A worldwide expansion of relatively cheap shale oil could put investment in renewable energy and global emissions targets under threat, as well as posing other environmental risks. The shale oil industry has the potential to reach up to 12 per cent of global production, potentially pushing down oil prices by as much as $50 per barrel by 2035, according to a new report by consultancy firm PwC.
Lower oil prices are more likely to extend production rather than simply increase it, but this could make alternative low carbon technologies less attractive, Jonathan Grant, director of sustainability and climate change at PwC, told BusinessGreen.
However, the report also notes that cheaper oil could displace production from higher cost and more environmentally sensitive areas such as the Arctic and Canadian tar sands, while tax windfalls could provide finance for carbon capture and storage and other low carbon technologies
It adds that global GDP could receive a $2.7tr boost by 2035 with a 25 per cent to 40 per cent cut in global oil prices resulting from shale oil production. Under this scenario, UK GDP would receive a 3.3 per cent boost in 2035, China would see a three per cent GDP increase, US GDP would rise 4.7 per cent, and India's would climb by up to 7.3 per cent.
Any related reduction in renewable energy investments and an expected increase in mobility arising from the availability of lower cost oil is likely to increase total carbon emissions in the long term and potentially impair future economic growth.
In the US, shale oil production has risen from 111,000 barrels per day in 2004 to 553,000 barrels a day in 2011, equivalent to an annual growth rate of around 26 per cent. In the rest of the world the industry remains in its early stages, although China, Australia, Mexico, Argentina, Russia, and New Zealand are all exploring the potential for shale oil development.
A Department of Energy and Climate Change (DECC) spokesman said there is no estimate of potential reserves in the UK and to date there have been no explorations, adding the energy source is "not on the horizon" for the country at the moment.
Supporters of shale gas argue that the fuel source can deliver net carbon savings by replacing coal, but shale oil remains significantly more carbon intensive raising concerns that the availability of a new cheaper source of oil will only lead to higher overall emissions.