The global impact of shale oil could revolutionise the world’s energy markets over the next couple of decades, resulting in significantly lower oil prices than would otherwise be the case and a consequent increase of around £500-800 in GDP per person in the UK (at today’s GDP values).
In this short video, we examine scenarios that consider the potential impact of future growth in shale oil production on global oil prices and the potential effect on the UK economy. We also assess how these changes could impact the wider economy and the oil and gas industry over the period to 2035.
Impact of Shale Oil - UK
Our report looks at the global impact of shale oil and is the first report we know of with integrated industry and global macro-economic perspectives.
Shale oil, like shale gas, is a resource which is produced through horizontal drilling and hydrofracture or “frac-ing." It is relatively widely distributed globally compared with conventional resources which are concentrated in the hands of fewer major producers.
Shale oil production has grown very quickly in the USA and, there are significant discoveries and investments being announced globally. In our report we have developed scenarios for global shale oil production which reaches around 10% of global oil supply by 2035. As a result of this new supply, oil prices are 25-40% lower than they are otherwise forecast to be.
Lower oil prices result in higher global macro-economic growth, with global GDP in 2035 around 2.3%-3.7% higher (which equates to around $1.7 -2.7 trillion at today’s global GDP values). Lower global oil prices, based on our scenarios, have the potential to increase UK GDP by between 2 and 3 per cent by 2035.
In the UK, significant shale gas resources have been identified and these are a good leading indicator of the potential for shale oil also to be found. The development of shale gas and oil in the UK could contribute directly to investment, employment, economic growth and greater energy independence.
The UK has traditionally been a centre of excellence in the oilfield services industry, serving the North Sea and global markets from Aberdeen and elsewhere. With North Sea resources in long term decline, we can create a new growth engine for UK plc if we seize the opportunity presented by the growth of this new resource in the UK and overseas.
If you would like any more information or would like to discuss the implications for your business, please speak with your usual PwC contact or get in touch with me directly.