- To assess changes in the supply responsiveness of the US oil and gas sectors, we analyzed 2000–2015 drilling and production data from approximately 62,000 gas wells in Texas and 164,000 oil wells in the five major oil-producing states.
- For both oil and gas, unconventional wells take somewhat longer than conventional wells to begin production after drilling begins—but they produce much more per well, compensating for the lag time.
- The increased productivity of unconventional wells makes production from shale resources much more sensitive to price.
- Decreased price volatility for natural gas appears to reflect these fundamental market changes, reducing the risk of policy and business decisions dependent on future gas prices.
- Our results point to a significantly larger role for the US incremental supply of oil than before the shale revolution—as well as continued relevance for the US Strategic Petroleum Reserve to respond to short-term market imbalances.