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(Showing results 1 to 6 of 6)



The Impact of the Fracking Boom on Arab Oil Producers

Lutz Kilian

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: 10.5547/01956574.38.6.lkil
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Abstract:
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.



Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?

Mark Agerton and Gregory B. Upton Jr.

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.mage
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Abstract:
Over the past decade the primary U.S. crude benchmark, WTI, diverged considerably from its foreign counterpart, Brent, sometimes selling at a steep discount. Some studies pointed to the ban on exporting U.S. crude oil production as the main culprit for this divergence. We find that scarce domestic pipeline capacity explains half to three quarters of the deviation of mid-continent crude oil prices from their long-run relationship with Brent crude. We are unable to find evidence that mismatch between domestic refining configurations and domestic crude characteristics contributed significantly to this deviation. This implies that the short-run deleterious effects of the export ban may have been exaggerated.



The Unconventional Oil Supply Boom: Aggregate Price Response from Microdata

Richard G. Newell and Brian C. Prest

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.rnew
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Abstract:
We analyze the price responsiveness of U.S. conventional and unconventional oil supply across three key stages of oil production: drilling, completion, and production. Drilling is the most important margin, with price elasticities of 1.3 and 1.6 for conventional and unconventional drilling respectively. Well productivity declines as prices rise, implying smaller net supply elasticities of about 1.1 and 1.2. Despite similar supply elasticities, the price response of unconventional supply is larger in terms of barrels because of much higher production per well (~10x initially). Oil supply simulations show a 13-fold larger supply response due to the shale revolution. The simulations suggest that a price rise from $50 to $80 per barrel induces incremental U.S. production of 0.6MM barrels per day in 6 months, 1.4MM in 1 year, 2.4MM in 2 years, and 4.2MM in 5 years. Nonetheless, the response takes much longer than the 30 to 90 days than typically associated with the role of "swing producer."



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

Manuel Frondel and Marco Horvath

Year: 2019
Volume: Volume 40
Number: Number 4
DOI: 10.5547/01956574.40.4.mfro
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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.



Living in an Era when Market Fundamentals Determine Crude Oil Price

Theodosios Perifanis and Athanasios Dagoumas

Year: 2019
Volume: Volume 40
Number: The New Era of Energy Transition
DOI: 10.5547/01956574.40.SI1.tper
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Abstract:
Crude oil price plays a crucial role in the trajectory of the economic activity. This paper aims at quantifying the impact of the fundamental drivers of crude oil price, over the period 2008-2017 using monthly data. This period, with sharp fluctuations of crude oil prices, has not been examined thoroughly in the literature. We apply regression analysis to examine the crude oil price drivers, concluding that crude oil price follows mostly market fundamentals, such as consumption, OPEC production, shale production and days ahead consumption for OECD stocks. Results unveil the importance of both factors of demand and supply to affect the price. We also find evidence on the considerable impact of S&P crude oil index, as a "paper oil" market indicator. We do not find evidence from indicators measuring political instability, such as the number of terrorists attacks in oil producing countries, but as well the VIX volatility index, which - besides a market instability index - could also be perceived as an index incorporating political instability. The impact of political factors is not evident in our analysis, possibly because we do not consider related dummy variables. Moreover, the paper applies bivariate VAR and GARCH analysis to examine crude oil price volatility, not finding strong volatility transmission with the examined market indices, namely the S&P crude oil and the VIX indices.



The Impact of U.S. Supply Shocks on the Global Oil Price

Thomas S. Gundersen

Year: 2020
Volume: Volume 41
Number: Number 1
DOI: 10.5547/01956574.41.1.tgun
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Abstract:
I examine the role of the U.S. shale oil boom in driving global oil prices. Using a structural vector autoregressive (SVAR) model that identifies separate oil supply shocks for the U.S. and OPEC, I find that U.S. supply shocks can account for up to 13% of the oil price variation over the 2003-2015 period. This is considerably more than what has been found in other studies. Moreover, while U.S. oil production has increased substantially since 2010, U.S. oil supply shocks first started to contribute negatively to oil prices beginning in late 2013. This mismatch implies a temporary friction in the transmission of U.S. supply shocks to the rest of the world likely caused by logistical and technological challenges observed in the downstream supply chain.





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