Does the Shale Boom Equal Climate Doom?, with Daniel Raimi

Notable Quotes

• “It’s relatively easy to estimate the effects of natural gas on greenhouse gas emissions in the United States, because natural gas is traded primarily domestically. It’s produced domestically, it's mostly consumed domestically. There are some imports and exports but for the most part it's sort of a contained system within the US. . . Whereas with the oil story, you sort of have to think of globally” (5:14)
• “So, in the high oil and gas world compared to the low oil and gas world, my estimate is that globally we’re consuming about 3 million barrels per day more oil” (15:22)
• “It’s hard to see how all of this growth in oil production is really particularly compatible with a low carbon future that we might want” (23:44)

Top of the Stack

References and recommendations made by Daniel Raimi:

• “The Greenhouse Gas Impacts of Increased US Oil and Gas Production” by Daniel Raimi
• “The Golden Age of Industrial Musicals”

The Full Transcript

Kristin Hayes: Hello and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Kristin Hayes. This week, we're going to talk with Daniel Raimi—probably a familiar name for many of you who are regular listeners to our podcast series.

Daniel is a usual host of this podcast, but he's also a senior research associate here at RFF. Today we're going to be talking about Daniel's latest research on the oil and gas industry. He recently released a paper called “The Greenhouse Gas Impacts of Increased US Oil and Gas Production,” so we'll be talking about that further. Stay with us.

Daniel Raimi—I'd like to welcome you to Resources Radio, where you have been a number of times before but always on the proverbial other side of the microphone. It's really nice to have you here as a researcher and as a guest, in addition, of course, to your being a host of the podcast regularly. So, welcome.

Daniel Raimi: Thank you, Kristin. It feels somehow familiar, but somehow different.

Kristin Hayes: Yeah, I'm really excited that our listeners get to hear from you as a researcher, because that's obviously the majority of your capacity here at RFF. So, tell us a little bit more about your background working on energy issues. What was one of the first forays you had, in particular, into working on oil and gas issues?

Daniel Raimi: I basically fell into it by accident when I was in graduate school. I did a master's degree in public policy at Duke University and, in between my first and second year, I did an internship at the North Carolina Department of Environment and Natural Resources (that's what it was called then; it's called something else now). I knew I was interested in energy and environmental policy, but that internship really took me in the direction of oil and gas issues in particular.

While I was doing my internship (working largely in the statehouse in North Carolina, and the state Senate), there was a bill that was passed by the legislature asking the department to do a study of the potential for shale gas development in North Carolina. And, for whatever reason, I thought that I could do part of that study. I really was not qualified in any way, but I raised my hand anyway, and—

Kristin Hayes: Good job, good job.

Daniel Raimi: —yeah, you know, I took the initiative. And, amazingly, they let me write a chapter of the study. And I ended up turning that chapter into my master's thesis while I was at Duke—and, through that process, met a variety of other researchers, and just sort of have kept on plowing ahead in that vein ever since.

Kristin Hayes: That's great. I actually thought there was going to be an oil and gas “well” pun in there. When you say, “Well, you just kind of fell into it”—I thought, “That's right. At least you didn't trip over over a wellbore.”

Daniel Raimi: Well, I thought I did it when I said, “I just kept plugging away.”

Kristin Hayes: There you go, there you go. It's amazing how many energy puns you can fit into things like, “Drilling down on certain topics.”

Daniel Raimi: It's true. We could fill up this whole podcast just making energy puns over and over again—our audience would love it.

Kristin Hayes: I don't think our audience is going to want too many podcasts where we just talk to each other but (for one) it is quite entertaining. Well, that's great, Daniel—of course, we are super thrilled here at RFF that you have continued to work on energy issues, because you work on them with us. So, I wanted to talk today about some of your very latest research, which I believe was just released February 11th?

Daniel Raimi: Yeah, sometime in the last couple of weeks.

Kristin Hayes: Okay, great. So, quite a recent piece of research, and it's titled, “The Greenhouse Gas Impacts of Increased US Oil and Gas Production.” I took a look at some of the materials produced related to your paper, and one of the press releases actually noted that there has been plenty of debate about the climate impacts of the shale revolution in the US (or the impacts on carbon emissions), but many of the studies (or many of the analyses) have focused more on the gas side than on the oil side.

So, why do you think that that may be? Why has the oil production side gotten perhaps less attention in this particular area than the natural gas side?

Daniel Raimi: Yeah, well, I think there's kind of two reasons for it. First, in the popular narrative, I think the shale boom has been the story of natural gas for the most part. I mean, if you read most newspaper articles that talk about shale development in the US, they often use the term “shale gas.” Similarly, there was this film in 2010 or 2011 called “Gasland” that made a big splash.

People have talked a lot about the greenhouse gas impacts of methane emissions. And methane, of course, is essentially the same thing as natural gas. So I think from a popular perspective, that's one of the main reasons—you know, this boom really did start off as a natural gas boom, primarily in northern Texas and other regions, but overtime it's shifted and it's become more and more of an oil story over time.

I think in the scholarly community, one of the reasons that natural gas has received more attention than oil is for partly the same reasons that I just mentioned. I think natural gas has been kind of the driver of the popular narrative, but it's also relatively easy—it's not easy—but it's relatively easy to estimate the effects of natural gas on greenhouse gas emissions in the United States, because natural gas is traded primarily domestically. It's produced domestically; it's mostly consumed domestically.

There are some imports and exports but, for the most part, it's sort of a contained system within the US, and it's relatively easy to model domestic changes in the energy mix when you have a supply shock of natural gas in one direction or another. Whereas with the oil story, you sort of have to think globally about the global impacts, because oil is a globally traded commodity—and so that's the element that I think is kind of new here, and that I hope is helpful in the conversation.

Kristin Hayes: Great. Thanks Daniel. So, I know in the paper you look both at domestic effects and at at global effects. As you noted, that's a very important distinction between the oil and gas markets as well. Can you start by telling us a little bit about effects that you found within US borders, and then maybe move on to telling us about some of those global impacts?

Daniel Raimi: Sure. So, I'll do this pretty quickly, and I just want to acknowledge at the outset that there are a lot of assumptions here and a lot of important uncertainties that I won't emphasize in my response—but I'll encourage people to go look at the paper and get a sense of what some of these ranges are and uncertainties are, because I think they are important.

First, looking domestically, what I do in the paper is I basically use the US Energy Information Administration's [EIA’s] Annual Energy Outlook, and they produce a variety of scenarios that estimate energy production and consumption trends over time out to the year 2050—and so I take three different scenarios.

One of them is essentially a high oil and gas production scenario; one of them is a low oil and gas production scenario; and one of them is a reference case, which is kind of in the middle. In the paper, I compare those three scenarios with each other and I focus on comparing the high oi, and gas scenario with the low oil and gas scenario—just to sort of see what the range of effects might be from this recently growing US oil and gas production.

Kristin Hayes: Okay. So, just to clarify that—is the high oil and gas production compared to low oil and gas production still just domestic production? Is that right?

Daniel Raimi: That's correct. So, these changes in domestic production, they have important effects domestically and then internationally. I'll first talk about the domestic effects. Domestically, in a world where we have high oil and gas production, generally what you find is that in the electricity sector, natural gas displaces coal, and that tends to reduce emissions. But natural gas also displaces nuclear and it displaces investment in new renewables that are increasingly becoming cost competitive [...]

Kristin Hayes: Okay.

Daniel Raimi: [...] on the grid.

Kristin Hayes: And that's compared to the reference case, is that right? Compared to what we predict without changes in this higher oil and gas production scenario?

Daniel Raimi: That's right. So, if you look at the high oil and gas scenario, and compare it to either the reference case or the low oil and gas scenario, you see a lot more natural gas, substantially less nuclear, and substantially less renewables.

Kristin Hayes: Sure, okay. That makes sense.

Daniel Raimi: You also see substantially less coal, right? So, it's interesting to know—does that net out an emissions reduction or an emissions increase? There are other roles here as well. In the United States, if we produce more oil here at home [...] the US faces global oil prices, so the effects are somewhat muted. But the US does also consume more oil in a world where we produce more oil (not a huge surprise).

Kristin Hayes: And is that because we lower the price? We increase supply, and we lower the price of that oil [...]

Daniel Raimi: That's right.

Kristin Hayes: [...] so, we consume more of it? Yeah.

Daniel Raimi: That's right. So, in the high oil and gas production scenario, the oil price (the global oil price) is about $80 a barrel. In the low oil and gas scenario, the global oil price is about a $100 per barrel. So, that delta of $20, you know, makes a difference when it comes to long-term oil consumption in the US and globally.

But in the US, really, the big effects are seen with this natural gas/fuel switching question—natural gas competing with coal, and nuclear, and renewables. There's also a really important role here that methane emissions play. We haven't talked about methane emissions much, but methane (which is the primary component of natural gas)—if it escapes from oil or gas wells, or natural gas pipelines or other infrastructure—has a very powerful greenhouse gas effect.

So, I incorporate a range of estimates of methane emissions that basically increase the greenhouse gas footprint of oil and gas production in a high oil and gas scenario. It's not just that we're using more oil and natural gas—it's also that, in a high oil and gas production scenario, we're emitting more methane.

Kristin Hayes: Right, right.

Daniel Raimi: And that has a substantial effect as well.

Kristin Hayes: I know that some of those estimates (around how much methane is actually released during oil and gas production)—there's still some debate over those. There've been a number of different estimates that have come out. You mentioned you used a range of those. Are there any particular sources that you were relying on to develop that range?

Daniel Raimi: Yeah, so (as you say), there's been a lot of discussion about this question of methane emissions. And what I do in the paper is I basically benchmark things off two estimates. One of them is from the US EPA [Environmental Protection Agency] and its annual greenhouse gas inventory—but my central case is actually a little bit higher than the US EPA's estimate, and that's based on a paper from 2018 by Ramon Alvarez and colleagues.

Basically, that paper synthesizes a variety of new data that's come out in the last five years or so on methane emissions from oil and gas in the US. So, to my mind, the Alvarez paper is probably the best source to use for domestic methane emissions, and their estimates are about 60 percent higher than EPA's estimates.

Kristin Hayes: Okay, that's quite a range.

Daniel Raimi: Yeah, so when you include that, it changes things. And I also have a sensitivity case where I look at different global warming potentials for methane, because the greenhouse gas effect (sort of the amount of heat that methane traps) changes over time in a more dramatic way than carbon dioxide.

So, the climate impacts of methane are more pronounced over a short time period than they are over a long time period. I include both of those estimates so readers can get a sense of what things look like under these sort of ranges of assumptions.

Kristin Hayes: Very interesting. Before we move into a discussion about your findings, I did just want to ask one more methane question. So, thinking back to our earlier conversation about how oil and gas have gotten different levels of attention in a number of ways—do you find that oil and gas actually have different methane emissions profiles?

It seems to me that they would—but is there a quantification of that difference that you also incorporated?

Daniel Raimi: They do have different profiles. Per unit of energy produced, natural gas tends to emit more methane. That's not a big surprise, because natural gas basically is methane.

Kristin Hayes: Is methane, sure.

Daniel Raimi: Right. But you know, the way that oil and gas systems are classified is kind of complicated, and there's overlap, right? Because oil wells produce natural gas, and many natural gas wells also produce oil. So the distinction between oil and natural gas wells—and attributing methane emissions to quote-unquote oil and quote-unquote natural gas—is actually kind of fuzzy.

And so, there are different ways to do that, and I try to lay out clearly in the paper exactly how I allocate those emissions. But (in short) your question is right on—oil and natural gas have different methane profiles. It's also worth pointing out that coal mining emits a substantial amount of methane as well, and I include coal mining methane emissions in this analysis, too.

Kristin Hayes: Great. Daniel, thank you for letting me ask you so many background questions here. Let's talk a little bit about what you've found. Can you break down some of the conclusions for us?

Daniel Raimi: Sure. Again, I'll be kind of simple in my description here. Basically, when you look at the US effects—so you have natural gas substituting for different fuels, you have oil consumption increasing, and you have methane emissions going up under the high oil and gas scenario compared to the low oil and gas scenario—if you look at the year 2030 in the United States, and you take all those factors into account, then greenhouse gas emissions are about 5 percent higher under my central estimates in the paper.

So, if you compare high oil and gas to low oil and gas—greenhouse gas emissions are about 5 percent higher with a range of about 2 to 10 percent (depending on assumptions about methane, mostly).

Kristin Hayes: Okay.

Daniel Raimi: That's the US-only story, and that result is pretty much in line with other studies that have looked at these domestic-only impacts. So I don't think that's a huge surprise—but what I thought was really interesting and what I really wanted to focus on in this study is the global effect of lower oil prices coming from the surge in US oil production.

As we talked about earlier, under the high oil and gas scenario, global oil prices are estimated by the US EIA to be $20 a barrel lower in the year 2030 than they would be under the low-production scenario.

Kristin Hayes: That's right. That's $80 versus $100 per barrel. Is that right?

Daniel Raimi: That's right. It's really hard to estimate how people are going to change their consumption patterns in response to prices over 15- or 20-year timescales. I take a range of estimates from the literature on what's called the “price elasticity of demand”—which is basically how much additional oil people consume in response to this decline in prices.

Again, I have a range. But at the low end (and I use the low end here to try to be conservative)—what I find is that, in 2030, the world outside of the US consumes about 3 million barrels per day more oil under the high oil and gas scenario in the US. So, all this new supply from the United States decreases prices so much that the world uses 3 million barrels per day more oil—and that's a lot of oil.

Kristin Hayes: Yeah, can you put that into context for us?

Daniel Raimi: So, in the high oil and gas world—compared to the low oil and gas world—my estimate is that, globally, we're consuming about 3 million barrels per day more oil. To put that in context, US oil demand in 2030 (in that year) is projected to be about 18 million barrels per day, and global oil demand is about 108 million barrels per day.

Today, the world is using about 98, 99 million barrels of oil per day. An increase of somewhere between 2 and 3 percent—that might not sound like a lot.

Kristin Hayes: Actually—it kind of does, to me.

Daniel Raimi: Yeah.

Kristin Hayes: Interesting. Okay. Thanks for that context.

Daniel Raimi: Yeah, and so when we translate that 3-million-barrels-per-day-of-oil bump in consumption—if we translate that into greenhouse gas emissions—then what you find is that it translates into (at the low end) about 450 million metric tons of carbon dioxide.

That's a new number, that's a new unit. We haven't talked about that, but that number is about twice as much as the US-only effect. So, I said that US emissions increased by about 5 percent%—the global effects are twice as big. And, to have another reference point, all this new oil consumption increases global emissions by about 450 million metric tons. In the year 2016, the country of Brazil emitted a little bit less than that.

One way to think about this is that new supplies from the United States in 2030 add another Brazil to global greenhouse gas emissions, and that's kind of at the low end of my estimate.

Kristin Hayes: Thanks Daniel. Just to expand a little bit more, can you say anything else about why those international impacts would be twice as large as the domestic impacts?

Daniel Raimi: Sure. It's pretty simple. It's based on the fact that the US uses a lot of oil, but the world uses a lot more oil than just the US. So, the US accounts for somewhere in the neighborhood of 20 percent of global oil demand.

When you look at the global impacts of lower oil prices—if oil prices are lower, everyone in the world is going to tend to use more oil because of that, because of those low prices. So it's only natural that we would see a bigger effect in the places where people use the most oil. In the US, we only use 20 percent of the world's oil, and so we'd likely see a bigger effect internationally.

Kristin Hayes: I better be careful when I ask this, because it's going to show I'm not an economist—but are there actually country-by-country elasticities for oil consumption that would mean that prices are actually more elastic in some countries than in others?

Daniel Raimi: Yeah, there are—and I need to be careful in answering, because I'm not a PhD economist either. There certainly are estimates out there for country-by-country elasticities.

What I do in this paper, is take estimates for non-US global elasticity for oil consumption—or for world demand, I should say. And so, again, there's a bunch of numbers that are out there that make these estimates, and I use a range of them.

The one that I think is the most appropriate for this paper is in the elasticity of negative 0.15, which comes from a recent review by Hill Huntington, and it applies to non-US oil consumption.

Kristin Hayes: Well, it's very clear from your description how many choices you've had to make around ranges of uncertainties and assumptions that went into this work— clearly you've done a robust literature review to make the choices you have. Are there any other key assumptions or pieces of information, judgment calls, that you made going into this work?

Daniel Raimi: Yeah, there are a number of them. Again, I'd refer people to the paper to get the full view. The one that I want to highlight is the role of OPEC [Organization of the Petroleum Exporting Countries]. The price effects that I estimate based on the US EIA's estimates—those assume that OPEC and other countries do not act in a sort of coordinated, strategic way to offset increased US oil production. And that is something that is happening to some extent today, and could continue to happen, and could affect these price changes.

Basically, OPEC is not factored into the equation. My gut sense is that decisions made by OPEC (or “OPEC plus,” as it's sometimes referred to today, because Russia is involved)—they could have an effect. But it seems very unlikely to me that it would really fundamentally alter the storyline that we sort of have here.

If you just kind of imagine a world in which the US did not have the shale revolution—does anyone actually think we would be anywhere near $60 per barrel of oil today? It seems unlikely to me, and so that's just kind of a gut check for me.

There are modelers out there who probably can answer that question more robustly than I can, but I just want to acknowledge that OPEC decisions are left out—the price estimates are based purely on market decisions in the global oil supply curve, outside of any strategic decisions made by OPEC or others.

Kristin Hayes: Okay, yeah, thanks for that clarification. It's funny that you said, “Try to imagine a world without the shale revolution.” And, I will be honest (having now worked at RFF for a decade)—it is very hard to imagine how different the policy and research landscape would be were that shale gas revolution not to exist. It really has colored a lot of the thinking in the past 7 to 10 years.

Daniel Raimi: Absolutely. And, you know, for good and bad. I wrote a whole book about this. I remember one of the first times I met Alan Krupnick (who's at RFF, and who we both know and love).

I was talking to him about the shale revolution thing (and this was maybe 2012, 2013), and I asked him: “So, how big a story is this shale story to you? Where does it stack up in the history of energy developments?” And he basically said it's the biggest thing in at least a generation—and probably since the 60s and 70s and the OPEC oil embargo (and all that), and maybe even more important.

So, yeah. Certainly, as an energy researcher, I can't imagine the world without it. It's something where I've been spending most of my time.

Kristin Hayes: Yeah. Sort of in that same vein—the growth of oil and gas production in the US isn't really going away at all. And, in fact, oil production—I was reading recently that oil production, at least in Permian Basin—is at the highest level, I think, that it's ever been.

And so, you know, this trend is here to stay—at least in the short term, potentially in the longer term. Given that context, how do we need to think about the climate impacts moving forward, even as production continues to expand?

Daniel Raimi: Well, you're absolutely right that production is growing at a really rapid clip. It's been outpacing pretty much everyone's expectations, year in and year out. If you look at projections from the EIA (and many other organizations; it's not just the EIA going forward),you see [that] pretty much everyone expects this production to continue growing for years (and really decades) to come. Even under the low oil and gas production scenarios in the paper that I include, production is essentially flat and even growing a little bit. That's under the low production scenario.

We're really in a different world. When I think about the future and the past when it comes to the shale revolution, I think that there have been some real climate benefits from low-cost natural gas over the last 10 years in the United States [...] 10, 15 years.

US greenhouse gas emissions are down near their 1990s levels, and that's been really helpful for the climate. Natural gas has played a big role there. But going forward, when you see this scale of production and the potential impacts in the marketplace on greenhouse gas emissions—it's hard to avoid the idea that these high levels of oil and gas production are likely to increase global greenhouse gas emissions.

It just kind of is another finger pointing in the direction of the need for climate policy that can actually start to get a handle on this climate change challenge that the entire world is grappling with. Without those climate policies coming into place at a federal level (that's where I think it would be most effective), it's hard to see how all of this growth in oil production is really particularly compatible with a low-carbon future that we might want.

Kristin Hayes: Thanks. We got a little metaphysical there—I like it. The future and the past; it was great.

Daniel Raimi: The future and the past. And maybe it's all the same.

Kristin Hayes: Maybe it's just one big circle of life.

Daniel Raimi: That's right.

Kristin Hayes: Well, Daniel, I will stick to our regular regimen and close with the “Top of the Stack.” I want to note for our listeners that we have expressed (offline) a little bit of envy that our guests get to talk about what they're reading and listening to—when sometimes we'd love to share something that we're reading and listening to. So, Daniel, it is your turn. Can you tell us what is on the top of your stack these days?

Daniel Raimi: Oh, I've been waiting. So, I've got a bunch of recommendations, but the thing that I have really been so thrilled about lately is a collection of songs that I learned about through an episode of Fresh Air, the radio show.

So, there's a book (it might be a series of books) called, The Golden Age of Industrial Musicals. And these musicals were written for, basically, industry conferences—where the oil industry would get together, or the electricity industry would get together, and they would want to sort of pep up their workforce with a celebratory song about the glories of their industry.

Kristin Hayes: Yes, don't we all?

Daniel Raimi: That's right, we should have these at RFF.

Kristin Hayes: That's right, yes.

Daniel Raimi: And so if you go online and do some searching for “Golden Age of Industrial Musicals”—there are a number of songs about standard oil, which are just completely amazing.

A number of songs by Exxon (it was Exxon at the time, not ExxonMobil) [...] There's one called, “Up Came Oil,” which sort of sounds like something from Joseph and the Amazing Technicolor Dreamcoat—except it's all about the discovery of oil, and Edwin Drake, and all this stuff. It's really wonderful. So, just do some internet searching for “golden age of industrial musicals” and you won't be disappointed.

Kristin Hayes: Daniel, I'm just going to say—at some point, we probably should do a segment called “Top of Top of the Stack,” in which we rank all of the Top of the Stacks. I'm not going to lie, this might be my winner so far, because that's amazing.

I also just want to point out to our listeners that Daniel's career before he started in energy research was as a musician. He wrote the theme music for this very podcast series. He is a man of many talents, and when he gives you a musical recommendation, you should take it quite seriously.

Daniel Raimi: Thanks, Kristin.

Kristin Hayes: Yeah—well, great. Daniel, this has really been a pleasure. I hope we can find another time to talk to each other. Thank you again for telling us about this latest research.

Daniel Raimi: Absolutely. I look forward to talking on the podcast, and off the podcast.

Kristin Hayes: Sounds good. Thank you so much for joining us on Resources Radio. We'd love to hear what you think, so please rate us on iTunes or leave us a review—it helps us spread the word. Also, feel free to send us your suggestions for future episodes.

Resources Radio is a podcast from Resources for the Future. RFF is an independent, nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement.

Learn more about us at rff.org. The views expressed on this podcast are solely those of the participants. They do not necessarily represent the views of Resources for the Future, which does not take institutional positions on public policies. Resources Radio is produced by Kate Petersen, with music by Daniel Raimi. Join us next week for another episode.