Why Oil Prices are Likely to Remain Low for the Foreseeable Future – Shale 2.0

By Anthony Watts – Re-Blogged From http://www.WattsUpWithThat.com

Shale Revolution Changes Everything

How the Shale Revolution Has Reduced Geopolitical and Price Risk

shale2-0

Opec was on the verge of claiming victory over its North American rivals last night after its strategy of squeezing out the shale industry by flooding the markets with oil appeared to be vindicated. The oil producers’ cartel said that falling prices would force lower production from its rivals by the end of this year, with American and Canadian producers particularly affected. –Marcus Leroux, The Times, 19 January 2016
When oil prices tick up, thousands of profit-seeking investors make individual decisions

to turn each shale factory’s switch to “on.” That’s how the U.S. so rapidly achieved, from 2009 to 2015, the record-breaking rise in production of four million barrels a day. Shale 2.0, when it comes, will be even better. The technology is advancing at a speed usually associated with Silicon Valley. Just as a new Internet ecosystem rose from the ashes of the dot-com crash, Shale 2.0 will emerge—and for the same structural reasons. –Mark P Mills, The Wall Street Journal, 19 January 2016

Even as the U.S. rig count has retreated like Napoleon from Russia, shale remains the key to understanding the global oil landscape. Consider that despite all of the turmoil in key oil-producing regions, namely the Middle East, oil prices have not spiked. Nothing — not Russian intervention in Syria, not ISIS attacks on Libyan oil infrastructure, not the torching of the Saudi Embassy in Tehran — has been able to stop the oil price collapse. What is going on here? Does turmoil in the Middle East suddenly no longer matter? The American shale oil model has changed the world oil marketplace for the foreseeable future. Shale producers’ ability to quickly throttle down or ramp up upstream investment spending, drilling and production, as oil prices change, is viewed as an effective shock absorber against any potential oil price spikes. Mark J Perry, Investor’s Business Daily, 15 January 2016

The full measure of the shale oil model’s impact will be tested when the current crude glut clears and geopolitical risk returns, which is a near certainty. As oil prices eventually rise, will production from America’s shale oil fields rise in tandem and absorb the shock? The next president is likely to find out, and the answer will almost certainly be “yes.” And maybe that president will do something President Obama has never done — acknowledge the game-changing shale revolution as the most extraordinary energy success story in U.S. history. Mark J Perry, Investor’s Business Daily, 15 January 2016

CONTINUE READING –>

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s