In theory, this should create jobs, lower energy costs, and bring manufacturing capacity back to the U.S.
But analysts now say that while there are real gains to be had, we should be a bit more realistic about their extent.
In his new book “The Power Surge,” Council on Foreign Relations expert Michael Levi says that while it’s undeniable the oil and gas boom has created jobs and wealth, it’s overall impact on GDP will probably be muted.
“People who claim that natural gas will spark a broad-based U.S. economic renaissance, if only pesky environmentalists lay off, are exaggerating the benefits of the shale gas bonanza,” he writes.
He’s not alone — we recently told you about the note from Capital Economics’ Paul Dales, who says, “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.”
We’ve compiled just a few charts that demonstrate why, outside of the energy industry itself, we’re probably not going to see all that big of a spill-over effect from shale oil and gas production into the broader economy.
According to the BEA, the U.S. mining sector, which includes oil and gas production, contributed a measly 7/100ths of a point to the 2.2 GDP growth we saw in 2012.
Basically, a nudge.
Same for sectors that are utilities intensive.
It's pretty much stayed even.
Materials were 61%. labour accounted for 18%.
According to Deutsche Bank's Peter Hopper writes: 'While US manufacturing will surely benefit from rising global labour costs and lower energy prices, the relatively low energy intensity of a number of manufacturing industries suggests that the shale energy revolution may have a more muted impact on the overall US economy.'
Source: Business Insider
Since the recession ended, the volume of petroleum imports has declined by just $23 billion, according to Capital Economics' Paul Dales. That contributed only 0.2 ppts to the increase in GDP.
Mexico has long enjoyed abundant natural gas reserves, but it too hasn't seen its energy-intensive industries go gangbusters.
'Gas prices are low and reserves abundant, yet it appears not to have played a major role in giving Mexican exporters a competitive edge,' Morgan Stanley says in a recent note.
Energy as a share of gross output has declined to a little over 3%, but it's almost certainly more a function of oil prices resetting after spiking in 2008.
They're going down, but only returning to the mean, the EIA says.
America's current account deficit is narrowing, but Morgan Stanley says it's unclear whether energy will have a material impact on this.
'it is difficult to estimate the magnitude and timing of the upside with any precision.'
Employment in the oil and gas industry is less than 1% of the national total, according to Morgan Stanley.
Job growth has surged, but it's only just returned to levels of the early '90s.
Source: Morgan Stanley
Though he says these jobs have a multiplier effect, and cites a UT-San Antonio study which found production in the Eagle Ford shale play alone has added $61 billion to the state's economy.
Source: Dallas Fed
Employment in energy intensive industries has picked up, but the rate trails that of the rest of the economy.
Morgan Stanley also notes that over the whole decade, the trend has been negative.
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