PER 2015
As we can see on the diagram above, the shift out in AD from 1 to 2 causes an increase in the price level in the form of inflation. This inflation can cause the price of goods and services in an economy to increas, which has a number of negative consequences such as falling real incomes, negative real interest rates and risk of wage inflation, which can cause lower profits for a business. Therefore, it is clear that a reduction in raw materials such as the one shale gas has caused in the USA can have negative consequences down the line. It is clear fracking could bring many different economic benefits and possible challenges. However, on the whole I feel that fracking should be allowed in the UK as the benefits to everybody are clearly larger than the costs. Now, we need to move onto the next part of the question. Who should benefit?? F f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f f ff f f f f f f f f f f f f f f f f f f f f f f The fact that hydraulic fracturing could affect so many different groups makes this part of the question quite difficult to answer, as this makes many people interested in whether fracking should continue in the UK, and if it does who should benefit. There two main sides to people who could benefit from fracking, and that is the businesses carrying it out such as Cuadrilla and households. I shall lay the claims for the households first.
Households could be the ones to benefit from fracking for many reasons. For example, the households are the ones fracking could directly affect in terms of negative consequences such as minor earthquakes, obviously depending on where the households are situated. If this is the case, households should be the ones to feel the benefits of fracking. However, for the majority of households, they will
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not be affected by fracking in this way. Also, the raw materials extracted from fracking would be used to create energy for households. This means households could be the ones to benefit as the increase in raw materials accessed in the UK could cause energy prices to drop. This is because the supply is increased in the UK, causing the price to drop. This is shown in the diagram below: As we can see on the diagram, the shift out of the supply curve causes a drop in price show in P to P1, and an increase in quantity from Q to Q2. The decrease in price has already happened in the USA, where, as discussed earlier, ‘ 29% of natural gas prices in Europe, and to one-fifth of natural gas prices in Japan.’ 46 Another quote to support this is ‘Gas bills have dropped $13 billion per year from 2007 to 2013 as a result of increased fracking, which adds up to $200 per year for gas-consuming
46 https://en.wikipedia.org/wiki/Hydraulic_fracturing_in_the_United_States#Gas_price
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