Economics of Energy: Shale Oil

Economics of Energy

As every nation endures the global recession, countries invest on various types of energy sources that offer the maximum benefits. There are many variations on energy that can be used such as solar energy, nuclear energy, wind-generated energy and shale oil reserves. Each type of energy has different economic benefits. At present times, shale oil reserves are to watch out for. Shale oil reserves are usually undeveloped given that the process of extracting its oil is a difficult process. However, the latest technology unfolds the overwhelming potential of shale oil exploration. The accessibility of shale oil resources across the globe and the effect of increased shale oil production have influence that extends further than the rest of competitors in energy industry. In contrast, other sources of energy offer economic benefits as well but only differ with costs incurred.

Among all energy sources, nuclear energy helps to reduce air pollution, balance the Earth’s weather, avoid acid rain, and depletion of ozone layer. Nuclear power plants are environment-friendly source of energy. There are many economic benefits of using nuclear power plants. Nuclear power plants are a good source of income while it incurs low costs on operation. In the United States, it is their second largest source of power. Aside from stability in future price, it also avoids the import on fuel. Although the economic benefits of nuclear power are great, the hype on shale oil exploration overshadows the nuclear industry. As many nuclear power plants are offline, most of them would find it easier to build new turbines for gas exploration than repair nuclear reactors. According to the Climate News Network in London, most of the nuclear reactors in the United States and Canada are shutting down since shale gas produces cheaper power (Brown, 2013, para.1). Moreover, the investment costs required for nuclear power plant is higher compared to shale oil exploration. Hence, the economic benefits of shale gas are better than nuclear power. Another source of energy is the solar power. This type of energy captures the photovoltaic cells that transform sunlight into electrical energy. Its edge among other sources of energy is that sunlight is free; hence, its energy is infinitely renewable. In the future, the cost of solar power is expected to decline below market price. To compare solar energy and shale gas, the latter has many variables to consider on its relevant costs such as land costs, drilling costs, corporate overhead and others. Hence, solar energy is more economic than shale gas when it comes to expenditures. Lastly, wind-generated energy is also an alternative source of electricity. Wind turbines convert the wind that passes through the blades into electricity. One of the challenges on wind energy industry is its disadvantage on costs. Its technology needs a higher amount of initial outlay than fossil fuels. Hence, shale gas is more cost-competitive compared to wind-generated electricity.

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Economic Costs and Profits of Shale Oil Exploration

Computation for economic costs basically includes explicit costs, real costs and opportunity costs (EconomicConcepts.com, 2012, n.p.). On the other hand, economic profit is the difference between revenue and costs incurred. In this section, the economic costs are cash outlays, opportunity costs, transportation expense to China and Beijing Costs, Insurance and Freight (CFI). Below is a table of the writer’s own model of economic costs and profits of shale exploration (Figure 1). The figures are rounded off to the nearest whole number.

Economic Costs and Profit for Shale Oil Exploration
Total Revenue			$ 12,000,000,000.00 Are Writing Services Legal? Totally! They’re a legit resource for sample papers to guide your work. Use them to learn structure, boost skills, and ace your grades—ethical and within the rules.
Explicit Costs
Pipeline costs
Materials What’s the Price for a Paper? Starts at $10/page for undergrad, up to $21 for pro-level. Deadlines (3 hours to 14 days) and add-ons like VIP support adjust the cost. Discounts kick in at $500+—save more with big orders!	$ 8,000,000.00
Miscellaneous Expenses	$ 1,000,000.00
		$ 9,000,000.00 Is My Privacy Protected? 100%! We encrypt everything—your details stay secret. Papers are custom, original, and yours alone, so no one will ever know you used us.
Land
(934400 acres x $ 5000 per acre)		$ 4,600,000,000.00
Well Cost Is AI Involved in Writing? Nope—all human, all the time. Our writers are pros with real degrees, crafting unique papers with expertise AI can’t replicate, checked for originality.
(50 wells x $5,000,000 rate per well)		$ 250,000,000.00
Drilling Costs		$ 14,000,000.00 Why Are You the Best for Research? Our writers are degree-holding pros who tackle any topic with skill. We ensure quality with top tools and offer revisions—perfect papers, even under pressure.
Transportations Costs (Cost Insurance Freight to Beijing, China)
(6000 trucks x $8000 rate per truck)		$ 48,000,000.00
			$ 4,921,000,000.00 Who Writes My Assignments? Experts with degrees—many rocking Master’s or higher—who’ve crushed our rigorous tests in their fields and academic writing. They’re student-savvy pros, ready to nail your essay with precision, blending teamwork with you to match your vision perfectly. Whether it’s a tricky topic or a tight deadline, they’ve got the skills to make it shine.
Total Explicit Costs
Real Costs
Labor		$ 11,500,000.00 Will My Paper Be Unique? Guaranteed—100%! We write every piece from scratch—no AI, no copying—just fresh, well-researched work with proper citations, crafted by real experts. You can grab a plagiarism report to see it’s 95%+ original, giving you total peace of mind it’s one-of-a-kind and ready to impress.
Total Real Cost			$ 11,500,000.00
Opportunity Costs
Opportunity Costs Can You Use Any Citation Format? Yep—APA, Chicago, Harvard, MLA, Turabian, you name it! Our writers customize every detail to fit your assignment’s needs, ensuring it meets academic standards down to the last footnote or bibliography entry. They’re pros at making your paper look sharp and compliant, no matter the style guide.		$ 50,000,000.00
Total Opportunity Costs			$ 50,000,000.00
Total Economic Costs Can I Change My Order Details? For sure—you’re not locked in! Chat with your writer anytime through our handy system to update instructions, tweak the focus, or toss in new specifics, and they’ll adjust on the fly, even if they’re mid-draft. It’s all about keeping your paper exactly how you want it, hassle-free.			$ 4,982,500,000.00
Total Economic Profit			$ 7,017,500,000.00

Figure 1. Sample Model of Total Economic Costs and Profit for Shale Oil Exploration

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In Figure 1, the figures indicated are merely estimates through extensive research. In the explicit costs, the costs incurred are for pipeline, land, well, drilling and transportations. These are costs that are directly attributed to the shale gas exploration. The estimates used for rate per acre, well, and truck are average computation for each account. Secondly, real cost includes all the labor costs incurred to extract oil from the shale. Lastly, the opportunity cost pertains to the amount which could have been earned using other alternatives such as nuclear power plant and so on. In the illustration, total revenue exceeds the total costs incurred which results to an economic profit of $7 Billion. Hence, the model shows a cash-generating shale oil exploration. The next illustration (Figure 2) shows the extended model of Figure 1.

Expanded Computation for Economic Cost and Profit of Shale Oil Exploration
Total Revenue		$ 12,000,000,000.00 How Quick Can You Write? Need it fast? We can whip up a top-quality paper in 24 hours—fully researched and polished, no corners cut. Just pick your deadline when you order, and we’ll hustle to make it happen, even for those nail-biting, last-minute turnarounds you didn’t see coming.
Total Economic Costs		$ 4,982,500,000.00
Other Costs
Decommission Cost
Waste Disposal costs Can You Handle Tough Topics? Absolutely—bring it on! Our writers, many with advanced degrees like Master’s or PhDs, thrive on challenges and dive deep into any subject, from obscure history to cutting-edge science. They’ll craft a standout paper with thorough research and clear writing, tailored to wow your professor.	$ 384,500,000.00
Labor	$ 568,050,000.00
Used-fuel Storage costs	$ 211,230,000.00 How Do You Match Professor Expectations? We follow your rubric to a T—structure, evidence, tone. Editors refine it, ensuring it’s polished and ready to impress your prof.	$ 1,163,780,000.00
Operation or Fracking Expense		$ 1,230,500,000.00
Construction Expense How Do You Edit My Work? Send us your draft and goals—our editors enhance clarity, fix errors, and keep your style. You’ll get a pro-level paper fast.		$ 805,080,000.00
Total Economic Cost		$ 8,181,860,000.00
Total Economic Profit		$ 3,818,140,000.00 Can You Brainstorm Topics? Yep! We’ll suggest ideas tailored to your field—engaging and manageable. Pick one, and we’ll build it into a killer paper.

Figure 2. Expanded Computation for Economic Cost and Profit of Shale Oil Exploration

In Figure 2, the amounts from Figure 1 are retained and only the other costs account is added as well as operation or fracking cost and construction expense. The marginal cost is computed by dividing the change in total cost by change in total quantity of shale oil (AmosWEB, 2014, para.4). Hence, $ 8,181,860,000.00 – $ 4,982,500,000.00 is $3199360000. Change in total quantity pertains to the change in output of shale oil extraction. For instance, a company can extract 100,000 tons of shale oil in a year and doubles for the succeeding years. Below is the computation for marginal cost per year.

	Change in Costs	Change in Quantity	Marginal Cost
1st year	3199360000 Do You Offer Fast Edits? Yes! Need a quick fix? Our editors can polish your paper in hours—perfect for tight deadlines and top grades.	100,000	31993
2nd year	3199360000	200,000	15996 Can You Start With an Outline? Sure! We’ll sketch an outline for your approval first, ensuring the paper’s direction is spot-on before we write.
3rd year	3199360000	400,000	7998
4th year	3199360000	800,000	3999 Can You Add Charts or Stats? Definitely! Our writers can include data analysis or visuals—charts, graphs—making your paper sharp and evidence-rich.
5th year	3199360000	1,600,000	1999

Figure 3. Computation for Marginal Cost

Figure 3 is a chart on computing for marginal cost. The numerator is the change in costs divided by the denominator which is the change in tons of shale oil.

Energy Forecast

Energy Forecast on UAE from 2014 to 2020
Year	Dollar Price per Oil Barrel	Year What About Multi-Part Projects? We’ve got it—each section delivered on time, cohesive and high-quality. We’ll manage the whole journey for you.	Dollar Price per Oil Barrel
2003	26.74	2014	120.76 Do You Adapt to International Rules? Yes! UK, US, or Aussie standards—we’ll tailor your paper to fit your school’s norms perfectly.
2004	33.46	2015	128.86
2005 What does a complex assignment mean? If your assignment needs a writer with some niche know-how, we call it complex. For these, we tap into our pool of narrow-field specialists, who charge a bit more than our standard writers. That means we might add up to 20% to your original order price. Subjects like finance, architecture, engineering, IT, chemistry, physics, and a few others fall into this bucket—you’ll see a little note about it under the discipline field when you’re filling out the form. If you pick “Other” as your discipline, our support team will take a look too. If they think it’s tricky, that same 20% bump might apply. We’ll keep you in the loop either way!	49.49	2016	136.97
2006 Who is my writer? How can I communicate with him/her? Our writers come from all corners of the globe, and we’re picky about who we bring on board. They’ve passed tough tests in English and their subject areas, and we’ve checked their IDs to confirm they’ve got a master’s or PhD. Plus, we run training sessions on formatting and academic writing to keep their skills sharp. You’ll get to chat with your writer through a handy messenger on your personal order page. We’ll shoot you an email when new messages pop up, but it’s a good idea to swing by your page now and then so you don’t miss anything important from them.	61.43	2017	145.07
2007	68.37	2018	153.17
2008	93.78	2019	161.28
2009	61.75	2020	169.38
2010	78.06
2011	106.03
2012	108.9
2013	105.43

Figure 4. Energy Forecast on UAE from 2014 to 2020

In Figure 4, the amounts from the year 2003 up to 2013 are data released by World Bank Commodity Price Data (Knoema, 2013). Following the past trends on Dubai’s oil prices, the next 6 six years are forecasts through the Microsoft Excel’s trend function. The illustration shows a forecast of the increasing oil price in the next 6 years. UAE’s oil price is to increase by $7-$9.

Comparative Energy Forecast on UAE, UK and US
	UAE	UK	United States
Year	Dollar Price per Oil Barrel
2003	26.74	28.85	31.11
2004	33.46	38.3	41.44
2005	49.49	54.43	56.44
2006	61.43	65.39	66.04
2007	68.37	72.7	72.28
2008	93.78	97.64	99.56
2009	61.75	61.86	61.65
2010	78.06	79.64	79.43
2011	106.03	110.94	95.05
2012	108.9	111.97	94.16
2013	105.43	108.86	97.94
2014	120.76	123.61	109.21
2015	128.86	131.63	115.36
2016	136.97	139.65	121.52
2017	145.07	147.66	127.67
2018	153.17	155.68	133.83
2019	161.28	163.70	139.98
2020	169.38	171.72	146.14

Figure 5. Comparative Energy Forecast on UAE, UK and US

Figure 6.Bar Graph of Energy Forecast on UAE, UK and US

Figure 5 illustrates the past and future forecasts on the oil prices of UAE, UK and the United States. Using the past trends on oil prices of these countries, a forecast for the next 6 years is made. The same method of computation has been made similar to Figure 5. Its summary on Figure 6, UK has the highest amount of oil price in the next 6 years while UAE falls second. Although United States has usually the highest price of oil in the last 10 years, UK started to lead starting 2012 until now. Hence, both United States and UAE has to improve more in terms of their energy economics to surpass UK’s performance in energy industry.

References

Brown, P. (2013, February 13).Shale gas kills nuclear power | Climate News Network. Retrieved from http://www.climatenewsnetwork.net/2013/02/shale-gas-kills-nuclear-power/>

EconomicConcepts.com (2012).Concept of Economic Costs – Explict Cost – Implict Cost- Real Cost – Oppotunity Cost – Definition and Example – Economicsconcepts.com. RetrievedJanuary24, 2014, from http://economicsconcepts.com/concepts_of_economic_costs.htm>

Knoema (2013, October).Crude Oil Prices Forecast: Long Term to 2025 | Data and Charts – knoema.com. RetrievedJanuary25, 2014, from http://knoema.com/yxptpab/crude-oil-prices-forecast-long-term-to-2025-data-and-charts>

Marginal Cost, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2014. Retrieved January 24, 2014>.

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