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Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas

Richard Newell (), Brian Prest and Ashley Vissing

No 22532, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the relative price elasticity of unconventional versus conventional natural gas extraction. We separately analyze three key stages of gas production: drilling wells, completing wells, and producing natural gas from the completed wells. We find that the important margin is drilling investment, and neither production from existing wells nor completion times respond strongly to prices. We estimate a long-run drilling elasticity of 0.7 for both conventional and unconventional sources. Nonetheless, because unconventional wells produce on average 2.7 times more gas per well than conventional ones, the long-run price responsiveness of supply is almost 3 times larger for unconventional compared to conventional gas.

JEL-codes: D24 L71 Q41 (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-ene and nep-reg
Note: EEE IO
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