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Shale Energy and the Development of the Modern Economy

In a June 2009 Energy Information Administration study, nearly two-thirds of American oil was imported from overseas. Alaska contributed just 11 percent of domestic oil, with various oil fields in the continental U.S. supplying the rest. Just three years later in 2012, the U.S. is producing 38% of its own oil domestically, and taking measures to reduce dependence on gas and oil.

What’s the major difference between 2009 and 2012? Shale oil and gas. Okay, shale oil isn’t exactly new: In the 19th century, shale oil plants were built. However, crude oil is easier to extract, so as more crude oil deposits were found–and extracted–shale oil plants shut down. With the cost and scarcity of oil, America and other countries have gotten back into shale oil and gas. And America holds vast shale oil reserves–nearly as much as the world’s existing oil reserves, according to the Government Accountability Office.

Shale natural gas reserves have drastically cut the price of natural gas in America, making it incredibly cheap. These natural gas and oil reserves have the potential to transform America from a country weak in energy into an energy-rich nation. The explosion in natural gas led General Motors to develop two trucks that run on ng, improving fuel efficiency and cutting oil dependency. And long-haul trucks that fuel up with gas instead of oil save substantially at the pump. While LNG pumps might not be at every truck stop from California to Maine, they will be soon.

Proponents say America can step up oil exports, effectively turning the energy boom into cold cash that just may help the economy recover, create jobs, and foster innovation. Financial giant Citigroup estimated that shale oil could grow the U.S. GDP by 0.5 percent a year for the near future. This growth could make energy investment the type of expense that gives back substantially.

Not everyone is gung-ho on shale oil and gas, however. Critics claim the boom is slowing down–and with it, the potential for economic growth. A Credit Suisse report noted that we can expect those rapid-fire increases in shale production to slow. Sure, shale oil and gas production will still be substantial, but the boom-level growth of recent years might just be a flash in the pan. Meanwhile, states struggle to regulate shale oil and gas production, fuel taxes, and other issues; many areas also deal with protests from residents who don’t want fuel extraction in their backyard. This type of bureaucracy has the potential to slow the pace of innovation.

What’s your take on the promise of shale oil and gas? Has it peaked or is the real boom just beginning?

-Mark