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The Impact of the Fracking Boom on Arab Oil Producers

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This article makes four contributions. First, it investigates the extent to which the U.S. fracking boom has caused Arab oil exports to decline since late 2008. Second, the article quantifies for the first time by how much the U.S. fracking boom has lowered the global price of oil. Using a novel econometric methodology, it is shown that in mid-2014, for example, the Brent price of crude oil was lower by $10 than it would have been in the absence of the fracking boom. Third, the article provides evidence that the decline in Saudi net foreign assets between mid2014 and August 2015 would have been reduced by 27% in the absence of the fracking boom. Finally, the article discusses the policy choices faced by Saudi Arabia and other Arab oil producers.

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Energy Specializations: Petroleum – Exploration and Production; Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q37: Nonrenewable Resources and Conservation: Issues in International Trade, Q35: Hydrocarbon Resources, L71: Mining, Extraction, and Refining: Hydrocarbon Fuels, Q40: Energy: General

Keywords: Arab oil producers, Saudi Arabia, Shale oil, Tight oil, Oil price, Oil imports, Oil exports, Refined product exports, Oil revenue, Foreign exchange reserves, Oil supply shock

DOI: 10.5547/01956574.38.6.lkil

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Published in Volume 38, Number 6 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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