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How Do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	How Do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments./
Author:	Fillebeen, Thomas.
Description:	1 online resource (119 pages)
Notes:	Source: Dissertation Abstracts International, Volume: 78-02(E), Section: A.
Contained By:	Dissertation Abstracts International78-02A(E).
Subject:	Economics. -
Online resource:	click for full text (PQDT)
ISBN:	9781369169782

How Do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments.
Fillebeen, Thomas.

How Do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments. - 1 online resource (119 pages)

Source: Dissertation Abstracts International, Volume: 78-02(E), Section: A.

Thesis (Ph.D.)

Includes bibliographical references

Derivative markets enable firms to eliminate unwanted risk and, thereby, focus on their core competence. We ask whether small firms respond to changes in complex risk structures, using the emerging Texas shale oil industry. Unlike their conventional drilling counterparts, shale oil producers are small, with short production lead times and most revenue earned in two to three years. This exposes them to recent unprecedented volatility in product prices, production costs, and-in the Permian, pipeline transportation basis risk. We develop a real option model of their decision process, within which we measure firm responsiveness to volatility. To estimate revenue expectations, we use forward-looking time-varying beliefs deduced from futures and futures option prices. For costs, we use expectations about the evolution of production technology and forward-contracted transport capacity. Our results show that investment in new wells responds optimally not only to time-varying market price, but also to a second source of uncertainty: transportation basis. This demonstrates that even small firms are able to coordinate their production activity to integrate two sources of risk, impacting their investment returns. Lastly, we estimate the impact of the Nixon-era crude export ban, which became binding in August 2013, and caused US domestic crude price to fall below the world price, distorting US shale oil production revenue by $10.7B.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2018

Mode of access: World Wide Web

ISBN: 9781369169782Subjects--Topical Terms:

555568
Economics.
Index Terms--Genre/Form:

554714
Electronic books.

How Do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments.
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100 1 $a Fillebeen, Thomas. $3 1179101
245 1 0 $a How Do Small Players Deduce Beliefs about Uncertainty? A Look at Texas Shale Oil Investments.
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300 $a 1 online resource (119 pages)
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500 $a Source: Dissertation Abstracts International, Volume: 78-02(E), Section: A.
500 $a Advisers: Christopher M. Anderson; Robert F. Halvorsen.
502 $a Thesis (Ph.D.) $c University of Washington $d 2016.
504 $a Includes bibliographical references
520 $a Derivative markets enable firms to eliminate unwanted risk and, thereby, focus on their core competence. We ask whether small firms respond to changes in complex risk structures, using the emerging Texas shale oil industry. Unlike their conventional drilling counterparts, shale oil producers are small, with short production lead times and most revenue earned in two to three years. This exposes them to recent unprecedented volatility in product prices, production costs, and-in the Permian, pipeline transportation basis risk. We develop a real option model of their decision process, within which we measure firm responsiveness to volatility. To estimate revenue expectations, we use forward-looking time-varying beliefs deduced from futures and futures option prices. For costs, we use expectations about the evolution of production technology and forward-contracted transport capacity. Our results show that investment in new wells responds optimally not only to time-varying market price, but also to a second source of uncertainty: transportation basis. This demonstrates that even small firms are able to coordinate their production activity to integrate two sources of risk, impacting their investment returns. Lastly, we estimate the impact of the Nixon-era crude export ban, which became binding in August 2013, and caused US domestic crude price to fall below the world price, distorting US shale oil production revenue by $10.7B.
533 $a Electronic reproduction. $b Ann Arbor, Mich. : $c ProQuest, $d 2018
538 $a Mode of access: World Wide Web
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773 0 $t Dissertation Abstracts International $g 78-02A(E).
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