boom. The plot shows the evolution of the global GDP factor with and without the contribution of U.S. oil supply shocks, where U.S. oil supply shocks are interpreted as unanticipated improvements in U.S. shale sector productivity. The results indicate that expansion in U.S. oil supply due to innovations in shale technology had an overall positive impact on global activity during this period. The results are especially pronounced starting in 2014—a period when exemptions were heavily used to circumvent the U.S. crude oil export ban, which contributed to a decline in global oil prices (see Melek, Plante, & Yücel, 2020). In particular, during the period 2014–2016 oil markets experienced one of the largest oil price declines since the 1970s. Stocker et al. (2018) attribute this decline primarily to supply factors with the “booming U.S. shale production [playing] a significant role in the oil price plunge from mid-2014 to early 2016.” Similarly, Nuño & Manescu (2015) conclude that the decline in oil prices in the second half of 2014 was mainly due to an unexpected increase in oil supply. The global oil price decline led to a temporary reduction in shale oil production as teh U.S. fracking industry competed with OPEC and other low-cost oil producers. However, further innovations in productivity allowed shale producers to mitigate production costs, which resulted in the second shale boom, which saw U.S. shale oil output expanding to record levels in 2019 (Rystad, 2019). These unexpected cost-reducing productivity gains had a relatively large positive impact on global output over the period 2017–2019 as seen in Figure 5. Overall, in the absence of the first and the second U.S. shale boom, global GDP growth would have been lower by approximately 0.27 percentage points during the period 2010–2019.<sup>26</sup> This translates to an increase of approximately 2.03 percent in global GDP as a result of the two shale booms, which represents approximately 7.5 percent of the total growth in global GDP that occurred over the period 2010–2019.

During the same period, a series of predominantly negative U.S. energy efficiency shocks had an adverse impact on global economic activity. The bottom panel in Figure 5 shows the evolution of the global GDP factor with and without U.S. energy efficiency shocks. The results indicate that in absence of U.S. energy efficiency shocks, global GDP growth would have been higher by approximately 0.19–0.23 percentage points over the period 2010-2019, which maps to an increase of 1.33 percent in the level of global GDP. The results are most pronounced during the period 2017– 2019—a period that overlaps with the second shale boom—when negative energy efficiency shocks eclipse the positive impact on global growth of the expansion in U.S. oil supply. These results are in line with other empirical findings. For example, the International Energy Agency (IEA) reports a decline in energy efficiency improvements since 2015 (see International Energy Association, 2017, 2018, 2019).<sup>27</sup>

> 26See also Mohaddes & Raissi (2019) who find that a U.S. supply-driven oil price shock increases global growth by 0.16–0.37 percentage points in the medium term. Their results are based on a Global VAR model, where they obtain a weighted average of country impulse responses to a U.S. oil supply shock. The use of historical decompositions to assess the impact on global GDP of U.S. shale revolution is crucial because the actual variation in GDP is driven by shocks of different magnitudes and signs (see Kilian & Lütkepohl, 2017).

> 27In particular, International Energy Association (2017) states that, “progress [in energy efficiency] has become dependent on yesterday’s policies, with the implementation of new policies slowing. If the world is to transition to a clean energy future, a pipeline of new efficiency policies needs to be coming into force. Instead, the current low rate of implementation risks a backward step.” Similarly, International Energy Association (2019) states that, “this decline [in energy efficiency improvements] partly reflects stagnation in the passing of new energy efficiency policies in recent years. Also, Acemoglu et al. (2019) study the impact of the shale revolution on CO2 emissions. They find that in the long run, a shale gas boom increases CO2 emissions and induces firms to direct innovation away from

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