Shale Is Slowing the Trend of Oil’s Declining Role in Global GDP


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(Bloomberg) — The world has steadily cut the amount of oil needed to power its economy, but the U.S. shale boom in the last decade slowed that decline and poses a challenge for transitioning to cleaner energy.

Only 0.43 of a barrel of oil was consumed per $1,000 in global gross domestic product in 2019, a 56% drop from the roughly 1 barrel needed in 1973, according to a report published by Columbia University’s Center on Global Energy Policy from Christof Ruhl and Titus Erker.

Oil intensity, as the metric is called, has steadily fallen by an average of 0.01 barrel each year over the last three and a half decades, regardless of boom or bust cycles, as nations find alternative fuels and oil-dependent technologies become more efficient.

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However, the pace of decline has slowed since 2009, largely driven by the U.S. and the shale “revolution,” the study found. While the decline of global oil intensity has slowed by 20% in that period, the U.S. saw it slow by half, especially after its shale production went into full swing.

No only did the U.S. shift from becoming the world’s largest oil importer to an exporter in a few years’ time, “the rapid rise of shale production and its bright future has completely changed perceptions of energy security and resource scarcity among U.S. consumers,” they said in the report, noting a massive increase in the share of less fuel-efficient crossover utility vehicles, pickup trucks and sports utility vehicles.

This is a crucial nuance as retail-based oil consumption, such as through appliances and vehicles, tends to use a single type of fuel and is less open to substitution. That poses additional challenges for policy makers, as it would require a higher carbon price to dent oil consumption, they said.

“No matter whether shale oil will be sufficient to move the dial on the long-term trend in global energy intensity, the episode already should provide food for thought for the energy transition — in many ways shale’s antidote, as an attempt to reverse current consumption patterns and to accelerate the oil intensity trend decline,” they said in the report.

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