that has driven down prices to pre-2005 levels.
The overall impact of this on oil and gas companies can be seen in their share price during and
after the final quarter of 2014 in Fig. 4. The
average share price of five major oil and gas
companies fell by more than 30% from 2014 to
the trough in 2016 and has yet to recover.
New, relatively low-cost supply sources are
becoming increasingly available as technology
improves, driving production above predicted
levels. New technologies have reversed
persistent declines in production and have
exceeded historical expectations, as illustrated in
Fig. 5. The U.S. Energy Information Administration (EIA) forecasts for oil production in both
the 2002 and 2012 Annual Energy Outlook did
not fully anticipate the impact that new fracking
methods would have on increasing tight oil
supply, as conventional oil production has continued to diminish. The result has been a near
doubling of oil production from its trough in
2008 to its peak in 2015.
Fig. 3 The trends of the oil and gas industry will likely result in significantly tighter margins for producers. Source
Vivid Economics
Fig. 4 The fall of oil prices in late 2014 coincided with sharp drops in the share price of major oil companies. Source
BP, Google Finance
54
W. Xiaoming et al.
The overall impact of this on oil and gas companies can be seen in their share price during and
after the final quarter of 2014 in Fig. 4. The
average share price of five major oil and gas
companies fell by more than 30% from 2014 to
the trough in 2016 and has yet to recover.
New, relatively low-cost supply sources are
becoming increasingly available as technology
improves, driving production above predicted
levels. New technologies have reversed
persistent declines in production and have
exceeded historical expectations, as illustrated in
Fig. 5. The U.S. Energy Information Administration (EIA) forecasts for oil production in both
the 2002 and 2012 Annual Energy Outlook did
not fully anticipate the impact that new fracking
methods would have on increasing tight oil
supply, as conventional oil production has continued to diminish. The result has been a near
doubling of oil production from its trough in
2008 to its peak in 2015.
Fig. 3 The trends of the oil and gas industry will likely result in significantly tighter margins for producers. Source
Vivid Economics
Fig. 4 The fall of oil prices in late 2014 coincided with sharp drops in the share price of major oil companies. Source
BP, Google Finance
54
W. Xiaoming et al.