Technological and Institutional Interaction in the Shale Oil Revolution

A decade ago, peak oil was widely discussed. By early 2015, U.S. oil production reached 9.7 million barrels per day, a figure not seen since the nation's previous peak production in 1971. The dramatic increase in U.S. production is commonly referred to as the shale oil revolution. It is often alleged that the shale oil revolution was the result of technological change, particularly horizontal drilling and fracking. Technological change contributed to the increase in production, but such change involved much more than horizontal drilling and fracking. Institutional changes also contributed to the shale oil revolution. Besides market changes, new mechanisms of financing exploration and production were facilitated by low interest rates and quantitative easing. The political and regulatory environments changed as well. We investigate the peculiar interaction of institutions and technology in the shale oil industry between 2010 and 2015.