The Impact of the COVID-19 Pandemic on the US Shale Industry: An (Expert) Review

Abstract

The US shale industry turned the world-wide energy landscape upside down in less than a decade and put the US (back) atop the global energy hierarchy. At the beginning of 2020, the Covid-19 pandemic shocked the global energy markets and led to an unprecedented economic downturn. US shale oil & gas demand plummeted, prices collapsed, and bankruptcies were announced at exceptional rates. This paper aims to assess the impact of the virus and its repercussions on US unconventionals. For that, this study focuses on six central drivers highly relevant for the industry and its future viability. These are: First, crude oil and natural gas prices. Second, Break-Even (BE) prices for fracking operations. Third, financial and technical constraints within the industry. Fourth, global hydrocarbon demand development. Fifth, political and regulatory factors in the US. Sixth, environmental and societal sustainability. Those drivers were initially assessed through a literature review whose results were then examined by an expert survey. It was comprised of 83 senior professionals from various backgrounds engaged with the US shale industry. From a synthesis of both examinations, the results show that some drivers, in particular demand and commodity prices, are shaping the industry’s future more distinctly than others. It further seems that while those drivers are also impacted substantially by the pandemic, they positively influence the future of the industry. In contrast to the literature review, the survey also revealed that most experts expect the industry to recover to pre-Covid-19 levels. While these results are quite noteworthy, uncertainty displays a thread throughout this assessment. The future US and global energy landscape projection is extremely complex, and its drivers are interconnected. Therefore, this study aims to highlight some basic considerations regarding the forces at work while considering that some future implications can change the picture fundamentally - just like Covid-19 itself did.