Where WILL We Be Without U.S. Shale Oil?
“That benefit of shale deflation has allowed us to pursue an expansionist monetary policy. We have cheaper capital for business, which has allowed business to drive economic growth that build amazing businesses, pursue clean energy policies and consumers have money in their pocket,” West said.
I don't buy the quote, save to say an expansionist monetary policy and cheaper capital did indeed lead to the entire shale oil phenomena, beginning 2014. For the record, some $300 B of monetary losses have occurred within the sector, to date, and there is another $200 B of debt, at least, still outstanding in the U.S. shale sector. It was built on and still relies on...debt.
14 B barrels of Permian tight oil have been exported to foreign countries, below costs. If it was exported at costs, or at a profit, the shale oil industry would be out of debt, right? Debt is NOT good in the oil business. Never has been, never will be.
So, read the title of this article again, please. It says without shale oil the price of oil would be $175 a barrel.
If that is correct, then you can bank on the fact that when America is out of shale oil, and shale gas, because of poor reservoir management, 8% recovery rates, lack of water, capital and/or corporate greed that is what the price of oil WILL be...$175 a barrel.
Thank you, Steve. I cannot open the link you provided but I get your drift and am not surprised many people think that about tight oil and tight gas debt, that it's paid off.
There have been a number of analyses made over the years about "free cash flow, that the sector was going to pay all its debt back and be able to work from net cash flow henceforth...the tight oil sector itself has suggested that about itself. Remember 2023 Bloomberg suggesting the tight oil sector was going to make $240B? It actually made about $80B and that was the best year in its existence.
It's actually quite easy to research debt for public tight oil and gas companies, it less than 30 minutes you can find debt from 40 corporations. You'll see that debt has been increasing across the sector, not decreasing. They are borrowing more money, not just deferring deleveraging, to pay dividends and buy shares back.
The thing is when you consider what price oil has to be for the sector to make ENOUGH money to pay this debt back, the only model that works is that the sector stop drilling wells completely and liquidate itself. Even then its touch and go whether it can generate net revenue to pay its debt and clean up its mess. That's at $62 WTI on the NYMEX.
Not very many people know how business works and particularly how oil and gas well economics work, financing and proper accounting works in the oilfield. 90% of what is said is based on lies and half-truths. The shale sector is well aware of this and takes great advantage of it.
Shale development occurred, and still exists today, squarely on the back of massive amounts of debt.
Thank you again for the compliment and for reading.