Supply flexibility in the shale patch: Evidence from North Dakota

Hilde Bjørnland (), Frode Nordvik () and Maximilian Rohrer

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper provides new results to the literature, showing that output flexibility in oil production depends on the extraction technology. In particular, constructing a novel well-level monthly production data set covering more than 16,000 crude oil wells in North Dakota, we find supply elasticity of shale wells to be positive and in the range of 0.3-0.9, depending on wells and firms characteristics. We find no such responses for conventional wells. We interpret the supply pattern of shale oil wells to be consistent with the Hotelling theory of optimal extraction. These results have far reaching implications for oil prices: as shale producers grow in size and importance, we should expect to see a stabilizing effect on prices.

Keywords: Supply elasticity; well panel data; US shale oil boom; Hotelling theory (search for similar items in EconPapers)
JEL-codes: C33 L71 Q31 Q40 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019-08
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (20)

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https://cama.crawford.anu.edu.au/sites/default/fil ... d_nordvik_rohrer.pdf (application/pdf)

Related works:
Journal Article: Supply flexibility in the shale patch: Evidence from North Dakota (2021)
Working Paper: Supply Flexibility in the Shale Patch: Evidence from North Dakota (2017)
Working Paper: Supply Flexibility in the Shale Patch: Evidence from North Dakota (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2019-56

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