UK: Fracking ‘could lower oil prices’
- Credit: Simon Finlay
Production around the world of oil sourced through controversial “fracking” could drive down global oil prices and boost the UK economy, a report suggested today.
Unconventional “shale oil” has the potential to reach up to 12% of total oil production, extra supply which could reduce prices by 25% to 40% in 2035 compared to what they would otherwise be, the study by consultancy firm PwC said.
A reduction in global oil prices could boost output in many countries, including in the UK, where GDP would be 2% to 3.3% higher in 2035 as a result of the lower prices.
But environmental campaigners warned the impact of failing to tackle climate change and move away from fossil fuels to low-carbon energy would hit the economy, with the costs of rising temperatures outweighing any benefits of shale oil.
Shale oil is exploited in the same way as shale gas, through hydraulic fracturing which uses high-pressure liquid to split rock and extract the fossil fuels.
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The arrival of shale gas exploration in the UK has prompted dismay among campaigners who fear operations could pollute water supplies, cause tremors and lead to damaging development of drilling well sites in the countryside.
Shale oil resources are thought to be widely distributed around the world.
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John Hawksworth, chief economist at PwC and the report’s co-author, said: “Lower global oil prices due to increased shale oil supply could have a major impact on the future evolution of the world economy by allowing more output to be produced at the same cost.
“These effects could build up gradually as shale oil production rolls out across the world to produce an estimated rise in global GDP of around 2.3%-3.7% in 2035.
“This would be roughly equivalent to adding an economy the size of the UK to total global GDP in that year.”
The report said governments would have to balance the conflicting objectives of providing affordable energy and decarbonising the economy.
But Dr Doug Parr of Greenpeace said: “Digging up and burning new reserves of fossil fuels can only exacerbate the huge negative impact on the global economy of climate change.
“As Lord Stern, a former World Bank chief economist calculated, the economic impact of global warming could be similar to that of a world war.
“Any short term price gains for consumers will ultimately be dwarfed by the impact of rising temperatures on every aspect of economic life.
“We have to leave fossil fuels in the ground and instead invest in the clean alternatives.”
And Friends of the Earth’s senior energy campaigner Tony Bosworth, said: “Fracking, whether for oil or gas, is a technology which brings huge risks for our environment and health - a gamble we simply don’t need to take.
“If we’re to avoid the looming spectre of catastrophic climate change we must urgently switch from fossil fuels to a power system based on slashing waste and getting clean British energy from the wind, waves and sun.”