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The U.S. Fracking Boom: Impact on Oil Prices

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Abstract:
As of late 2008, the steady decline of U.S. crude oil production over the last decades was reversed by the increased adoption of the hydraulic fracturing ("fracking") technology. Adapting the supply-side model proposed by Kaufmann et al. (2004) to assess OPEC's ability to influence real oil prices, this paper investigates the effect of the increase in U.S. oil production due to fracking on world oil prices. Among our key results obtained from (dynamic) OLS estimations, there is a statistically significant negative long-run relationship between increased U.S. oil production and oil prices.

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Keywords: Dynamic OLS, Error Correction Model, Shale Oil

DOI: 10.5547/01956574.40.4.mfro

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Published in Volume 40, Number 4 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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