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Market tremors: shale gas exploration, earthquakes, and their impact on house prices

Stephen Gibbons, Stephan Heblich and Christopher Timmins

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Shale gas has grown to become a major new source of energy in countries around the globe. While its importance for energy supply is well recognized, there has also been public concern over potential risks from hydraulic fracturing (‘fracking’). Although commercial development has not yet taken place in the UK, licenses for drilling were issued in 2008, signalling potential future development. This paper examines whether public fears about fracking affect house prices in areas that have been licensed for shale gas exploration. Our estimates suggest differentiated effects. Licensing did not affect house prices but fracking the first well in 2011, which caused two minor earthquakes, did. We find a 3.9–4.7 percent house price decrease in the area where the earthquakes occurred. The earthquakes were too minor to have caused any damage but we find the effect on prices extends to a radius of about 25 km served by local newspapers. This evidence suggests that the earthquakes and newspaper coverage increased awareness of exploration activity and fear of the local consequences.

Keywords: shale gas; fracturing; hedonic prices; housing prices; consumer expectation; information; media; United Kingdom; ES/K006460/1; ES/M010341/1; Elsevier (search for similar items in EconPapers)
JEL-codes: R14 J01 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2021-03-01
New Economics Papers: this item is included in nep-ene and nep-ure
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Published in Journal of Urban Economics, 1, March, 2021, 122. ISSN: 0094-1190

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