Abundant Demand – How can Public Policy Help Keep Energy Affordable?

On January 8, the Peterson Institute for International Economics here in Washington D.C. launched a new study by Trevor Houser and Shashank Mohan on the oil and gas production boom in the United States.1 Houser and Mohan use a general equilibrium model to assess the effects on the rest of the U.S. economy and, since the U.S. economy is so large, find the impact to be significant but not overwhelming: between 2010 and 2020 the total impact of oil and gas production growth is estimated at 2.1 per cent of U.S. GDP, roughly the boost provided by the Recovery Act stimulus spending in 2008-2012, but spread over a longer period. Still, in the case of oil, increased U.S. production was enough to offset production declines in Europe and supply reductions due to sanctions on Iran.