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The Impact of U.S. Supply Shocks on the Global Oil Price

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  • Thomas S. Gundersen

Abstract

I examine the role of the U.S. shale oil boom in driving global oil prices. Using a structural vector autoregressive (SVAR) model that identifies separate oil supply shocks for the U.S. and OPEC, I find that U.S. supply shocks have exerted considerable negative pressure on the oil price. More specifically, U.S. supply shocks explain up to 13% of the oil price variation over the 2003 2015 period, considerably more than what has been found in other studies. However, the timing of the downward pressure on prices is delayed relative to the boom in U.S. shale oil production. This mismatch implies a temporary friction in the transmission of U.S. supply shocks to the rest of the world likely caused by logistical and technological challenges in the downstream supply chain.

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  • Thomas S. Gundersen, 2018. "The Impact of U.S. Supply Shocks on the Global Oil Price," Working Papers No 7/2018, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    • Handle: RePEc:bny:wpaper:0065
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    Cited by:

    1. Storrøsten, Halvor Briseid, 2024. "U.S. light tight oil supply flexibility - A multivariate dynamic model for production and rig activity," Energy Economics, Elsevier, vol. 131(C).
    2. 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.
    3. Ulrich Blum & Jiarui Zhong, 2021. "The Loss of Raw Material Criticality: Implications of the Collapse of Saudi Arabian Oil Exports," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 362-370, November.
    4. Knut Are Aastveit & Hilde C. Bjørnland & Thomas S. Gundersen, 2021. "The Price Responsiveness of Shale Producers: Evidence From Micro Data," Working Papers No 05/2021, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    5. Huang, Dayong & Li, Jay Y. & Wu, Kai, 2021. "The effect of oil supply shocks on industry returns," Journal of Commodity Markets, Elsevier, vol. 24(C).
    6. Nooman Rebei & Rashid Sbia, 2021. "Transitory and permanent shocks in the global market for crude oil," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(7), pages 1047-1064, November.
    7. Thomas St rdal Gundersen & Even Soltvedt Hvinden, 2021. "OPEC's crude game: Strategic Competition and Regime-switching in Global Oil Markets," Working Papers No 01/2021, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    8. Pang, Jindong & An, Lan & Shen, Shulin, 2023. "Gasoline prices, traffic congestion, and carbon emissions," Resource and Energy Economics, Elsevier, vol. 75(C).
    9. Ganepola, Chanaka N. & Shubita, Moade & Lee, Lillian, 2023. "The electric shock: Causes and consequences of electricity prices in the United Kingdom," Energy Economics, Elsevier, vol. 126(C).
    10. Zeina Alsalman, 2021. "Does the source of oil supply shock matter in explaining the behavior of U.S. consumer spending and sentiment?," Empirical Economics, Springer, vol. 61(3), pages 1491-1518, September.

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    More about this item

    Keywords

    structural VARs; oil prices; demand and supply shocks; shale oil;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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