Shale Production and the Transmission of Oil Supply Shocks: Evidence from U.S. States

Does the composition of local oil and gas production shape how global oil supply shocks propagate through U.S. state economies? Using a novel monthly panel that decomposes well-level output into shale and conventional components for U.S. states over 1990-2024, we estimate panel local projections interacted with state-level production shares. States with a larger shale share experience significantly milder employment and economic conditions contractions following an adverse oil supply news shock, whereas the conventional share generates no differential effect. This buffering operates entirely through non-mining employment - consistent with local multiplier channels rather than direct extraction jobs - and spills over to manufacturing-intensive non-producing states via supply-chain linkages. The dominant source of nonlinearity is the prevailing price level: contractionary effects concentrate in low-price environments, when shale producers operate near breakeven. Together, these results help reconcile conflicting findings on whether the shale revolution altered the macroeconomic transmission of oil shocks.