.png)
In the decades preceding the arrival of U.S. shale oil, the oil market had only one stabilizing force, namely OPEC. The reason the oil market was structured as such was due to the nature of conventional oil production, most non-OPEC oil production prior to U.S. shale oil fell in one of two categories: major offshore projects that took 5 to 7 years to build (North Sea, Gulf of Mexico … etc.) or mature conventional onshore fields (U.S. conventional fields, Russian Siberian fields … etc.); both of these conventional oil supply sources were either non-responsive, or only slowly reactive, to changes in the oil price, major offshore oil projects tended to come online regardless of the oil price environment, while conventional onshore oil production with shallow decline rates (sub-10 percent) meant that even a slowdown in drilling would not impact total production in any meaningful way for an extended period of time. The aforementioned state of affairs meant that it was up to OPEC to adjust production to balance the market in case of abrupt supply or demand changes, OPEC had (and still has) the flexibility to withdraw millions of barrels from the market within a month or two if […]
