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To: Hoodat
When prices go up, so does supply.

Eggsackly.

7 posted on 01/18/2013 5:19:02 PM PST by hinckley buzzard
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To: hinckley buzzard

This is true.

There is nothing new about fracking. It’s been around 30 years. But it wasn’t economical to do it until oil prices exploded as they have from sub $20 a decade or so ago to about $100 now (that’s WTI’s price, not the real price of oil, which is Brent at $112).

With price rise, more oil flowed because the frantic, desperate drilling necessary to overcome the steep decline rates in horizontal wells could be paid for. On a joules in vs joules out basis, the ratio is horrible, but the money (which is defined by man, not nature) generates the flow — and it would even if the joules ratio were negative.

The bad news is this works in reverse, too. If you dare let price fall, fracking becomes uneconomic and capitalism works again and the flow stops. Bakken output in November (the latest month for which we have data) was down as WTI dropped under $90.

With WTI up from $82 about 2 months ago to today’s $96 and Brent nudging along at the same rate, we can expect about 1.5% GDP drag. Lots of drags on GDP upcoming this year.


10 posted on 01/18/2013 5:56:45 PM PST by Owen
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