Instead, producers use a combination of horizontal drilling and hydraulic fracturing, or “fracking,” during which fluids are injected under high pressure to break up the formations and release trapped fossil fuels. But the fuels are trapped in these formations and cannot be extracted in the same way as from conventional sources. Other geological structures in the United States-shale rock and tight sand formations-have long been known to contain oil and gas. Oil and gas have long been produced from what are now called “conventional sources”: wells are drilled into the earth’s surface, and pressure that is naturally present in the field-possibly with help from pumps-is used to bring the fuel to the surface. ![]() The unconventional oil and gas revolution The technology and geology behind the revolution in the United States are the same for both fuels (see box). More generally, the development of new sources of supply is a normal response to a commodity price boom and has historically been one of the forces behind price declines after a boom. The jump in oil prices in late 1973, for example, made the development of new oil resources in the Arctic (Alaska) and the North Sea economical and eventually contributed to declines in oil prices that persisted well into the 1980s. The sudden takeoff in the production of oil and gas from unconventional sources in recent years is another case in which high prices and new technologies combined to turn a previously uneconomical resource into an economically viable one. Could its development foreshadow a long-term decline in oil prices, as happened during the mid- to late 1970s after the 1973 Middle East war triggered a surge in oil production? Conversely, are there risks that the revolution will not last? Moreover, how will it alter the macroeconomic effects of sharp changes in oil prices (so-called oil shocks) on the U.S. and other economies? Triggered by high prices Prospects for unconventional shale and tight oil production are more uncertain though. It is already widely accepted that the availability of shale gas resources has fundamentally changed the outlook for natural gas as a source of energy. The revolution in production occurred first in natural gas and more recently in oil. The surge in production is largely the result of the new ability of producers to extract oil and gas from unconventional geological formations-so-called shale rock and tight rock or sand formations. Midwest is selling at an unusually large discount from international benchmark prices. ![]() As a result, natural gas prices in the United States are at a 20-year low after adjusting for inflation, while light sweet crude oil from the landlocked production areas in the U.S. High prices and new technology have triggered a sudden surge in oil and gas production in the United States that could shake up global energy marketsĪ strong rebound in gas and then oil production in the United States over the past few years has taken markets and policymakers by surprise (see Chart 1).
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |