Hausman examines economic impacts of recent shale gas boom in Brookings paper

March 23, 2015

Welfare and distributional implications of shale gas, a paper by Catie Hausman, provides the first estimates of broad-scale welfare and distributional implications of the recent shale gas boom. The report, coauthored with U-M economics professor Ryan Kellogg, was released last week by the Brookings Institution. Hausman and Kellogg found that, overall, the fracking revolution in 2013 led to an increase in economic welfare for natural gas consumers and producers of $48 billion.

The net welfare gain stems from the $74 billion increase in consumer surplus. Natural gas producers experienced a reduction in surplus because gains from expansion of supply were outweighed by drops in gas prices, according to the paper. The 2013 producer surplus is lower than it would have been before the boom by $26 billion per year, the research shows. But given the consumer gain of $74 billion, the net overall gain is $48 billion.

The paper also attempts to address fracking’s environmental impacts, though the authors conclude that higher quality and more comprehensive data are needed on the extent and valuation of the environmental costs of shale gas production.