The pitch is unusually high when it comes to energy-related news these days. From the one side, we hear that the US will soon become energy-independant, and that its a brave new world. From the other side, we hear that “fracking” (hydraulic fracturing), the technology used for getting shale oil out of the ground is the worst thing to happen to the environment since, well, ever.
What is MORE interesting than the regular propaganda pieces is the raw data. And what the raw data seems to indicate is that at $80 and above per barrel of oil, there is probably a case to be made that US oil production will be higher than it has been for some time (although eventually that too will fade). However – and this is a big however, there are some significant issues with the rapid depletion rates of shale oil wells that make it very hard to predict whether or not a well is economic or not. I’ve already read a few observations on companies cutting back on drilling because the oil price is in a zone where it might not be economic to keep drilling.
I do think that shale oil will continue to be drilled, but oil prices will need to stabilize at or above $100/barrel or so to see continued stable drilling. On the other hand, with federal reserve printing this is likely to be the case sooner or later. There’s just one catch – costs will go up to the same extent, so it may all be an illusion.
…..wouldn’t it be great if there was a stable currency that could be used to measure things with, instead of the paper nonsense? In the end, we are likely to see one or two blow-ups of companies that invest in non-economic production, but aside from that, shale oil is probably here to stay – with both the good and the bad.
Here is some interesting stuff from the Oil Drum, which inspired this little rant.