Shale Boom in the Us
نویسندگان
چکیده
Implementation of hydraulic fracturing dramatically altered the fundamentals in the oil and gas markets. A new technology rst got implemented in the natural gas market, but by 2012 unprecedentedly low gas prices forced most exploration rms to switch to shale oil exploration. Large capital expenditure on drilling activity resulted in the growth of oil production in the US, and likely triggered the decline in oil prices. Oil prices collapsed to $50/bbl by the end of December, 2014. However, as Figure 1 shows, oil prices continued to fall and crossed the level of $30/bbl in 2016. At such low prices most shale oil plays cannot remain economical, many shale oil rms were forced to le bankruptcy. The prolonged period of extremely low oil prices raises concerns on whether some additional factors could have attributed to the oil price decline or have delayed the rebounding. This paper provides evidence in favor of non-fundamental ampli cation mechanism: trading activity in the oil futures market led to a build-up in oil inventories, which was misinterpreted my the market as a sign of oversupply and, thus, put a signi cant downward pressure on oil prices.
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