The Shale Revolution and the Dynamics of the Oil Market

Nathan Balke, Xin Jin and Mine Yucel

The Economic Journal, 2024, vol. 134, issue 662, 2252-2289

Abstract: We build and estimate a dynamic, structural model of the world oil market to quantify the impact of the shale revolution. We model the shale revolution as a decrease in shale production costs and find that the resultant increase in shale production lowers oil prices by 24% in the short run and 48% once the shale oil transition is complete. Current oil price volatility is lowered by 8% to 23% depending on the horizon. We also find that OPEC core acts to keep its market share constant in the face of the dramatic increase in shale production.

Date: 2024
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Working Paper: The Shale Revolution and the Dynamics of the Oil Market (2020)
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