CEU Electronic Theses and Dissertations, 2018
| Author | Bokenov, Yerbolat |
|---|---|
| Title | The relationship between oil prices, rig counts and tight oil production in the United States in the shale era |
| Summary | Since the beginning of an implementation of the hydraulic fracking and horizontal drilling techniques for extraction of a tight oil and shale gas from wells, the so called ‘shale era’ has started in the U.S. Its implication for the global energy market seems tremendous: some scholars indicate the surge of tight oil, as one of the major causes of the 2014-2015 plunge in oil prices. With rising importance of tight oil comes need for an assessment of the relationship between shale industry and global crude prices. Thus, this paper’s aim was to evaluate the relationship between changes in oil prices, rigs counts and tight oil production in the U.S. in 2005-2018 while controlling for economic and financial variables. The VARX model was used to assess the relationship. The model was constructed based on Khalifa et al. (2017) with some adjustments. The results suggest that rig counts and tight oil output are responsive to the oil price shock. Though, the initial response is negative, the rig counts displayed statistically significant positive response with 2-month lag. This outcome is consistent with the literature and economic theory. Other key finding was that unlike common market believe the changes in rig counts and tight oil production do not have a direct and positive relationship. This outcome further strengthens the call to look beyond the rig counts when assessing the shale industry’s ‘health’. The changes in rig counts and oil output have only a minor impact on oil prices. But still the trend is negative, which is consistent with recent oil market developments. |
| Supervisor | De Chiara, Alessandro |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2018/bokenov_yerbolat.pdf |
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