Supply flexibility in the shale patch: Evidence from North Dakota

This paper provides new results to the literature, showing that output flexibility in oil production depends on extraction technology. In particular, constructing a novel well‐level monthly dataset covering more than 16,000 crude wells North Dakota, we find supply elasticity of shale be positive and range 0.3–0.9, depending firms characteristics. We no such responses for conventional wells. interpret pattern consistent with Hotelling theory optimal extraction. Reserves are an inventory, decision produce is intertemporal choice when draw down below‐ground inventory.