The Price Responsiveness of Shale Producers: Evidence From Micro Data

Shale oil producers respond positively and significantly to favourable oil price signals. This finding is established using a novel proprietary data set consisting of more than 200,000 shale wells across ten U.S. states spanning almost two decades. We document large heterogeneity in the estimated responses across the various shale wells, suggesting that aggregation bias is an important issue for this kind of analysis. We find responses to be stronger for the largest oil producing firms, among wells that are spaced further apart and in regions where the density of shale wells is higher. The response also depend on the level of production. Our empirical results calls for new models that can account for a growing share of shale oil in the U.S., the inherent flexibility of shale extraction technology in production and the role of shale oil in transmitting oil price shocks to the U.S. economy.