NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Brian C. Prest

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Institutional Affiliation: Resources for the Future

NBER Working Papers and Publications

October 2017Informing SPR Policy Through Oil Futures and Inventory Dynamics
with Richard G. Newell: w23974
This paper examines how information on the time pattern of expected future prices for crude oil, based on the term structure of futures contracts, can be used in informing whether to draw down, or contribute to the Strategic Petroleum Reserve (SPR). Such price information provides insight on expected changes in the supply-demand balance in the market and can also facilitate cost-effective transitions for SPR holdings. Backwardation in futures curves suggests that market participants expect shocks to be transitory, creating a stronger case for SPR releases. We use vector autoregression to analyze the relationship between the term structure of futures contracts, the management of private oil inventories, and other variables of interest. This relationship is used to estimate the magnitude of...
The Unconventional Oil Supply Boom: Aggregate Price Response from Microdata
with Richard G. Newell: w23973
We analyze the price responsiveness of onshore oil supply from conventional versus new unconventional "tight" formations in the United States. We separately analyze three key stages of oil production: drilling wells, completing wells, and production from completed wells. We find that the important margin is drilling investment. We estimate drilling responses of approximately 1.6 percent for tight oil and 1.2 percent for conventional oil per 1 percent change in oil prices. In addition, tight oil wells produce about 4.6 times more oil compared to conventional ones. Together, the long-run price responsiveness of supply is about 6 times larger for tight oil on a per well basis, and about 9 times larger when also accounting for the rise in unconventional-directed drilling. Based on our estimate...

Published: Richard G. Newell & Brian C. Prest, 2019. "The Unconventional Oil Supply Boom: Aggregate Price Response from Microdata," The Energy Journal, vol 40(3).

August 2016Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas
with Richard G. Newell, Ashley Vissing: w22532
We analyze the relative price elasticity of unconventional versus conventional natural gas extraction. We separately analyze three key stages of gas production: drilling wells, completing wells, and producing natural gas from the completed wells. We find that the important margin is drilling investment, and neither production from existing wells nor completion times respond strongly to prices. We estimate a long-run drilling elasticity of 0.7 for both conventional and unconventional sources. Nonetheless, because unconventional wells produce on average 2.7 times more gas per well than conventional ones, the long-run price responsiveness of supply is almost 3 times larger for unconventional compared to conventional gas.
June 2016Prices versus Quantities with Policy Updating
with William A. Pizer: w22379
This paper considers how policy updates and trading of regulated quantities over time changes the traditional comparative advantage of prices versus quantities. Quantity regulation that can be traded over time leads firms to set current prices equal to expected future prices. A government seeking to maximize net societal benefits can take advantage of this behavior with a sequence of quantity policy updates that achieves the first best in all periods. Under price regulation where current prices remain fixed until future policy changes occur, no such opportunity exists to achieve the first best, and prices are never preferred. However, if we assume policy updates are driven in part by political "noise" rather than maximizing net societal benefits, the result changes and prices can again be...
 
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