Regional economic impacts of the shale gas and tight oil boom: A synthetic control analysis

Abstract

Abstract:The dramatic increase in oil and gas production from shale formations has led to intense interest in its impact on local area economies. Exploration, drilling and extraction are associated with direct increases in employment and income in the energy industry, but little is known about the impacts on other parts of local economies. Increased energy sector employment and income can have positive spillover effects through increased purchases of intermediate goods and induced local spending. Negative spillover effects can occur through rising local factor and goods prices and adverse effects on the local area quality of life. Therefore, this paper examines the net economic impacts of oil and gas production from shale formations for key shale oil and gas producing areas in Arkansas, North Dakota and Pennsylvania. The synthetic control method (Abadie and Gardeazabal 2003;Abadie et al., 2010) is used to establish a baseline projection for the local economies in the absence of increased energy development, allowing for estimation of the net regional economic effects of increased shale oil and gas production.

Is shale development drilling holes in the human capital pipeline?

“…1 Montana and North Dakota lie above the Bakken shale oil play, while West Virginia lies above the Marcellus shale natural gas play. Munasib and Rickman (2015) found larger employment multiplier effects from the fracking boom in North Dakota nonmetropolitan counties extracting shale oil than in the nonmetropolitan counties of Arkansas and Pennsylvania that were involved in shale gas extraction.…”

“…implicitly matches on unobservables over time (Abadie et al, 2010). Because technical presentations of the SCM can be found elsewhere (Abadie and Gardeazabal, 2003;Abadie et al, 2010;Munasib and Rickman, 2015) we only discuss its implementation in our study.…”

“…Among the states listed by Cascio and Narayan (2015) as possessing clusters of high oil and gas reserves based on btu contents, these three are small and had the largest nonmetropolitan shares of total employment in the states in 2005, which makes it more likely that the effects of the shale boom 4 can be detected (Weinstein and Partridge, 2011;Munasib and Rickman, 2015). 1 Montana and North Dakota lie above the Bakken shale oil play, while West Virginia lies above the Marcellus shale natural gas play.…”

“…The intensive development of U.S. shale oil and gas resources through hydraulic fracturing (fracking) that began in earnest after 2005 dramatically increased employment and income in many state and local economies (Weber, 2012;Brown, 2014;Weinstein, 2014;Munasib and Rickman, 2015). Development of shale oil and gas resources in the lower 48 states largely drove the 35 percent increase in dry natural gas and the nearly 44 percent increase in oil production from [2005][2006][2007][2008][2009][2010][2011][2012][2013] in the nation (U.S. Energy Information Administration, 2015).…”

Sustainability lessons from shale development in the United States for Mexico and other emerging unconventional oil and gas developers

“…There are indications the US has received short-term localized economic benefits in areas of shale development. Communities sited near shale operations have experienced increases in employment, salaries, and per capita income during the initial stages of such operations [9]. However, the economic instability associated with price volatility and the panoply of environmental, social, and community impacts that emerge due to shale development, complicate decision-making processes over whether unconventional oil and gas resources should be developed fully.…”