Unconventional Gas and the European Union (EU): Prospects and Challenges for Competitiveness

11-12-2014 | Publication

This paper analyses the likely impact of unconventional gas developments in the United States on EU competitiveness, in both the short and the long run. It reviews the recent literature and brings together facts and trends in both conventional and unconventional gas production and prices, as well as in other related energy markets in Europe and other world regions.

First of all, there is little evidence of a prosperous unconventional gas development in Europe. Second, the US boom already has a strong impact on both global and European energy markets. In particular, lower US gas and coal prices have changed relative energy prices, both in the United States and abroad.

Finally, the competitiveness impacts in some (sub)sectors will be considerable. These impacts are not restricted to gas use but also strongly relate to the production of ‘by-products’ such as ethylene, propane and butane, which are transformed into products competing with similar but oil-based products from the EU. These indirect impacts may even be more important in the long run, although several general equilibrium impacts may soften the adverse competitiveness impact in the EU.