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# Dallas Fed: US Shale Boom Accounted for 10% of US GDP Growth

## Researchers from the Federal Reserve Bank of Dallas quantified the economic impact of the US shale revolution for the first half of this decade.

The maturing application of horizontal drilling and hydraulic fracturing in the US, and the resulting spike in crude oil production, increased US gross domestic product (GDP) by roughly 1% during 2010–2015, according to a study published by the Federal Reserve Bank of Dallas.

That amounted to 10% of total US GDP growth from a sector that makes up less than 1.5% of the economy. The impact on the overall economy came as US crude production jumped to 9.4 million B/D from 5.5 million B/D during the same period, US Energy Information Administration (EIA) data indicate.

As the shale boom flooded the market with light crude, oil and oil-product prices declined, refiners took in as much domestically produced light oil as they could, and oil imports declined nearly 2 million B/D. Fuel prices in the US and abroad fell 14% as consumers benefited from free trade in refined products, according to a model generated by the Dallas Fed researchers who authored the study.

Cheaper fuel prices resulted in a 3.6% rise in fuel consumption and 0.7% increase in overall consumption. Not only did households benefit from having more disposable income due to lower fuel prices, but industries were able to boost their output of non-oil-related goods and US aggregate investment rose.

Much of the positive economic impact was driven by Texas and North Dakota and their respective shale oil growth engines: the Permian Basin and Bakken Shale. During 2010–2015, overall oil output in Texas increased to 3.4 million B/D from under 1.2 million B/D, while North Dakota grew to almost 1.2 million from 308,000 B/D, EIA data show.

Those two states experienced strong employment and GDP growth in particular during 2010–2014 when oil prices averaged $95/bbl: North Dakota’s GDP expansion was 4.5 times that of the US, while Texas’s was 1.5 times the national rate. North Dakota’s employment growth averaged 5.3% and Texas’s averaged 3%, compared with 1.7% for the US as a whole. While those numbers have fluctuated since the oil-price downturn that began in mid-2014, the trade effects are lasting. In 2006, before the shale boom, the US imported about twice the amount of oil it produced. Now it imports the equivalent of two-thirds its production, with the US petroleum trade balance narrowing to negative$136 billion in 2018 from negative \$492 billion in 2005.

US exports of petroleum products have jumped fivefold since 2006 to 5 million B/D. And, since the crude export ban was lifted, the US has become a major exporter, with exports rising to 3 million B/D last month from less than 500,000 B/D in December 2015.

Authors of the study outlined their methodology and process in their paper (PDF) published on the Dallas Fed website. Their analysis employed a two-country, multiperiod equilibrium model describing the decisions and interactions of households, oil producers, refiners, and the non-oil-production sector. It assessed the boom’s implications by comparing its effect on a model economy with what happens in the economy absent the boom.