The development of a profitable oil shale industry offers large economic benefits

The development of a profitable oil shale industry offers large economic benefits

Summary

The development of a profitable oil shale industry offers large economic benefits to investors and workers in firms associated with oil shale development, production, (The Strategic Significance of Oil Shale 33) and supporting industries. In addition, oil consumers in the United States, as well as abroad, will likely experience lower oil prices.

Developing a quantitative estimate of these benefits is difficult, requiring

assumptions far into the future regarding OPEC production and pricing behavior,

the demand and price for crude oil, the costs of producing shale oil, and the nature of investments that would be taken in the absence of a domestic oil shale option. If low-cost shale oil production methods can be realized, direct economic profits in the $20 billion per year range are possible for an oil shale industry producing 3 million barrels per day. Conservative assumptions regarding supply and demand elasticities yield an additional annual benefit to American consumers of between $15 billion and $45 billion per year because of reductions in the world oil price.

A manifestation of the economic benefits of shale oil production is an increase

in employment in regions where shale oil production occurs or in regions that contain industries that provide inputs to the production process. While it is difficult to predict the employment gain, it is possible to estimate that a few hundred thousand jobs will be associated, directly and indirectly, with a 3 million barrel per day industry.

The net effect on nationwide employment is uncertain, however, because

increases in employment caused by shale oil production could be partially offset by reductions in employment in other parts of the country.

OPEC production or lower world oil prices should also result in limited national security benefits. In this case, the principal value of oil shale production would be as a contribution to a portfolio of measures intended to decrease to reduce

revenues of oil producing nations.

In deciding to provide access to federally owned lands bearing oil shale, these

are the benefits that will eventually accrue from full-scale development and which

offset costs associated with land use and adverse environmental impacts that cannot be mitigated.

It is relevant to note that a portion of the benefits—namely, those economic

and national security benefits associated with lower oil prices—would occur whether the additional production occurs within the United States or in some other country that is not a member of or colluding with OPEC.