In a recent research note, Swiss bank UBS AG expressed uncertainty about the economic impacts of surging U.S. oil and gas production. While the domestic energy boom is widely thought of as an unequivocal economic driver, UBS analysts suggest that it may not be that straightforward. [E&E News (Sub. Req’d.)]
If the current U.S. oil and gas boom – which is driving domestic supply up and prices down – is sustained, UBS projects, it could spur marginal economic growth of around 0.8% annually over the next five years. However, increased U.S. oil supply would reduce the need for imported oil, thereby strengthening the dollar. A stronger dollar, with associated decreases in exports and increases in non-oil imports, could reduce economic growth by as much as 0.3%.
Stephen Brown, a fellow at Resources for the Future, suggested that the UBS analysis’ figures seem high and that it’s important “not to overstate the impact energy can have” on the economy. “I don’t think more abundant oil really does a lot for the United States,” he said. “It reduces our dependence on foreign oil to some extent, but oil is priced on an international market, and a little bit of additional production in the United States only has a small impact on world oil prices.”
What impacts do you expect from domestic oil and gas production? What externalities and trade-offs, if any, accompany and complicate the projected 0.5 – 0.8% growth?
Regarding U.S. oil production I agree w/ my fellow Brown: our increase, although quite desirable, is unlikely to have a big impact on global oil price. However, given that the… Read more »
Indeed, the implications of increased US oil output are somewhat limited in terms of the global energy market. But only recently was the International Energy Agency ‘questioned’ about whether or… Read more »