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Is the Recent Low Oil Price Attributable to the Shale Revolution?

Listed author(s):
  • Cheolbeom Park

    (Department of Economics, Korea University, Seoul, Republic of Korea)

  • Erdenebat Bataa

    ()

    (Department of Economics, National University of Mongolia , Ulaanbaatar, Mongolia)

The U.S. Energy Information Administration estimates that approximately 52% of total U.S. crude oil was produced from shale oil resources in 2015. We examine whether the recent low crude oil price is attributable to this shale revolution in the U.S., using a SVAR model with structural breaks. Our results reveal that U.S. supply shocks are important drivers of real oil price and, for example, explain approximately a quarter of the 73% decline between June 2014-February 2016. Failure to consider statistically significant structural changes results in underestimating the role played by global supply shocks, while overestimating the role of the demand shocks.

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1704.pdf
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 1704.

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Date of creation: 2017
Handle: RePEc:iek:wpaper:1704
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