Shale could raise GDP by £50 billion

London - Shale oil could revolutionise the world’s energy markets by significantly lower oil prices, according to new analysis from accountancy firm PwC. The net effect, it estimates, could be an increase of around £500-800 in GDP per person in the UK..

A new PwC report, titled Shale Oil - the Next Energy Revolution, examines the potential impact of future growth in shale oil production on global oil prices and on the oil and gas industry up to 2035.

Shale oil production could, it estimates, reach up to 14 million barrels of oil per day by 2035 and push global oil prices down by around 25%-40% in 2035. The figure is relative to an EIA baseline projection of $133 per barrel in that year.

In UK, meanwhile, PwC reckons that GDP could increase by around £30-50 billion or 2%-3.3% by 2035, while global GDP could rise by up to 4%

The findings suggest that shale oil production will spread gradually from its current US base, increasing to almost 12% of the world’s total oil supply by 2035.

Given the relative insensitivity of oil demand to price changes, PwC estimates that real oil price falls of around 25%-40% could be needed by 2035 to increase demand sufficiently to absorb this additional supply, depending also on how OPEC responds.

In the UK, significant shale gas resources have been identified and are likely to contribute directly to investment, employment, economic growth and greater energy independence. In addition, lower oil prices could increase UK GDP as we become an increasing net oil importer over time.

“Without shale oil, it is likely that global oil prices would continue to rise in real terms over the next few decades due to the pressure of rising demand from China, India and other emerging economies,” said John Hawksworth, chief economist at PwC.

The UK has traditionally been a centre of excellence in the oilfield services industry, serving the North Sea and global markets from Aberdeen and elsewhere in the UK, notes Adam Lyons, director in the PwC oil and gas team.

“The UK government would lose some North Sea tax revenues if global oil prices were lower, but with North Sea resources in long term decline, shale oil and gas present an opportunity to create a new growth engine for UK plc as well as a new source of tax revenue,” Lyons said.

midstream, downstream and oilfield services sectors.”