The paper presents a theoretical model and an empirical analysis to examine the relation between the entry into the market of oil companies with non-conventional extraction technology (shale) and the increase in the risk premium on oil derivatives contracts. The aim of the study is to deepen the analysis of the technological and financial channels through which the hedging needs of oil producers exert pressures on the oil futures prices.
The empirical results show that the financial characteristics of shale companies, more than the technological ones, affect the oil futures risk premium. These companies, which are more risk averse and are highly reliant on bank debt, are on average more inclined to buy financial contracts to hedge against future losses, exerting upward pressure on futures prices in line with the predictions of the theoretical model.
