Shale Oil May Boost Global Economy by $2.7 trillion

Fracking operations are becoming a major source of U.S. oil and gas

Shale oil production could boost the world economy by as much as $2.7 trillion by 2035 while reducing global oil prices by up to 40 percent, according to a new report by PricewaterhouseCoopers (PwC).

The oil, extracted through hydraulic fracturing, or "fracking," could add as much as 3.7 percent to global growth, the equivalent of adding an economy about the size of the United Kingdom (UK) to the world, by 2035.

Shale oil will also change global economic dynamics, with lower oil prices hurting current major exporters like Russia and the Middle East, with the report saying they could see a significant
worsening of their trade balances by around 4-10 percent of GDP in the long run if they fail to
develop their own shale oil resources.

In contrast, large net oil importers such as India and Japan might see their GDP boosted by around 4-7 percent by 2035, while the U.S., China, the Eurozone, and the UK might gain by 2-5 percent of GDP.

Fracking for both oil and gas has been criticised over potential environmental impacts, and the PwC report adds that shale oil could have adverse environmental effects by making alternative lower carbon transport fuels less attractive.

However the report also noted it may displace production from higher cost and more
environmentally sensitive areas such as the Arctic and Canadian tar sands.

Last month China awarded exploration rights on 19 share gas areas to 16 firms, and the UK government agreed in December to let fracking for gas resume in Lancashire despite tremors that the process may have caused, the BBC reports.

The U.S. has large quantities of oil and gas that can be extracted through fracking, and a report by the International Energy Agency (IEA) last year predicted that the country will become the world's largest oil producer by 2020 and the world's largest gas producer by 2015.