Shale oil to base line world oil prices

Falling oil prices and rising US shale-oil production are up-ending the established price setting mechanisms for world crudes

After years of dominance by the Brent futures market - leading, some say, to prices that are higher than physical supply and demand might point to - world prices seem set for a fall towards the marginal cost of new production. The reasoning is that surging production of shale crudes in the US has increased the price-sensitivity of production. In the past, when oil prices have fallen, most fields have stayed in production. That is because, even if the price falls below the range the company wanted when it took the decision to develop the field, a reduced income is better than shutting-down and receiving no income. But shale-oil fields are different. Shale wells only flow at peak for a short w