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The Shale Revolution and the Dynamics of the Oil Market

Author

Listed:
  • Nathan S Balke
  • Xin Jin
  • Mine Yücel

Abstract

We build and estimate a dynamic, structural model of the world oil market to quantify the impact of the shale revolution. We model the shale revolution as a decrease in shale production costs and find that the resultant increase in shale production lowers oil prices by 24% in the short run and 48% once the shale oil transition is complete. Current oil price volatility is lowered by 8% to 23% depending on the horizon. We also find that OPEC core acts to keep its market share constant in the face of the dramatic increase in shale production.

Suggested Citation

  • Nathan S Balke & Xin Jin & Mine Yücel, 2024. "The Shale Revolution and the Dynamics of the Oil Market," The Economic Journal, Royal Economic Society, vol. 134(662), pages 2252-2289.
    • Handle: RePEc:oup:econjl:v:134:y:2024:i:662:p:2252-2289.
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    File URL: http://hdl.handle.net/10.1093/ej/ueae013
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    Cited by:

    1. Gelain, Paolo & Lorusso, Marco, 2025. "Oil price fluctuations, US banks, and macroprudential policy," Journal of Monetary Economics, Elsevier, vol. 156(C).
    2. Baehr, Christian J., 2026. "Energy Transitions and Political Transformation: Evidence from the Shale Oil Revolution," SocArXiv pc5nz_v1, Center for Open Science.
    3. Tsionas, Mike G. & Philippas, Dionisis & Philippas, Nikolaos, 2022. "Multivariate stochastic volatility for herding detection: Evidence from the energy sector," Energy Economics, Elsevier, vol. 109(C).
    4. Jeong, Minhyuk & Ahn, Kwangwon, 2025. "Energy organization sentiment and oil return forecast," Energy Economics, Elsevier, vol. 141(C).
    5. Tiwari, Aviral Kumar & Dam, Mehmet Metin & Altıntaş, Halil & Bekun, Festus Victor, 2025. "The dynamic connectedness between oil price shocks and emerging market economies stock markets: Evidence from new approaches," Energy Economics, Elsevier, vol. 141(C).

    More about this item

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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