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How the Tight Oil Boom Has Changed Oil and Gasoline Markets

Author

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  • Kilian, Lutz

Abstract

Starting in late 2008, the U.S. production of tight oil surged, causing a renaissance in the U.S. oil sector that few industry analysts had anticipated. This tight oil boom reduced the dependence of the United States on petroleum imports and allowed it to become a major exporter of gasoline and diesel fuel. Since mid-2014 the global real price of crude oil has experienced a large and sustained decline. This review article addresses several questions of general interest. First, to what extent was the recent oil price decline caused by the tight oil boom? Second, how did the tight oil boom affect the price of gasoline in global markets and in the United States? Third, what determines the investment response of the oil sector to oil price fluctuations? Fourth, how has the tight oil boom affected the transmission of oil price shocks to the U.S. economy? Finally, what are the implications of the U.S. tight oil boom for European oil importing economies?

Suggested Citation

  • Kilian, Lutz, 2017. "How the Tight Oil Boom Has Changed Oil and Gasoline Markets," CEPR Discussion Papers 11876, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11876
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    References listed on IDEAS

    as
    1. Lutz Kilian, 2016. "The Impact of the Shale Oil Revolution on U.S. Oil and Gasoline Prices," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 185-205.
    2. repec:cup:cbooks:9781107622371 is not listed on IDEAS
    3. Christiane Baumeister & Lutz Kilian, 2016. "Understanding the Decline in the Price of Oil since June 2014," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(1), pages 131-158.
    4. Christiane Baumeister & Lutz Kilian & Xiaoqing Zhou, 2017. "Is the Discretionary Income Effect of Oil Price Shocks a Hoax?," CESifo Working Paper Series 6369, CESifo Group Munich.
    5. Edelstein Paul & Kilian Lutz, 2007. "The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-41, November.
    6. 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 1053-1069, June.
    7. Severin Borenstein and Ryan Kellogg, 2014. "The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Foroni, Claudia & Stracca, Livio, 2019. "Much ado about nothing? The shale oil revolution and the global supply curve," Working Paper Series 2309, European Central Bank.
    2. repec:aen:journl:ej40-4-frondel is not listed on IDEAS
    3. Cakir Melek, Nida & Plante, Michael D. & Yucel, Mine K., 2017. "The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis Nida," Research Working Paper RWP 17-10, Federal Reserve Bank of Kansas City, revised 04 Sep 2017.
    4. repec:aen:journl:ej40-3-newell is not listed on IDEAS
    5. repec:eee:ecolet:v:159:y:2017:i:c:p:208-213 is not listed on IDEAS
    6. repec:eee:eneeco:v:80:y:2019:i:c:p:86-99 is not listed on IDEAS
    7. Manuel Frondel and Marco Horvath, 2019. "The U.S. Fracking Boom: Impact on Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    8. repec:eee:appene:v:228:y:2018:i:c:p:1550-1560 is not listed on IDEAS
    9. Bao H. NGUYEN & OKIMOTO Tatsuyoshi, 2017. "Asymmetric Reactions of the U.S. Natural Gas Market and Economic Activity," Discussion papers 17102, Research Institute of Economy, Trade and Industry (RIETI).
    10. repec:eee:eneeco:v:78:y:2019:i:c:p:165-173 is not listed on IDEAS
    11. Richard G. Newell and Brian C. Prest, 2019. "The Unconventional Oil Supply Boom: Aggregate Price Response from Microdata," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).

    More about this item

    Keywords

    gasoline price; oil investment; oil price; real GDP growth; shale oil; Tight oil;

    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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