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Equity, Commodity, and Distillate Risks During Industrial Transformation: Innovation in the Oil & Gas Industry Using GARCH Difference-in-Decompositions

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  • Scott Alan Carson
  • Scott A. Carson

Abstract

The oil and gas industry’s early 2000’s fracking and horizontal drilling revolution realigned the industry and larger economies. This study uses New Growth Theory to evaluate innovation across an industry with various integrated but distinct upstream, midstream, and downstream units. Two issues are considered. First, how did Independent returns vary within the industry by equity, commodity, and distillate risks relative to Integrated majors before and after the fracking revolution? The fracking revolution changed within-group technology that favored Independent firms who outperformed larger Integrated producers. Second, how did upstream, midstream, and downstream risks vary across the industry by equity, commodity, and distillates relative to Integrated firms before and after the fracking revolution? Exploration & production across-group Independent equity return gaps with the fracking revolution increased the most for any Independent sector, either within or across decompositions, indicating that the greatest fracking industry realignment was in equity markets as participants increased upstream exploration & production returns closer to oil and gas extraction.

Suggested Citation

  • Scott Alan Carson & Scott A. Carson, 2024. "Equity, Commodity, and Distillate Risks During Industrial Transformation: Innovation in the Oil & Gas Industry Using GARCH Difference-in-Decompositions," CESifo Working Paper Series 11534, CESifo.
    • Handle: RePEc:ces:ceswps:_11534
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    References listed on IDEAS

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    More about this item

    Keywords

    New Growth Theory; hydraulic-fracturing; technology; financial; commodity markets and technological change;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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