Tischler, Benjamin (2015). Four Essays on the Economics of Oil and Gas Markets. PhD thesis, Universität zu Köln.

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Abstract

Since the 1960s hydrocarbons like crude oil and natural gas have been the most important energy source to fuel the world economy. Despite high recent growth rates for renewable energies, hydro- carbons are expected to be a dominant source of energy for several decades to come. In the last 20 years not only fundamental trends, but also singular events such as the financial crisis have shaped the development of crude oil and natural gas markets as well as the corresponding academic debate. On a historic scale these last two decades have seen changes in oil and gas markets that - in terms of price and regional production changes - are only matched by the turmoils of the oil crisis of the 1970s. Hence, the objective of this thesis is to improve the understanding of some of the dynamics and trends underlying these developments. Around the turn of the millenium the growth of wealth and resource consumption in emerging economies and the fear of shrinking oil and gas production in industrialized countries refueled the time-honored debate about the point of time when the supply of fossil energy resources will reach its historic all time high. Labeled as the “peak oil hypothesis” the discussion gained most momentum for the case of crude oil, but similar worries were also expressed for natural gas. These solicitudes were also reflected and amplified by prolonged and steep increases in global oil and gas prices which in turn raises the question of how strong hydrocarbon supply will react to these price shocks. Accordingly, Chapter 2 of this thesis addresses oil and gas supply response to oil and gas price changes in the US. More specifically, because oil and gas supply can only be kept constant or increased by drilling additional wells, the essay focuses on the response of oil and gas drilling activity to changes in oil and gas prices as well as drilling costs. In the late year 2008 the oil and gas price boom came to a sudden end in a stark collapse during the turbulences of the financial crisis and its macroeconomic aftermath. Both oil and gas prices stopped plummeting only in spring 2009. Whereas global oil prices quickly recovered to pre-crisis levels, the US price of natural gas stayed at low levels and even started to trend slightly downward. Given the growing gas prices in Europe this led several market stakeholders to announce a disintegration of the Atlantic gas market into an US market and an European market. However, given quickly expanding transport capacities and trade volumes for liquified natural gas (LNG) other industry participants hesitate to consent with the market decoupling hypothesis. Accordingly, Chapter 3 empirically investigates the integration of Atlantic gas markets before and after the financial crisis. Price spikes are a frequent phenomenon in natural gas and other commodity markets. This can result in a low power of empirical market integration tests that are based on threshold autoregressive models. Similarly, threshold autoregressive (TAR) model based estimates of the transaction costs of arbitrage can be subject to large small sample biases when extreme price movements are present. To address this Chapter 4 investigates the small sample properties of TAR estimators and TAR based market (co-)integration tests. To remedy the poor small sample properties of the usual OLS based TAR estimation we propose two robust estimators. Accordingly, Chapter 4 methodologically advances the econometric approaches used in Chapter 3. In North America, the major driver underlying this putative gas market decoupling was the so called shale revolution - a term that describes a steep and unforeseen increase in hydrocarbon supply from unconventional shale formations in the US. The shale revolution started off in gas markets where the novel combination of hydraulic fracturing and horizontal drilling in formerly unfamiliar shale geology enabled sweeping production gains. However, oil drilling also quickly adopted the new approach. By tapping shale oil resources with cost-efficient technologies and pulled by high oil prices US crude oil production is now close to surpassing its historic all time high of November 1970. Hence, for the moment the advent of the US shale revolution has refuted most arguments for an impending now and forever peak in US oil or gas production. As shale resources are available in many countries around the globe, the success of the US shale revolution stimulates the desire to replicate the shale revolution in other countries. A large part of the technical side of the replication debate is about updating the technology of rig fleets such that they are capable of performing hydraulic fracturing and horizontal drilling. However, in the US industry participants also highlight the importance of accumulated experience in using these technologies in a given region. Against this background, Chapter 5 investigates the role of drilling technology and local drilling experience as drivers of the oil and gas production growth during the US shale revolution. When the accumulation of local experience plays a crucial role for shale oil and gas production, it might be difficult to replicate the shale revolution in other countries by merely updating the technology level of the old rig fleet.

Item Type: Thesis (PhD thesis)
Creators:
CreatorsEmailORCID
Tischler, Benjaminbe.tischler@googlemail.comUNSPECIFIED
URN: urn:nbn:de:hbz:38-65195
Subjects: General statistics
Economics
Uncontrolled Keywords:
KeywordsLanguage
gasUNSPECIFIED
oilUNSPECIFIED
econometricsUNSPECIFIED
supply responseUNSPECIFIED
market integrationUNSPECIFIED
learning curveUNSPECIFIED
SVARUNSPECIFIED
TARUNSPECIFIED
non-linear adjustmentUNSPECIFIED
cointegrationUNSPECIFIED
market integrationUNSPECIFIED
law of one priceUNSPECIFIED
robust TAR estimationUNSPECIFIED
experience curveUNSPECIFIED
common correlated effectsUNSPECIFIED
drillingUNSPECIFIED
shale revolutionUNSPECIFIED
Faculty: Faculty of Management, Economy and Social Sciences
Divisions: Weitere Institute, Arbeits- und Forschungsgruppen > Staatswissenschaftliches Seminar
Language: English
Date: 2 October 2015
Date of oral exam: 2 October 2015
Referee:
NameAcademic Title
Vuong, Van AnhPhD., Jun. Prof.
Breitung, JörgProf. Dr.
Refereed: Yes
URI: http://kups.ub.uni-koeln.de/id/eprint/6519

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