An Unconventional Phenomenon: Quantitative Analysis of Economic Development Effects Accompanying North American Shale Oil & Gas

Abstract

This thesis has a two-fold focus; firstly, it uses both OLS and 2SLS regressions to analyze the relationship between shale permit issuance and crude oil & natural gas prices on a county-level in Pennsylvania. Results for this section indicate that higher Brent prices and higher commercial natural gas prices encourage shale production. Secondly, I apply entity and time fixed effects regressions to explore the economic development effects that have accompanied both shale oil and shale gas production across 48 states in North America between 2000-2011. Economic development effects analyzed include: Gross County Product (GCP), median household income, poverty estimates, unemployment rate, community health by proxy of hypertension prevalence, foreclosure prevalence by proxy of Real Estate Owned (REO), and educational attainment levels. Results from these analyses suggest that shale development is either positively associated with or not associated with all examined effects except for GCP and educational attainment levels. This thesis finds a slightly positive relationship between income and shale oil and gas production across 48 states, suggesting that the Brown (2014) finding that “local employment and wage effects have been positive, but modest”1 in reference to shale gas production holds true for shale gas and shale oil production. Further, my results indicate that shale oil production is associated with lower educational attainment beyond high school. This conclusion implies that while Weber (2013) concludes that shale gas production does not harm educational attainment, analyses examining shale oil production could reach the opposite conclusion. On net, this thesis concludes that positive economic development effects have accompanied shale oil and gas production between 2000-2011 across 48 states although this boon has come, to some extent, at the cost of GCP and educational attainment.