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Supply Flexibility in the Shale Patch: Evidence from North Dakota

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Listed:
  • Hilde C. Bj�rnland
  • Frode Martin Nordvik
  • Maximilian Rohrer

Abstract

We analyse if output flexibility in oil production depends on the extraction technology.In particular, we ask to what extent shale oil producers respond to price incentives by changing completion of new wells as well as oil production from completed wells. Using a novel well-level monthly production data set covering more than 15,000 crude oil wells in North Dakota, we find large differences in response between conventional and unconventional (shale) extraction technology: While shale oil wells respond significantly to spot future spreads by changing both well completion and crude oil production, conventional wells do not. Our results indicate that firms using shale oil technology are more flexible in allocating output intertemporally. We interpret such output pattern of shale oil wells to be consistent with the Hotelling theory of optimal extraction.

Suggested Citation

  • Hilde C. Bj�rnland & Frode Martin Nordvik & Maximilian Rohrer, 2017. "Supply Flexibility in the Shale Patch: Evidence from North Dakota," Working Papers No 2/2017, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    • Handle: RePEc:bny:wpaper:0051
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Oil extraction; crude oil prices; US oil shale boom; Hotelling theory;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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