WORKING PAPERS

• Kellogg, Ryan, The End of Oil, conditionally accepted at the Review of Economic Studies .
  - NBER working paper #33207 (November, 2024)

  [abstract]

  Even as global oil demand has increased in recent years, it is plausible to envision scenarios in which clean energy technologies or climate policies drive demand to essentially zero by the century's end. This paper asks what such a demand decline, when anticipated, might mean for global oil supply. One possibility is a ``green paradox'': producers accelerate extraction. However, because extraction requires durable capital investments, the opposite may occur: producers reduce their investment rate, decreasing extraction. To evaluate the relative strengths of these opposing mechanisms, I develop a model of global oil supply that incorporates both, among other industry features. For model inputs with the strongest empirical support, both effects are modest, with disinvestment typically outweighing the green paradox. In order for the green paradox to substantially increase cumulative global oil extraction, investments must have short time horizons, and producers' discount rates must be less than 4% real.

• Covert, Thomas R., Konan Hara, Ryan Kellogg, and Richard L. Sweeney, Investment, Productivity, and Selection in the U.S. Shale Boom, working paper .
  

  [abstract]

  The goal of this paper is to understand why output per well increased so dramatically during the shale boom. A core question is the extent to which production growth arose from changes in well site selection---i.e., changes in the underlying geological quality of the precise areas being drilled---or from changes in firms' operational decisions, such as changes in inputs and adoption of new technologies. We develop a joint model of well-level production and drilling decisions that allows us to address site selection that comes from firms' private ex ante signals of sites' underlying geologic quality and from firms' ability to learn about quality over time by observing drilled wells' production outcomes. The model is designed to account for not just whether but when sites are drilled. We estimate the model using data on drilling, production, and leasing from two major U.S. shale plays: the Bakken in North Dakota and the Haynesville in Louisiana. We find that site selection has been important: firms initially drilled areas for which they had initial signals of high quality, and then they later repeatedly drilled in areas that had positive production outcomes. But after accounting for selection, as well as reservoir depletion, firms' operational improvements emerge as the largest driver of output growth. These improvements occurred within firms, rather than being driven by reallocation of drilling activity to more productive firms. Price and cost data suggest that these gains were driven by improvements in the productivity with which firms brought together drilling inputs.