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Report: Shale oil could revolutionize global energy markets

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If shale oil production spreads globally over the coming decades, it could revolutionize global energy markets and, for many countries, provide greater energy security at lower cost.

"Put simply, increased shale oil production could lead to oil prices that are significantly lower than projected in current forecasts," reads the report "Shale Oil: The Next Energy Revolution," released Feb. 25 by analysts at PricewaterhouseCoopers.

Global production of oil from shale — like the recently booming production from the Bakken Shale in North Dakota — has the potential to reach up to 12 percent of world oil supply by 2035, the PwC analysts found.

PwC's projections are more optimistic about shale oil than are those of the U.S. Energy Information Administration.

The EIA's most recent reference case, from its 2011 International Energy Outlook, puts shale oil production at 143,000 barrels per day in 2035, or a relatively insignificant one-tenth of one percent of global production.

PwC puts it 100 times higher, at 14 million barrels per day — a volume that, at more than 12 percent of global production, would affect global prices.

The benefits would differ by country, the analysis found.

Large net oil importers, such as India and Japan, might see their gross domestic product, or GDP, boosted from 4 to 7 percent by 2035.

The U.S., China, the Eurozone and the UK might gain 2 to 5 percent of GDP.

And oil exporters — Russia, the Middle East — could see trade balances worsen by 4 to 10 percent if they fail to develop their own shale resources.

Beyond the implications for companies working directly in the industry, reduced oil prices could create long-term benefits for a wide range of businesses with products that use oil or oil-related products as inputs — for example, airlines, plastics manufacturers and even heavy industry more generally.

Potential environmental consequences of an increase in shale oil production would need to be met with appropriate regulation, the analysis noted.

The effects could be complex — for example, shale oil could make alternative, lower-carbon transport fuels less attractive, but it might also displace production from higher cost and more environmentally sensitive plays.

At this still early stage of development, attitudes about shale resources vary widely.

The optimistic PwC analysis follows by a few days a report from the Post Carbon Institute finding that unconventional fossil fuel sources, shale oil included, are unlikely to produce as much as some have projected. It found that U.S. shale oil is a "production bubble of a little over ten years duration."