On the demand side, the market dynamics of recent years have been rooted in consumer responses to a decade of high oil prices, with industry shifting from oil to natural gas, and families buying more fuel-efficient cars and using them less. Even if oil product prices were to fall durably, the decline in gasoline consumption should continue nonetheless with the gradual tightening of rules promoting improved fuel economy for vehicles to 2025, as decided by the Obama Administration in 2011. The fall in oil consumption could be accelerated if energy policy aggressively promoted natural gas vehicles.
On the production side, high prices have stimulated the unlocking of new supply sources. However, in contrast to other forms of crude oil production, in tight oil there is little 'sunk' capital. Therefore, supply is very responsive to price: if prices fall there will be less drilling and lower production.
A key brake on the production of tight oil is the US oil-export ban, which has been in place since the Second World War. It creates a risk of over-supply, with US crude oil prices settling below world prices (mirroring the current situation for natural gas). Exports of refined products derived from imported heavier crudes and processed by Gulf Coast refineries have grown dramatically, but these do not alleviate the oversupply of light crude oil. If US crude exports are not liberalised, new export-oriented light crude refining capacity - and associated pipeline infrastructure - would be needed to balance the market.
The drilling intensity of tight oil production raises environmental challenges. Production from individual wells peaks quickly and then declines sharply, and so a large number of wells are needed to maintain a field's output. In 2012, more than 10,000 wells were drilled in the Bakken formation, compared with 9,000 in the whole of Canada and 6,000 in Russia. Sustaining growth in US tight oil would, therefore, require not only a large resource base but also unconstrained ability to drill in prospective areas. How long this drilling boom can last before it generates serious opposition from local and national environmental groups is an open question. Continued growth in the supply of tight oil over the next 20 years is not impossible but cannot be taken for granted.
Strategic impact
US oil imports will soon have declined by more than 50% from their 2006 peak and, if the consensus is correct, they will fall yet further. In the coming years, one effect of this shift will be to test the degree to which the need for oil imports is a factor behind the US strategic approach to the Middle East.
