The Washington Post’s Brad Plumer points us to a note from Capital Economics’ Paul Dales that makes a fairly radical assertion: America’s shale boom has barely moved the needle on domestic economic growth.
While the industry accounts for 2.5% of overall GDP, it’s contributed just 0.6 percentage points (ppts) to the 7.6% rise in GDP since the recession, he says. Exploration and production investment has increased by 56%, but this represents only a $36 billion chunk of to real GDP, or 0.3 ppts of the increase.
Nor have falling natural gas prices really done much (Goldman’s Jan Hatzius has previously addressed this). Dales estimates producers have only saved about $70 billion, or 0.8% of total wage costs; while households have only saved $20 billion, or 0.2% of real incomes. Here’s the graph showing energy-intensive industries have seen zero or even negative output growth since the recession.
Overall, the boom in domestic energy production is responsible for only a small part of the rise in GDP since the recession and it does not explain why the US has outperformed most of its closest competitors. Instead, the recovery in US GDP since the recession has been driven by an improved performance across a wide range of sectors, including motor vehicle production and professional business services.