Publications: Notes at the Margin

The Fracking Miracle: A Triumph of Markets (December 23, 2013)


Optimism also abounds in the United States. Earlier this week, the Energy Information Administration issued the preliminary version of its 2014 long-run outlook. The forecast changes are astounding. In the midst of all this, EIA ignores the fact that the development of sophisticated markets in the United States explains the expectations for greater US oil and gas production than had been predicted in 2005 or even a year ago. In fact, EIA gives market forces almost no credit for its newfound optimism regarding oil and gas production. As we discuss this week, the role played by markets and financial engineering in facilitating the frackers’ success must not be understated. Indeed, everyone should recognize that US and global GDPs and their growth rates would be far lower if US oil and gas production had not surged thanks in large part to the presence of futures markets.


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