The Economic Impact on UK Energy Policy of Shale Gas and Oil
Source: House of Lords Economic Affairs Committee (UK)
The shale gas revolution in the United States has illustrated the economic opportunity offered to the United Kingdom by its own shale gas resources—if they can be developed successfully. We strongly support the Government in their objective to exploit these resources but believe they need to do much more to encourage exploration and get development moving.
In the US, new production techniques using horizontal drilling and hydraulic fracturing (fracking) to release gas from shale rocks have brought abundant and growing new supplies of gas to market in a short time. Shale oil production is also growing rapidly. The US energy mix has changed fast....
The effects of the US revolution are already being felt globally. The UK and Germany, for instance, are generating more electricity from US coal displaced by shale gas. North America is expected soon to become self-sufficient in energy and a large exporter of shale gas in the form of liquefied natural gas (LNG). Many other countries have also been alerted to the economic potential of their own shale resources and expect to develop them.
Patterns of global trade in energy seem likely to change, reducing dependence on the Middle East and Russia and promoting energy security through greater diversity of supply. The impact on prices is harder to predict. Gas prices, unlike oil prices, are regional rather than global. World price cuts on the US scale are unlikely. But abundant new shale gas supplies are bound to have a restraining effect on prices....
Development of shale gas in the UK cannot go ahead without public acceptance. Public concerns must be taken seriously and every possible effort made to reduce or eliminate risk and provide reassurance. We consider that the risks to human health and the environment are low if shale development is properly regulated, with the improvements we recommend. We welcome the community benefit schemes announced by the industry which, if well-targeted, could play a role in winning public acceptance. We also recommend that the industry improves its presentation and communication skills and puts across more convincingly the economic and employment gains shale development can bring to areas like Lancashire.