The Dallas Fed just issued its quarterly energy survey, and in it are some special questions on what price of oil shale firms need to profitably operate existing wells, and what oil price they need to drill new ones as well. These prices vary by shale basin (and even within shale basins), but overall it looks like most U.S. shale operations would be able to continue to turn a profit even if oil prices were to drop $20 per barrel, and current prices are enough to profitably drill new wells in nearly every shale formation.The implication here is nothing short of astonishing. If oil companies can be profitable even at $20 a barrel, there's essentially nothing OPEC can do to move the world oil market. Cutting production to raise the prices of crude oil? Won't work, because the frackers will simply produce enough to cover the cuts. Moreover, it means the games the Russians play won't have much effect in world petroleum markets. And it means U.S. energy security is assured for the foreseeable future. While there may be temporary shocks here and there, the proven reserves and overall supply of oil is greater than it's been in decades. The geopolitical implications are even more enormous -- put it this way, it's not good news for Putin, or the mullahs.
Friday, March 31, 2017
Actually, no, this post has nothing to do with Donald Trump. It's far more important than the lysergic kabuki going on in the Beltway. Frackers are changing the world: