Oil Revolution Research Articles

The U.S. crude oil refining industry: Recent developments, upcoming challenges and prospects for exports

In 2018 the U.S. petroleum refining industry is the largest and most advanced in the world. Continuous consolidations and investments in complex refinery additions have allowed this industry to remain competitive and the shale oil revolution has contributed to the U.S. becoming a net exporter of refined petroleum products in 2008. In light of current and forecasted changes in refined petroleum product demand and worldwide refining capacity additions, the U.S. petroleum refining industry faces new challenges. This paper provides an in-depth study of this industry, presenting past trends, its current state and the effects that a changing U.S. crude oil production has on refiners. Furthermore, a scenario analysis is used to forecast future production levels and the volumes of major refined products available for exports over the years 2017–2032. The competitiveness of current U.S. gasoline and diesel exports is evaluated and forecasted gasoline and diesel demand in current export markets is compared to available export volumes. Major challenges facing refiners by changing market conditions and new regulatory rules are discussed. Finally, a set of recommendations is provided.

Oil prices and the U.S. economy: Evidence from the stock market

Using three identification strategies, this paper finds that supply-driven oil price increases lowered U.S. stock returns in many sectors before the shale oil revolution but not after. It also reports that oil prices are a priced factor in a multi-factor asset pricing model both before and after the shale revolution. While oil prices mattered in both periods, the beneficial effects of oil price increases on the U.S. stock market have risen and the harmful effects have fallen since U.S. oil production soared after 2010.

Much Ado About Nothing? The Shale Oil Revolution and the Global Supply Curve

Much Ado About Nothing? The Shale Oil Revolution and the Global Supply Curve

Limits of Technological Efficiency of Shale Oil Production in the USA

The shale oil revolution in the United States had an irreversible impact upon the global oil market and was a key factor determining oil price reduction in 2014-2016. One of the main reasons for the rapid growth of the shale oil production in the US was the development of extracting technologies, which reduced the cost of production to an acceptable level. This article studies the problems of long-term forecasting in shale oil production and the productivity of drilling rigs. This research applies the fitting of an asymmetric bell-shaped function using an OLS approach. This function is derived as an analytical solution of the differential equation for oil production.Another innovation of this study is the asymmetric function, which correlates better with data on the extraction of traditional and non-traditional oil resources. An analysis of the empirical data with the derived asymmetrical bell-shaped curve shows that the productivity of drilling rigs will peak by 2026 at 1,200 bbl per day, which is 2 times higher than the current level. The peak of production would correspond to the maximum oil production of 11.3 mln bbl per day and to technically recoverable resources of 96 bln bbl. This could mean that starting from 2023, the volume of shale oil production in the US may not be enough to meet the growing global demand for oil and other resources with even higher production costs should be developed. The theoretically grounded and practically tested asymmetrical bell-shaped curve can serve as one of the tools for assessing the long-term impact of technological innovation and the growth of equipment productivity upon the development of oil production in the US in the course of Foresight studies.

Managing Basin‐Scale Fluid Budgets to Reduce Injection‐Induced Seismicity from the Recent U.S. Shale Oil Revolution

Managing Basin‐Scale Fluid Budgets to Reduce Injection‐Induced Seismicity from the Recent U.S. Shale Oil Revolution

The U.S. Shale Oil Revolution and the Behavior of Commodity Prices

The United States is committed to technological improvements in horizontal drilling and hydraulic fracturing in its drive of toppling the world's leading oil producers by the mid-2020s and evolving into a net oil exporter by 2030. Consequently, these technological innovations revolutionized the U.S. oil sector and the international oil market with increasing relevance of the shale oil and attendant shock spillovers to financial and commodity markets. Upon these attractions and consistent with evidence in the literature, we trace the oil price and commodity price dynamics to the shale oil revolution using a recursive structural VAR model of the shale supply shocks. In line with the standard practice of ensuring sensitivity of results, we conduct analyses such as impulse responses, forecast-error variance decomposition, and historical decompositions to accommodate energy and nonenergy commodity components. We show, in addition to the popular view in the extant literature, that the shale oil revolution is not only associated with the recent oil price plunge, but also responsible for the tumble in the total energy-based commodity prices with crude oil price being just a component.

Geologic significance and optimization technique of sweet spots in unconventional shale systems

Crude oil in unconventional shale systems, present as tight oil and shale oil, accumulates inside an oil kitchen in formations with coexistent sources and reservoirs. Organic matter present in oil shale is not yet mature and requires heating to convert it into crude oil. Oil exploration in shale systems involves the exploration of shale oil retained in source rocks and tight oil rich zones located near source rocks. Tight oil is a type of realistic unconventional oil resources in China. The marked increase in potential shale oil reserves, and exploration of these reserves, will result in a shale oil revolution similar to that experienced for shale gas. Based on a systematic comparison of geologic features of shale systems in the US and China, the geologic significance of the sweet spots in shale systems is proposed. This zone contains an abundance of unconventional oil in shale systems that can be explored and developed under current economic and technical conditions. The sweet spot zone refers to the zone in the tight oil rich zone which has industrial value within the scope of matured high-quality source rocks on the plane. The sweet spot interval refers to the high-productivity interval of tight oil which has industrial value through artificial stimulation. The main aim of oil exploration in shale formations is to identify the sweet spots. The distribution of the economic sweet spots in shale systems is evaluated by overlapping the geologic, engineering and economic sweet spots. Resource assessment techniques, the identification of logging data properties, high-resolution 3D seismic surveys, horizontal well production from well pads, and artificial reservoir development of sweet spots in oil-bearing shale formations can assist efficient development of oil. Globally, shale formations contain a significant volume of oil reserves. Currently, stimulated reservoir volume (SRV) techniques in horizontal wells in marine shale gas formations in the United States have average peak-productivity cycles of 10–15 years. To achieve commecial oil production in lacustrine shale systems in China, it is important to utilize large formation thicknesses and the high abundance of organic matter. In addition, the development of practical and economic techniques will result in an increase of productivity of tight oil and shale oil by 30–50 million tons, as well as the economic development of oil in lacustrine shale systems in China.

The US oil supply revolution and the global economy

This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the USA, using a global VAR model estimated for 38 countries/regions over the period 1979Q2–2011Q2. Set identification of the US oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a US supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, output declining in commodity exporters, inflation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that a US supply-driven oil price shock (equivalent to a 10–12% fall per quarter in the price of oil) results in an increase in global growth by 0.16–0.37 percentage points in the medium term. This is mainly due to an increase in spending by oil-importing countries, which exceeds the decline in expenditure by oil exporters.

Oil Revolution: Anti-Colonial Elites, Sovereign Rights, and the Economic Culture of Decolonization

Oil Revolution: Anti-Colonial Elites, Sovereign Rights, and the Economic Culture of Decolonization

The Saudi 2014 gambit: a counterfactual analysis

The November 2014 Saudi gambit to increase oil production and drive down prices was a deliberate decision to quell the shale oil revolution. Ostensibly, that decision has been very costly to the Saudis, but the relevant question is would they find themselves worse off had they not acted. This paper presents a counterfactual analysis of that decision and finds that to have continued to cut production to sustain high prices would have been worse yet. Consequently, because of the shale revolution, future oil prices appear likely to fluctuate between a new floor and new ceiling price. A critical question then becomes what role will OPEC play in affecting prices within this new range of variation. This paper presents two contrasting views.

Evolution of the classification of flammable and combustible liquids in Russia

Classification of liquids on the basis of the fire and explosion characteristics plays an important role to ensure fire safety. The history of this classification is closely connected with oil revolution that took place in the second half of the 19th century in USA. Cheap kerosene led to the beginning of kerosene era. The increase of fires and explosions was the by‐effect of that process and became a real problem for a lot of countries. For safe kerosene in Russia, the first limits were set in 1886 and 1889 by the decree of the Russian Emperor Alexander III. In the future, this classification has been extended to all liquids. The first Soviet classification appeared in 1939. After the World War II, it has been further developed. Now in Russia there are several classifications of flammable and combustible liquids, in which there is the ideology of the criteria of safe kerosene. © 2017 American Institute of Chemical Engineers Process Saf Prog 37: 230–236, 2018

OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics

Why did OPEC not cut oil production in the wake of 2014's price fall? This study aims at aiding the mostly qualitative discussion with quantitative evidence from computing quarterly partial market equilibria Q4 2011 – Q4 2015 under present short-term profit maximisation and different competition setups. Although the model performs reasonably well in explaining pre-2014 prices, all setups fail to capture low prices, which fall even beyond perfect competition outcomes. This result is robust with respect to large variations in cost parameters. Rejecting present short-term profit maximisation, as well as a qualitative discussion of Saudi Arabian politics and the shale oil revolution, lead to the conclusion that the price drop of 2014-16 was most plausibly the result of an attempt to defend market shares and to test for shale oil resilience, besides being fuelled by other factors such as rising competitiveness of alternative technologies. Although shale oil might have increased competition permanently (as supported by model results), the agreement of December 2016 should not be misunderstood as an OPEC defeat.

U.S. shale oil production and WTI prices behaviour

The aim of this paper is to relate the shale oil revolution in the United States with WTI oil price behavior. Since the development of the combination of horizontal drilling techniques together with hydraulic fracturing in the 1970s, known as shale oil, oil markets have undergone a significant transformation with the unexpectedly strong rise in the United States production affecting oil prices. The goal of this paper is two-fold: first, we analyze the relationship of total United States crude oil production and WTI crude oil prices by studying its performance in the time-frequency domain applying wavelet tools for its resolution. Using wavelet methodologies, we observe a shift to higher frequencies of the wavelet coherency for the time period 2003–2009 and lower frequencies for the period 2009–2014. The results also indicate that during the period 2003–2009 the U.S. oil production and WTI oil prices time series are in phase; they move together, with total United States oil production leading. During the period 2009–2014 oil production and WTI oil prices time series are out of phase (negatively correlated), suggesting that oil production increases precede a decrease in WTI oil prices. In the second part of the paper and to give greater credibility to the results obtained through the wavelet transform, we analyze the behavior of WTI crude oil before and after the shale oil boom in the United States employing methodologies based on long run dependence. The results indicate that mean reversion takes place only for the data corresponding to the first subsample, ending at 2003. For the second subsample, as well as for the whole sample, lack of mean reversion is detected with orders of integration equal to or higher than 1 in all cases.

Desert kingdoms to global powers: the rise of the Arab Gulf

Rory Miller of Georgetown University's Qatar campus tells readers on page one of this informative work that it is ‘not intended for the specialist reader’. Those who follow the Gulf region will be familiar with the themes and issues he raises: the oil-fuelled ambitions of the states of the Gulf Cooperation Council (GCC)—Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman; their remarkable political stability and the serious domestic and regional challenges that they face; and the problems they have in actually cooperating within the GCC framework. For those unfamiliar with the region, the book can be a deep dive. The wealth of detail may at times overwhelm readers, obscuring the larger points the author hopes to make. But Miller gets those larger points right. The book is organized chronologically, beginning with the oil revolution of the early 1970s that made these countries rich. The early chapters focus on the international and regional politics of their emergence—oil policy within the Organization of Petroleum Exporting Countries (OPEC), relations with the United States and other powers, the upheavals created by the Iranian Revolution, the Iran–Iraq War and the Gulf War of 1990–91. Miller does a good job of relating the ups and downs of world oil prices from the 1970s to the 1990s to the challenges the Gulf states faced in building and sustaining the modern welfare states that oil made possible. He concentrates more on the domestic and intra-GCC stories in the periods of the dramatic oil price increases of the 2000s and the collapse of oil prices in 2014.

Technological and Institutional Interaction in the Shale Oil Revolution

:A decade ago, peak oil was widely discussed. By early 2015, U.S. oil production reached 9.7 million barrels per day, a figure not seen since the nation’s previous peak production in 1971. The dramatic increase in U.S. production is commonly referred to as the shale oil revolution. It is often alleged that the shale oil revolution was the result of technological change, particularly horizontal drilling and fracking. Technological change contributed to the increase in production, but such change involved much more than horizontal drilling and fracking. Institutional changes also contributed to the shale oil revolution. Besides market changes, new mechanisms of financing exploration and production were facilitated by low interest rates and quantitative easing. The political and regulatory environments changed as well. We investigate the peculiar interaction of institutions and technology in the shale oil industry between 2010 and 2015.

The impact of oil price changes on major US tight oil plays

ABSTRACTUS oil production for the last decade has been revolutionized by tight oil development activities around the country. The main oil plays contributing approximately 50% of the US total daily production are the Permian, Bakken, Eagle Ford, and Niobrara plays. Among the factors sustaining this tight oil revolution are advanced well positioning technology undergirded by high crude oil prices. Since the fourth quarter of 2014, oil prices have dropped from highs of $105/bbl observed in 2013 to lows of $28/bbl, leading to seismic shifts in activities across the oil plays. However, these impacts have not been uniform across all plays. This paper examines the varied impact of crude oil price fluctuations on the nation’s top tight oil plays. Using an autoregressive distributed lag (ARDL) approach, this study investigates the effects of oil prices and rig counts on oil production in these plays. The results show that oil price fluctuations affect all tight oil plays differently. Plays like the Permian show more resilience even amidst the oil price crash and plays like the Bakken are impacted in the short and long run by oil price fluctuations. This study also shows that the long-run impact of price fluctuations is not symmetrical and oil production increase caused by a rise in price is more sustained than production drops that follow price declines. In an era of lower oil prices, these insights become even more valuable to decision makers and operators who search for opportunities to stay profitable.

The Impact of the Shale Oil Revolution on U.S. Oil and Gasoline Prices

This article examines how the shale oil revolution has shaped the evolution of U.S. crude oil and gasoline prices. It puts the evolution of shale oil production into historical perspective, highlights uncertainties about future shale oil production, and cautions against the view that the U.S. may become the next Saudi Arabia. It then reviews the effects of the ban on U.S. crude oil exports, of capacity constraints in refining and transporting crude oil, of differences in the quality of conventional and unconventional crude oil, and of the recent regional fragmentation of the global market for crude oil on the determination of U.S. oil and gasoline prices. It discusses the reasons for the persistent wedge between U.S. crude oil prices and global crude oil prices in recent years and for the fact that domestic oil prices below global levels have not translated to lower U.S. gasoline prices. It also examines the role of shale oil in causing the 2014 oil price decline. Finally, it explains why the shale oil revolution unlike the shale gas revolution is unlikely to stimulate a U.S. boom in oil-intensive manufacturing industries, and it explores more generally the implications of the shale oil revolution for the U.S. economy.

Guest Editorial: Climate Policy with Low Oil Prices

Guest editorial Although oil experienced an extraordinary price increase over the past 4 decades, a turning point has been reached where scarcity, uncertain supply, and high prices will be replaced by abundance, undisturbed availability, and suppressed price levels in the decades to come. In our new book, The Price of Oil, we conclude that the shale revolution will yield an increased output of oil in the world totaling nearly 20 million B/D by 2035. We also assert that a “conventional oil revolution”—the application of horizontal drilling and hydraulic fracturing to conventional oil formations in the world—will yield a further addition of almost 20 million B/D in the same period. This extra 40 million B/D is nearly twice as much as the global increase in oil production in the 20-year period from 1994 to 2014. As these new production revolutions develop and expand internationally, they are bound to have a strong price-depressing impact, either by preventing price rises from the levels observed in 2015 (the Brent spot price averaged USD 53/bbl), or by pushing prices back to these levels if an early upward reaction takes place. Our optimistic scenario sees a price of USD 40/bbl by 2035. Without serious climate policy restrictions, the use of cheaper oil will likely grow and extend its life expectancy throughout the global energy system. The Carbon Bubble Fallacy A deep climate policy is one that ensures that CO2 concentrations in the atmosphere do not exceed a doubling from pre-industrial levels throughout the 21st century, believed to be a warming of about 2 degrees Celsius. Such a policy would require global emission cuts of 30% by 2035, and no less than 50% by 2050, compared with 2011 levels. There is little doubt that implementation of climate policy this ambitious implies the end of the recent revolution in oil production. There have also been widespread claims that such a policy would result in massive stranded assets in the fossil fuel industries. Would sizable proved reserves remaining in the ground due to a deep climate policy constitute a serious problem to the fossil industries? We do not think so, or else, the reserves would never have been created on such a prevalent scale. In the case of oil, the reason proved reserves have been created to last more than 50 years into the future, at present production levels, is that investment in reserve creation is relatively small in relation to total production costs, and therefore worth the companies’ while to assure reasonable peace of mind about future production potential.

The US Oil Supply Revolution and the Global Economy

This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Set-identification of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, output declining in commodity exporters, inflation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that following the U.S. oil revolution, with oil prices falling by 51 percent in the first year, global growth increases by 0.16 to 0.37 percentage points. This is mainly due to an increase in spending by oil importing countries, which exceeds the decline in expenditure by oil exporters.

The U.S. Oil Supply Revolution and the Global Economy

This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Set-identification of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, output declining in commodity exporters, inflation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that following the U.S. oil revolution, with oil prices falling by 51 percent in the first year, global growth increases by 0.16 to 0.37 percentage points. This is mainly due to an increase in spending by oil importing countries, which exceeds the decline in expenditure by oil exporters.