When will the Shale Bubble Burst?

OilPrice.com ^ | 31 October 2013 | Tom Whipple

[thackney]

Most of us are aware by now that the introduction of widespread hydraulic fracturing into the oil and gas business has resulted in a rapid growth in U.S. production. U.S. crude output is up by nearly 2.5 million barrels a day (b/d) since mid-2007 and natural gas production is up by 25 percent. The key question of course is how long production will continue to grow before it inevitably declines. Optimists maintain that we have just scratched the surface of our shale oil reserves and that production will continue increasing for years, if not decades.

Realists are not so sure, noting that not only is fracked oil very expensive, requiring circa $80 a barrel to cover the costs of extraction, but that production from fracked oil wells drops off quickly so that new wells have to be drilled constantly to maintain production. Until recently information about just how fast our fracked oil wells were depleting was rather hard to come by, so that the hype about the US becoming energy independent and a major oil exporter became conventional wisdom for most.

Last week the US’s Energy Information Administration issued the first in a new series entitled Drilling Productivity Report for key tight oil and shale gas regions. This report analyzes the six onshore oil and gas regions in the U.S. where 90 percent of the growth in oil production and nearly all of the growth in natural gas production has taken place in the last few years. The report tallies the number of drilling rigs at work in these six regions; the amount of new oil and gas they are bringing into production each month; and most importantly, the rate at which production from those wells already in production is falling.

Nearly all.. growth... from NorthDakota's Bakken... Texas’s Eagle Ford.

[PAR35]

Here you go - heating oil pricing calculated for New York Harbor.

http://www.economagic.com/em-cgi/data.exe/doecrude/day-EER_EPD2F_PF4_Y35NY_DPG

And retail gasoline is calculated off of what it costs at New York harbor, not what it would cost at the local refinery. Big profits to the oil company, bigger profits to the international bankers who rig the market.

[Eric in the Ozarks]

More BTUs per gallon.
Prettier flame !

[American Constitutionalist]

So we still import half of what we use ?

[thackney]

It used to be more than that not to long ago. At least we have reversed the trend. The percentage is going down not up.

In 2006, our crude oil production was 27% of our refined product consumption.

U.S. Field Production of Crude Oil
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=a

U.S. Product Supplied of Finished Petroleum Products
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mtpupus2&f=a

[thackney]

Do you think a link of price in some way validated your false claims?

God’s Peace be with You.

[PAR35]

You might start here:

http://auto.howstuffworks.com/fuel-efficiency/fuel-consumption/gas-price-quiz.htm

And if you think that supply-and-demand controls the prices, we probably don’t have a place to start a discussion.

[thackney]

So which of those ten question had anything to do with your claim? Asking what OPEC stood for? Volumes imported?

None of it was related to your claims.

On the new topic you jumped to, do you understand government regulations, taxes and the liquidity in the market all are part of the supply and demand curves?

[Sequoyah101]

Art Behrman’s analysis from last year presents the decline for shale oil. He took all the wells drilled to the end of 2010 and stopped drilling at that time then tracked just the ensuing two years or so of decline. It drops like a rock. Like all “resource” plays shale required drilling like a mad man to keep production going and the drilling pace has to ever increase to keep production growing.

People don’t understand that we will run out of rate long before we run out of reserves. From time-to-time people figure out how to coax some more squeal out of the pig at ecoomic recovery rates. You gotta convert resources to reserves. Lots of resources for conversion by someone who can figure out how.

So it has been, so it is and so it will be.

[thackney]

People don’t understand that we will run out of rate long before we run out of reserves.

Well said, BTTT