Some Truth about Oil Shales......

[Benton]

(12-29-2016, 03:09 AM)Stewy Wrote: ....and their future effect on Oil prices.

I have written a few comments on articles on the website Oilprice.com, but people are fairly civil there and don't reply to comments, so even though my comments have been published, it's far too civil as i say so no one really discusses anything.

Anyway, my purpose for posting this is that there is a lot of misunderstanding even in the so called "oil" press as to the immediacy and relative reaction speed of the shale industry.  They are essentially full of crap in their understanding.  Everyone in the press literally gives the impression that oil shales are something that can have an immediate impact on oil prices, by the price nudging UP just a little bit leading to a recovery in drilling rig number.  This one premise alone shows a complete lack of understanding of the basics of the oil shale business.

Here is what I wrote in one comment that was published:

It all comes down to cash flow.  Without prices over 80$ the companies themselves won't have the cash flow to do a major ramp up at any time in the near future.  Additionally, these companies are no risk taking cowards.  They've been bit hard by low oil prices and aren't going to take risks until they have some financial breathing room.  Additionally, as I said, most of these companies have either already gone bankrupt or are in hock nearly to the max, so the banks aren't going to give them another dime.  Finally, what no one considers is that the rig numbers dropped from 1300 to less than 300 today in south Texas.  One cannot just snap their fingers and produce/train/implement 1000 crews again over night.  Most of these are blue collar workers, but it is skilled labor.  They have moved on to other industries after nearly two years out of work, so even if oil was 200$ a barrel it would take significant time to train the manpower if nothing else.

No.  The quick recovery of the Oil Shale industry at 60-70$ oil is a complete fallacy, and in this aspect OPEC's attempt to cripple the Oil Shale industry actually worked IMO.  OPEC didn't kill US Oil Shales, but it did create a deep long term wound requiring a significant recovery time.

Thanks for the post. I didn't know some of that.

I was talking to a friend not too long ago about things to expect in the Trump world and I brought up gas, saying it would go to $3.50 a gallon before the end of next year (right now it's around $2.10-$2.25 in our area). He works in the ME some and said it wasn't likely, that OPEC would probably keep prices lower for at least 2-4 more years trying to keep the shale industry from gaining any more ground.