The price elasticity of U.S. shale oil reserves

James Smith and Thomas K. Lee

Energy Economics, 2017, vol. 67, issue C, 121-135

Abstract: We formulate a model of shale oil development that identifies how much of the U.S. resource base is likely to be economically viable at various price levels, and what share of potential drilling sites are likely to be exploited. The analysis is driven by the lognormal variability in productivity of individual wells. We find the volume of reserves to be highly inelastic with respect to price. The number of viable drilling sites is less inelastic, which may explain why reserve additions and production fell much less than drilling activity during the recent industry slump.

Keywords: Shale oil; Price elasticity; Drilling productivity; Lognormal distribution (search for similar items in EconPapers)
JEL-codes: L71 Q31 Q33 Q35 Q41 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:67:y:2017:i:c:p:121-135

DOI: 10.1016/j.eneco.2017.06.021

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