Like most revolutions, the US shale boom is producing unintended consequences. After President Obama's rejection of the Keystone XL Pipeline and on the heels of the Bureau of Land Management's decision to suspend new coal leases on federal land, some public figures, elected officials and a couple million petitioners are now calling for an end to offshore drilling. It's hard to imagine any of these efforts, including a new "Keep It in the Ground" movement, being taken seriously without the changes in the economic and political landscape that shale development has helped bring about.
Consider the financial, employment and energy security impact of shale since 2007, when this revolution was just emerging. That year, the US trade deficit in goods and services stood at over $700 billion. Energy accounted for 40% of it (see chart below), the result of relentless growth in US oil imports since the mid-1980s. Rising US petroleum consumption and falling production added to the pressure on oil markets in the early 2000s as China's growth surged. By the time oil prices spiked to nearly $150 per barrel in 2008, oil and imported petroleum products made up almost two-thirds of the US trade deficit.
Today, oil's share of a somewhat smaller trade imbalance is just over 10%. Since 2008 the US bill for net oil imports--after subtracting exports of refined products and, more recently, crude oil--has been cut by $300 billion per year. That measures only the direct displacement of millions of barrels per day of imported oil by US shale, or "tight oil" and the drastic reduction in global petroleum prices resulting mainly from that same displacement. It misses the trade benefit from improved US competitiveness due to cheaper energy inputs, especially natural gas.
Compared with 2007, resurgent US natural gas production is saving American businesses and consumers around $100 billion per year, despite consumption increasing by about 20%--in the process replacing more than a fifth of coal-fired power generation. $25 billion of those savings come from lower natural gas imports, which were also on an upward trend before shale hit its stride.
The employment impact of the shale revolution also contributed to making energy less of a hot-button issue in US politics. Following the financial crisis and recession of 2008-9, job creation understandably became the main focus of government policy. The key metric of the 2009 stimulus was "jobs created or saved." Analysis of federal and state employment data indicates that shale development played an important role in reducing US unemployment that peaked at 10% in 2009, on its narrowest measure.
From 2007 to the end of 2012, US oil and gas employment grew by 162,000 jobs, ignoring the "multiplier effect" frequently cited for stimulus projects. That broader impact is evident at the state level. US states with active shale development appear to have lost fewer jobs and added more than a million new jobs from 2008-14, while "non-shale" states struggled to get back to pre-recession employment. That effect was also visible at the county level in states like Pennsylvania, where counties with drilling gained more jobs than those without, and Ohio, where "shale counties" reduced unemployment at a faster pace than the average for the state, or the US as a whole. The loss of some of these jobs in today's challenging oil market, as stressful as that is for those affected, does not negate their contribution in the crucial period following the recession.
Now imagine what things would be like today if the shale revolution had never gotten off the ground. US oil production would be around 5 million barrels per day lower, and OPEC would be in the driver's seat, rather than fighting for market share and engaging in a price war with non-OPEC producers like the US and Russia. The price of oil would assuredly not be in the low $30s, but much likelier at $100 or more, extending the situation that prevailed from 2011's "Arab Spring" until late 2014.
In such a world oil, and increasingly natural gas, would dominate the trade deficit. The US would have taken longer recovering from the Great Recession, with fewer states and counties leading the way back to growth, and everything that implies for home values, tax revenues and the federal deficit. Energy efficiency efforts would be thriving, driven by scarcity, and we might have a little more renewable energy than we do now. However, wind and solar power, which in 2015 were together equivalent to just 27% of the natural gas output of Pennsylvania's portion of the Marcellus shale, could not have grown fast enough to fill the resulting energy gap.
In effect, then, the environment in which a US president could block a major oil pipeline from America's most reliable foreign supplier without incurring serious political consequences depended on the success of an "all of the above" energy policy that was implicitly a bet on shale gas and oil buying years for renewables to scale up. Absent this energy abundance, to which offshore drilling contributes significantly, how long would it take for public sentiment to reach the point at which calls to "Drill baby, drill" drowned out any notion of leaving anything in the ground?