A few weeks ago, John Mauldin called fracking a “happy solution” that will produce jobs, potentially solve our trade deficit and generate new tax revenue, though energy prices may rise in the process. But how excited should we be about the “shale revolution”?

Over the last few years, we have seen increasing enthusiasm – bordering on hype – over the idea that horizontal drilling plus hydraulic fracturing of shale rock to produce oil and gas, commonly referred to as “fracking,” is changing everything. The US is about to be the leading oil-producing nation again, says the International Energy Agency. We have 100 years of abundant gas supplies, says President Obama. In the recent election, thanks to these developments, the candidates were actually debating how soon the United States would be “energy independent.”

Largely due to fracking in North Dakota and Texas, US oil production has grown from five million barrels per day (bpd) in 2008 to about 6.5 million bpd now, though that is still much less than the total amount we use. Natural gas production over that time has risen from 21 trillion cubic feet per year to about 24.7 trillion cubic feet today, led by fracking for gas in Texas, Louisiana, and Pennsylvania. After decades of declining production, these reverses are big news.

That’s indisputable. The question is “how big?”

Some background

First, a bit of geology. Oil and natural gas are ancient plant life that has been transformed by millions of years of pressure into hydrocarbons and captured in rock formations rather than escaping into the air. When these pressure-cooker carbons end up with a single carbon atom, the resulting methane is what we call natural gas. When there are two, three, or four carbons, the resulting “natural gas liquids” have mostly industrial uses, and while they are often included in statistical reports of oil production, they are not “oil.” Molecules with more carbon atoms are liquids that are mostly used for transportation fuel – what we call oil. Refineries sort out all these molecules and remove various impurities. When gas and oil are found in large quantities in sandstone or other porous rock, we call that “conventional” oil or gas, because the fossil fuel can flow through pores in the rocks to reach a well. (Note that “gas” as I’m using it in this article refers to “natural gas” or methane, not to “gasoline.”)

Sometimes, though, the gas is locked up in the shale rock where it formed, and it won’t move, or the oil is so thick or impartially “cooked,” that we have to use extreme “unconventional” technologies to get at it. Worldwide production of conventional oil has been on a plateau since about 2005, so we have turned to “unconventional” production to keep the wheels of the world economy turning. The Canadian tar sands, for example, are a major “unconventional” oil source.