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A Blessing in Disguise: The Implications of High Global Oil Prices for the North American Market

  • Ron Alquist
  • Justin-Damien Guénette

We examine the implications of increased unconventional crude oil production in North America. This production increase has been made possible by the existence of alternative oil-recovery technologies and persistently elevated oil prices that make these technologies commercially viable. We first discuss the factors that have enabled the United States to expand production so rapidly and the glut of oil inventory that has accumulated in the Midwest as result of logistical challenges and export restrictions. Next, we assess the extent to which the increase in U.S. domestic production will affect global supply conditions and whether the U.S. experience can be repeated in other countries with rich unconventional oil sources. The evidence suggests that even in the best-case scenario, the increase in U.S. production will not make a large contribution to global production, so its effect on the price of oil is expected to be limited. Furthermore, the United States enjoys unique infrastructural and technological advantages that make it unlikely that similarly rapid increases in unconventional production can be achieved elsewhere.

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Paper provided by Bank of Canada in its series Working Papers with number 13-23.

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Length: 24 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:bca:bocawp:13-23
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  1. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-69, June.
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  4. Bahattin Buyuksahin, Thomas K. Lee, James T. Moser, and Michel A. Robe, 2013. "Physical Markets, Paper Markets and the WTI-Brent Spread," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
  5. Christiane Baumeister & Lutz Kilian, 2011. "Real-Time Forecasts of the Real Price of Oil," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(2), pages 326-336, September.
  6. Joyce Dargay & Dermot Gately & Martin Sommer, 2007. "Vehicle Ownership and Income Growth, Worldwide: 1960-2030," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 143-170.
  7. Sorrell, Steve & Speirs, Jamie & Bentley, Roger & Brandt, Adam & Miller, Richard, 2010. "Global oil depletion: A review of the evidence," Energy Policy, Elsevier, vol. 38(9), pages 5290-5295, September.
  8. Severin Borenstein & Ryan Kellogg, 2012. "The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest?," NBER Working Papers 18127, National Bureau of Economic Research, Inc.
  9. McGlade, C.E., 2012. "A review of the uncertainties in estimates of global oil resources," Energy, Elsevier, vol. 47(1), pages 262-270.
  10. Höök, Mikael & Hirsch, Robert & Aleklett, Kjell, 2009. "Giant oil field decline rates and their influence on world oil production," Energy Policy, Elsevier, vol. 37(6), pages 2262-2272, June.
  11. Johnson, Corey & Boersma, Tim, 2013. "Energy (in)security in Poland the case of shale gas," Energy Policy, Elsevier, vol. 53(C), pages 389-399.
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