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Fracking and Structural Shifts in Oil Supply

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Abstract:
The adoption of hydraulic fracturing (fracking) and horizontal drilling technology substantively altered the structure of oil supply. Using disaggregate state-level data from the U.S, this paper provides empirical evidence that oil supplies are now asymmetric with respect to price changes as a result of the adoption of new production methods. The changed structure of U.S. oil supply—particularly the low supply elasticities for price declines and large supply elasticities for price increases—is consistent with the ineffectiveness of OPEC policies intended to drown fracking American producers in oil.

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Keywords: Fracking, Oil Supply, OPEC

DOI: 10.5547/01956574.43.3.wwal

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Published in Volume 43, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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