Posted by Brad Plumer
It’s hardly news that America is awash in cheap shale gas. Since 2007, drillers have been extracting natural gas (and oil) from shale-rock formations around the country, using new fracking and horizontal drilling techniques. The boom has boosted incomes in states like Texas, upended the electricity sector and helped cut U.S. carbon emissions.
That cheap gas is also saving Americans money on their energy bills. But how much? Ask the experts, and you get a fairly wide range of answers.
Case in point: New research from Boston Consulting Group (BCG) suggests that shale-gas benefits might be much, much bigger than we think. The study estimates that the natural gas boom is now saving the average U.S. household $425 to $725 a year. That’s enough to blunt most of the impact from, say, the expiration of the payroll tax cut back this past January.
And the study suggests that savings will rise over the next decade:
Note: Consumer savings from driving personal natural gas vehicles (not displayed on chart) represent less than 1 percent of overall savings. Logistics savings on fuel for transportation of goods and services included in finished goods. (Source: EIA, Credit Suisse Global LNG July 2013, BEA, IEA, BCG analysis)
But this is also significantly higher than previous studies have found: In October, 50 experts and 14 modeling teams convened at Stanford’s Energy Modeling Forum to discuss the shale boom. Their average estimate of the economic upside? About $70 billion per year — and that included all benefits, with household energy savings only a small portion of the total.
Why the variation? Here’s one key difference: The BCG study estimates that the average American household spent $9,000 on energy in 2012. One-third of that was direct expenditures — gasoline, electricity, natural gas for heating. But there are also the indirect energy costs “embedded” in various goods and services. And that adds up.