Publications: The Petroleum Economics Monthly

Only in America (March 2012)

Eight to ten years from now, a future Council of Economic Advisers will celebrate a period of extraordinary US economic success, remarking on how our economy exceeded expectations by growing one or two percentage points per year faster than projected in 2012. This surprising outcome will be linked to the nation’s competitive advantage in energy and labor. In particular, economists will explain that institutional conditions found only in the United States underpinned the dramatic increase in natural gas production. The unexpected supply boost created a unique situation where large volumes of gas were available in North America at prices one quarter, one half, and even at times one tenth the prices prevailing elsewhere.

The March report focuses on the unique structural conditions found in the United States that will make this astonishing economic development possible. Yes, shale gas can be found across the globe, as can shale oil. However, possessing the resource does not guarantee success. Successful development requires an owner-oriented system of property mineral rights, a competitive drilling industry, access to pipelines, and a supportive financial system. As noted below, these conditions can only be found in the United States at present. This unique combination will not likely develop in other countries for the foreseeable future. Hence the title of this report: “Only in America.”

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