ABSTRACT
The main contribution of this paper is to provide the answer to the question of whether changes in crude oil prices really matter to US shale oil production over the past decades. This study takes specific account of the asymmetric effects of oil prices, using an autoregressive distributed lag (ARDL) cointegration approach. It was found that oil price indeed has an asymmetric effect on shale production in the short run, i.e., US shale production is more responsive to an increase in oil price than to its decrease. However, it is found that the asymmetric short-run effects do not seem to be persistent in the long run.
Notes
1 Shale oil production and crude oil prices are collected from the Energy Information Administration.
2 The linear combination of lagged level variables in Eq. (5) is a proxy for a lagged error term, which is known as an error-correction term from Eq. (5). Hence, establishing joint significance of lagged level variables amounts to establishing significance of a lagged error-correction term.
3 The critical value is obtained from Pesaran et al. (Table CI(iv) Case III, p. 301).