Oil price shocks on shale oil supply and energy security: a case study of the United States

Abstract

Purpose The purpose of this study is to examine oil price shocks on US shale oil supply and energy security during the period 2000q1–2020q4. Design/methodology/approach In this study, the Shannon–Wiener index was used to calculate energy security, and then a structural vector autoregression (VAR) was applied to measure the effect of oil price shocks. Findings The results of the variance decomposition indicate that oil prices account for about 20% of changes in US shale oil production, while it explains only about 3% of changes in energy security. Finally, historical decomposition confirms the results of impulse response functions. Originality/value The novelty of this study is that so far, no study has examined the effect of oil price shock on shale oil production and energy security in the USA using the structural VAR model. This study also used the latest Shannon–Wiener index as a measure of energy security in the USA. The reason for selecting this index is that, in addition to considering the share of the total consumption of each primary energy, the share of energy imports from each country as well as the political risk of energy exporting countries to the USA are also included.