The US shale revolution and low oil prices

During 2000~2014, high oil prices were maintained. In the summer of 2014 oil prices began to plummet. Oil prices were lost by 60%. This week we are going to study why oil prices fell in the summer of 2014 and the role of U.S shale oil production. Over the last decades, high oil prices generated a number of political and economic problems. The global economy as a whole was stunted by high oil prices. The energy market was controlled by suppliers, particularly by the OPEC and Russia. Under high oil prices, hundreds of billions of dollars flew into the oil producing countries in the form of oil export revenues.

High oil prices were derived as a whole particularly because new oil supply could not catch up with demand.

Supply shortages were attributed to two factors: the above-the-ground and below-the-ground factors. Among the above-the-ground factors was the political instability in the Middle Eastern oil producers. Regarding the below-the-ground factors, oil reserves in the Middle Eastern producers were interpreted to be under geological depletion, which is known as the “oil-peak” theory. Because of this, beginning the 1980s, Western oil majors companies began to search for new production

sites outside the Middle Eastern region: Central Asia and deep-sea offshore and Arctic developments but all of these new oil explorations turned out to be not successful because of high cost and geopolitical conflicts. What emerged as most successful diversification of supply sources was unconventional oil and gas development, namely shale gas and tight oil.