energy trade
balance goes down by about $44 billion due to increases in net imports of
energy items in 2007-35 (see the last column of the top panel of Table 3). On
the other hand, since the reduction in supply of energy negatively affects
employment and that reduces household incomes and their demand for
goods and services, the US economy exports/imports more/less non-energy
items (by $76 billion net), as listed in the last column of the top panel of
Table 3. Hence, in the first experiment the US overall net trade improves by
$32 billion in the period 2007-35.
In the second experiment, with the expansion in shale oil and gas, the US
net trade in energy items improves, significantly. In this case, the US net
export of energy (the combination of reductions in imports and expansions
in exports) increases by about $72 billion in the period 2007-35, as shown in
the last column of the middle panel of Table 3. However, in this case, due to
the expansion in economic activities, increases in employment and im-
provements in household incomes, demand for goods and services goes up.
This reduces the net exports of non-energy commodities by $122 billion in
2007-35. Hence, in the second experiment the US net trade balance worsens
by about $50 billion in 2007-35. Finally, in the third experiment, where
we restrict exports of both oil and gas, the net export of energy drops to
$49 billion in 2035, and the overall net trade balance decreases by about
$56 billion as shown in the last column of the bottom panel of Table 3.
6.6 Welfare Impacts
Economists use changes in economic well-being (called ''welfare'') to
measure the impacts of economic changes. The expansion in shale oil and
gas affects many aspects of the US economy and those of other regions.
These changes eventually affect consumer welfare. The GTAP-E model
measures changes in welfare using the concept of Equivalent Variation (EV),
which measures changes in welfare in monetary terms. The regional changes
in welfare for the three main experiments are reported in Table 4 for each of
the time slices of 2007-12, 2012-17, 2017-22, 2022-27, 2027-35 and for the
entire period 2007-35.
This table shows that, with no expansion in shale oil and gas, US welfare
goes down by $223 billion in 2035 compared to its 2007 level. In the second
experiment, the expansion in shale oil and gas improves US welfare by $354
billion in 2035 compared to its 2007 level. Finally, in the third experiment,
where we restrict exports of oil and gas jointly, welfare goes up further to
$377 billion in 2035 compared to its 2007 level.
Since the magnitudes of changes in US oil and gas production vary over
time, we now provide a more comprehensive analysis of the welfare impacts
of the expansion in shale oil and gas based on the results obtained for all five
periods 2007-12, 2102-17, 2017-22, 2022-27 and 2027-35. As shown in
Figure 4, with no expansion in shale resources US welfare drops during
the period 2007-12. The magnitude of welfare
losses would be
