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Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas Abstract: We analyze the relative price elasticity of unconventional versus conventional natural gas extraction. We separately analyze three key stages of gas production: drilling wells, completing wells, and producing natural gas from the completed wells. We find that the important margin is drilling investment, and neither production from existing wells nor completion times respond strongly to prices. We estimate a long-run drilling elasticity of 0.7 for both conventional and unconventional sources. Nonetheless, because unconventional wells produce on average 2.7 times more gas per well than conventional ones, the longrun price responsiveness of supply is almost 3 times larger for unconventional compared to conventional gas

Author

Listed:
  • Newell, Richard G.

    (Resources for the Future)

  • Prest, Brian C.

    (Duke University)

  • Vissing, Ashley

    (University of Chicago)

Abstract

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Suggested Citation

  • Newell, Richard G. & Prest, Brian C. & Vissing, Ashley, 2016. "Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas Abstract: We analyze the relative price elasticity of unconventional versus conventional natural gas extraction. We separ," RFF Working Paper Series dp-16-32, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-16-32
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    Keywords

    shale gas; unconventional natural gas; price elasticity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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