[Ok-sus] If the oil price plunge continues, now may be the time to panic for shale companies

John Miggins jmiggins at cox.net
Wed Oct 15 17:00:03 UTC 2014

The price drop is a factor of many things, demand, supply, contraction, but I believe a large part of this is the west trying to starve Russia out on oil prices as punishment for not following the New World Order agenda on Ukraine and Syria and Iran.  The four sisters BP, Exxon Mobil, Shell, and  Chevron all owned by the world elite are subsidizing prices to hurt Russian Economy and Iranian Economy.

Economic warfare- it will come back when something breaks,  demand does not curtain that quickly.

Go solar now, free  yourself from the serfdom of oil.  :)

John Miggins
jmiggins at cox.net
Renewable solutions to everyday needs

-----Original Message-----
From: Ok-sus [mailto:ok-sus-bounces at lists.oksustainability.org] On Behalf Of Bob Waldrop
Sent: Wednesday, October 15, 2014 10:26 AM
To: ok-sus at lists.oksustainability.org; okc at lists.sustainableokc.org; RunningOnEmpty2 at yahoogroups.com
Subject: [Ok-sus] If the oil price plunge continues, now may be the time to panic for shale companies

When it comes to oil production and peak oil, price is THE issue. But it's not just about high prices, it's also about low prices. Peak oil is as much of an economic and technological issue as it is a geological constraint.

Since conventional oil production peaked in 2005, based pretty much on geological issues, just as many in the peak oil community predicted, we have avoided major problems by deploying money and and fracking tech to exploit unconventional energy sources -- shale oil and gas, Alberta tar sands and etc. But the problem with that is the high cost of production. 
Oil prices have to remain high, and gas prices must substantially increase, otherwise the whole shale/fracking boom is going bye-bye, and that could happen very quickly. Oil companies can't continue spending more to produce than they will get when they sell the oil.

That's something to keep in mind when we hear our local leaders in Oklahoma City talk about the boom times going on forever. if there is one thing that Oklahoma's economic history teaches us, it is that no boom goes on forever. The Mayor seems convinced that by diversification we have broken the ankle chain between Oklahoma City's economy and the oil and gas bidness, but I for one ain't persuaded.

So oil prices are in nose dive status, and we have to wonder how far they will go. Is this temporary? Is it part of a general worldwide deflation such as we saw in the. . . 1930s. . . ? Inquiring minds want to know and it is clear that rosy predictions notwithstanding, we are in for rougher times.

Comes now the infamous pseudononymous Tyler Durden of the equally infamous zerohedge.com website. . .

If the oil price plunge continues, now may be the time to panic for shale companies. Too many charts to pull the whole thing into an email so you will need to click on the link for the complete articles.

Bob Waldrop, OKC


Over the past 5 years, the shale industry, fabricated or real reserves notwithstanding, has been a significant boon to the US economy for four main reasons: it has been the target of billions in fixed investment and CapEx spending, it has resulted in tens of thousands of high-paying jobs, its output has been a major tailwind for the US trade deficit, and has generally been a significant contributor to GDP (not to mention various Buffett-controlled or otherwise railway corporations). And perhaps, most importantly, it has become a huge buffer to the price of global oil, as the cost curve of US shale is horizontal, with a massive
10,000 kbls/day available within pennies of $85/bl.

Goldman's explanation:

We believe that the vast reserves that have been opened for development through shale oil in the US have flattened the cost curve meaningfully, at around a US$85/bl Brent oil price. We estimate shale reserves from the top three fields in the US onshore (the Permian, Bakken and Eagle
Ford) at around 91bn boe, which to put it in context, is equivalent to roughly one third of Saudi Arabia’s current stated reserves (ZH: this number may be vastly overstated). Most of this resource has become available in the past five years, with few barriers to exploiting the reserves. Production in the US as a result is growing strongly, by more than 1mbpd currently, and we expect this pace of growth to continue over the coming three years as capital continues to be drawn in to these developments. The consequence is that costs of production and E&P capex/bl should stabilise as the marginal cost of production remains stable. We believe that shale oil has become effectively the marginal source of supply, providing the bulk of non- OPEC production growth. 
This is also the key driver of our oil price view: we continue to expect Brent oil to stay at c.US$100/bl for the coming few years.
For once, Goldman is spot on (even if their Brent price target may be a bit off): with shale oil profitable only above its virtually horizontal cost curve, it means that a whopping 11,000 kbls/day are available as long as Brent is above $85, a clear "red line" for all OPEC producers.

The red line is conveniently shown on the chart below:


http://www.ipermie.net How to permaculture your urban lifestyle and adapt to the realities of peak oil, economic irrationality, political criminality, and peak oil.

Ok-sus mailing list
Ok-sus at lists.oksustainability.org

More information about the Ok-sus mailing list