Oil, the rouble and the spectre of deflation

Michael Roberts Blog

Crude oil prices have dropped to five-year lows in just a few months.  And the reason is clear: it’s supply and demand!  On the supply-side, the most significant development has been the accelerating expansion of shale oil and gas production in North America, mainly in the US.

Oil and gas reserves are trapped in layers of shale rock and can be released by a process of hydraulic water pressure called fracking.  By sinking hundreds of rigs in quick succession, shale rock can produce significant supplies of tight oil and natural gas – and this process in North Dakota, Texas and other areas has turned US oil production round.  US oil output up to now had been based in traditional deep oil reserves in Texas, Louisiana and the Gulf of Mexico.  US production was in decline from the mid-1970s to around 4mbd and falling.  But with shale, annual output has rocketed…

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