January 19, 2016 – The Wall Street Journal
After the Carnage, Shale Will Rise Again
By: Mark Mills
How low can oil prices go? When pundits start competing to predict where the barrel will hit bottom, you know that a rebound is inevitable. It’s the inverse of what happens before a high-price bubble bursts. Only a few years ago forecasters were suggesting that oil might hit $300 a barrel.
The unpleasant reality is that petroleum prices are cyclical. Starting with the 1973-74 Arab oil embargo, they have been through six extremes. Because the peaks and the valleys both wreak financial havoc, producers and politicians imagine a Goldilocks ideal, with prices “just right”—not so high that legislators feel pressure to claw back “windfall profits,” and not so low that suppliers fall like dominoes, destroying jobs and tax revenue.
Read the full article here: http://www.wsj.com/articles/after-the-carnage-shale-will-rise-again-1453162664
When prices rise again, even modestly, as they eventually will, shale producers will be ready—and this is what worries OPEC, Russia and Iran. Many foreign producers need oil above $80 a barrel to balance their national budgets. Yet industry experts at RBN Energy foresee vast swaths of American shale profitable at just north of $40 a barrel. And it can come online extremely quickly.
The billion-dollar projects of conventional oil require long planning by enormous corporations or nation-state monopolists. Each shale well is comparatively tiny—which is why tens of thousands are drilled. Permits are obtained in weeks on private and state lands (where so much shale resides), and the wells are drilled in months instead of years. Structurally speaking, shale resembles a multitude of small tech-factories “manufacturing” oil from rocks.
