Medium and Long Term Crude Oil Price Outlook: Economic research on shale oil and gas production behavior in the United States (Japanese)

It has been pointed out that the steep fall in crude oil prices after the latter half of 2014 has been strongly affected by both demand side factors such as the slowdown of world economic growth and supply side factors such as a massive increase in shale oil production in the United States and other structural factors. Shale oil and gas production is well known for its different aspects compared to conventional oil and gas production such as differences in oil and gas reserves, differences in production well construction technology, and so on, but production behavior and/or relationship of price and quantity of shale oil and gas production have not yet been well analyzed. This paper tries to analyze the relationship of shale oil and gas production and rig count trends and the relationship of price and rig count trends in the United States, applying econometrical approaches based on official statistics of the United States Energy Information Agency (EIA). The analysis indicates that the rig counts are affected by price changes with an average time lag of 7-10 months and four months in the fastest case, and that the elasticity of rig count change to oil price change is plus 0.3 to 0.4, with a maximum of 1.4. The analysis also indicates that shale oil and gas production change occurs after rig count changes with an average time lag of eight months and two months in the fastest case. Furthermore, the analysis indicates that the contribution of one rig month unit of rig count change to the oil and gas production change is approximately 0.1 to 0.3 petajoule per month. But in the shale oil case, the time lag from the start of rig operations to the start of oil production varies widely due to the waiting time for intermediate processes such as hydro pressure fracture cracking; "fracking" process exists. This paper tries to forecast the shale oil and gas rig count and production in major U.S. oil and gas field regions based on these outcomes, and finds that if the current crude oil price level continues for a long period, the oil rig count will be decreased by almost half of its current level until the end of 2015, and that shale oil production will stop its increase and may start to fall in the latter half of 2016. It is necessary to continue a periodical re-quantification of the above analysis, to expand the scopes to other regions and to start demand side quantitative analysis.