Working Paper: CEPR ID: DP11107
Authors: Lutz Kilian
Abstract: This article contributes to the debate about the impact of the U.S. fracking boom on U.S. oil imports, on Arab oil exports, and on the global price of crude oil. First, I investigate the extent to which this oil boom has caused Arab oil exports to the United States to decline since late 2008. Second, I examine to what extent increased U.S. exports of refined products made from domestically produced crude oil have caused Arab oil exports to the rest of the world to decline. Third, the article quantifies by how much increased U.S. tight oil production has lowered the global price of oil. Using a novel econometric methodology, it is shown that in mid-2014, for example, the Brent price of crude oil was lower by $10 than it would have been in the absence of the fracking boom. I find no evidence that fracking was a major cause of the $64 decline in the Brent price of oil from July 2014 to January 2015, however. Fourth, I provide evidence that the decline in Saudi foreign exchange reserves between mid-2014 and August 2015 would have been reduced by 27 percent in the absence of the fracking boom.
Keywords: Arab oil producers; oil price; oil trade; refined products; Saudi Arabia; shale oil; tight oil
JEL Codes: F14; Q33; Q43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US fracking boom (L71) | decline in Brent prices (Q31) |
| US fracking boom (L71) | Brent prices decline not major cause of 64% decline from July 2014 to January 2015 (Q31) |
| US fracking boom (L71) | decline in Arab oil exports to the United States (N72) |
| increase in US shale oil production (L71) | decline in Arab oil exports to the rest of the world (Q37) |
| US shale oil production (L71) | global price of oil (Q31) |
| decline in Arab oil exports to the United States (N72) | decline in Saudi foreign exchange reserves (F31) |