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W(h)ither U.S. Crude Oil Production?

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Abstract

People across the world have cut back sharply on travel due to the Covid-19 pandemic, working from home and cancelling vacations and other nonessential travel. Industrial activity is also off sharply. These forces are translating into an unprecedented collapse in global oil demand. The nature of the decline means that demand is unlikely to respond to the steep drop in oil prices, so supply will have to fall in tandem. The rapid increase in U.S. oil production of recent years was already looking difficult to sustain before the pandemic, as evidenced by the limited profitability of the sector. Now, U.S. producers may have to bear the brunt of the global supply adjustment needed over the near term.

Suggested Citation

  • Matthew Higgins & Thomas Klitgaard, 2020. "W(h)ither U.S. Crude Oil Production?," Liberty Street Economics 20200504, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87885
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    More about this item

    Keywords

    prices; COVID-19; International Energy Agency (IEA); fracking; coronavirus; oil; supply; consumption; pandemic; United States; OPEC;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets

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