SHALE AND THE US ECONOMY

Kathleen B. CooperOctober 22, 2013

Hope for the U.S. economy?

• Global economy remains in the doldrums…even Emerging Market economies have slowed

• Fiscal uncertainty and QE tapering drags on economy

• Three powerful forces for 2014 and beyond• Housing market slowly rebounding• Increased financial regulatory certainty• Shale production adding well-paying jobs

• Bottom line: Challenges remain but better growth and a healthier financial industry ahead

Why shale production an economic driver?• Energy industry tends to create high-paying jobs and

projects are long-lasting

• But US until recent years was becoming increasingly dependent upon other countries for fuel imports

• Negative for our confidence and trade balance

• Especially dependent upon the Middle East for energy imports

• So…what has changed? Technology is the key

Shale basins pervasive in the US

Shale gas leads growth in total production

Source: EIA, Annual Energy Outlook 2013

Tight oil leads growth domestically

Source: EIA, Annual Energy Outlook 2013

Top natural gas producing countries, 2011

Source: BP Statistical Review of World Energy June 2012

U.S. becomes a net exporter of natural gas

Source: EIA, Annual Energy Outlook 2013

U.S. leads the oil revolution

Source: Energy Information Agency

U.S. dependence on oil imports declines

Source: EIA, Annual Energy Outlook 2013

Middle East oil export by destination

Source: IEA, 2012

Net oil & gas import dependency by country

Source: IEA, 2012

Study finds positive economic impact from shale production

• IHS Consulting estimates that unconventional natural gas will equal 2/3 of total used by 2015

• Gas activity will account for 1.5 million U. S. jobs in 2015, 2.4 million jobs in 2035

• Over the next 20 years, 20 “producing states” will earn significant revenues and generate jobs

• Majority of top producing states have lower rates of unemployment than national average

Employment change since January 2008

Global fuel mix evolution by decade

Source: Smil, Energy (1800-1960)

Percent

Conclusions

• US shale production of oil & gas will continue growing over the next decade…in our region and elsewhere

• Jobs created will boost US economic growth, reduce energy dependence, require lower foreign capital inflows

• Healthier economic growth means a healthier financial industry, which will adapt to new requirements and regenerate profits

• Safety concerns overblown according to UT study

• Road ahead challenging but likely rewarding for the industry and economy

SHALE AND THE US ECONOMY

Kathleen B. CooperOctober 22, 2013

Canadian oil to US via Keystone