Supply flexibility in the shale patch: Facts, no fiction
Hilde Bjørnland ()
No No 08/2019, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School
In two recent papers, Kilian and Zhou (2019) and Kilian (2019) have criticized Bjørnland, Nordvik, and Rohrer (2017), arguing that our finding of a large price elasticity of output for shale producers is not credible. We welcome a discussion of our methods and findings, but the criticisms made in these two papers are inaccurate and mischaracterize our analysis and results. In this note I address the criticism that has been made, arguing that our findings support the notion that the degree of output fl exibility is dependent on the production technology in question. Furthermore, I argue that knowledge that shale producers are more price elastic than conventional oil producers could have far reaching implications for the industry, for macroeconomic outcomes, and for policy analysis.
Pages: 14 pages
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