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Working Paper
The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis
This paper examines the effects of the U.S. shale oil boom in a two-country DSGE model where countries produce crude oil, refined oil products, and a non-oil good. The model incorporates different types of crude oil that are imperfect substitutes for each other as inputs into the refining sector. The model is calibrated to match oil market and macroeconomic data for the U.S. and the rest of the world (ROW). We investigate the implications of a significant increase in U.S. light crude oil production similar to the shale oil boom. Consistent with the data, our model predicts that light oil ...
Journal Article
The Evolving Link between Oil Prices and U.S. Consumer Spending
Oil prices have fluctuated widely since the 1970s. Historically, consumers have tended to increase spending on non-oil goods and services when oil prices decline and cut back on such spending when oil prices rise. However, this relationship may have changed more recently. The U.S. oil sector has increased in importance in the last decade, and consequently the United States has become less reliant on oil imports. Moreover, gasoline expenditures have fallen as a share of households’ budgets. As a result, price swings may no longer have the same effect on U.S. consumption.Nida Çakır Melek ...
Journal Article
Evaluating a year of oil price volatility
Troy Davig, Nida ak?r Melek, Jun Nie, Lee Smith, and Didem Tzemen find changes in expectations of future oil supply relative to demand are the main drivers of the recent oil price decline.
Working Paper
The Income Share of Energy and Substitution: A Macroeconomic Approach
As the atmospheric concentration of CO2 emissions has grown to record levels, callshave grown for governments to make steeper emissions cuts, requiring to reduce an economy’s use of fossil energy dramatically. Meanwhile, in the U.S., fossil energy still met 80percent of the total energy demand as of 2019. This paper examines U.S. energy dependence, measured by its factor share, using a simple neoclassical framework in a systematicway. We find that with empirically plausible differences in substitution elasticities, particularly with a time-varying substitution elasticity between equipment ...
Working Paper
Mining for Oil Forecasts
In this paper, we study the usefulness of a large number of traditional determinants and novel text-based variables for in-sample and out-of-sample forecasting of oil spot and futures returns, energy company stock returns, oil price volatility, oil production, and oil inventories. After carefully controlling for small-sample biases, we find compelling evidence of in-sample predictability. Our text measures hold their own against traditional variables for oil forecasting. However, none of this translates to out-of-sample predictability until we data mine our set of predictive variables. Our ...
Journal Article
What could lower prices mean for U.S. oil production?
U.S. oil and natural gas production has grown significantly since 2005, reflecting a move toward shale gas and tight oil extraction. Since 2011, the most productive tight oil and shale gas fields accounted for nearly all of the growth in U.S. energy production, due largely to extensive use of hydraulic fracturing and horizontal drilling. High energy prices made these costly technologies profitable to apply on a large scale. However, oil prices and rig counts declined sharply in 2014, calling into question whether the boom in U.S. oil production can continue. Nida ak?r Melek examines how ...
Working Paper
Productivity, nationalization, and the role of \"news\": lessons from the 1970s
The number of occurrences of an old phenomenon, expropriation of foreign-owned property, had peaked in the 1970s, and virtually every significant oil-producing developing country had nationalized its oil. Nationalization again was on the rise in the 2000s. Using novel data, this paper examines nationalization and its effect on productivity. First, we document historical global trends in expropriations, and examine the effect from the 1960s to the 1990s in a sample of oil-producing developing countries. We show that nationalization brings significant productivity losses. Then, we focus on ...
Journal Article
Evaluating a Year of Oil Price Volatility
Troy Davig, Nida ak?r Melek, Jun Nie, Lee Smith, and Didem Tzemen find changes in expectations of future oil supply relative to demand are the main drivers of the recent oil price decline.