Crude Economics
When Should U.S. Shale Producers Worry?
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  • Andrew Allison

    Another way of looking at this is that U.S. shale effectively puts a lid on domestic oil and gas prices: as the price goes up, supply will increase rapidly.

  • vepxistqaosani

    Actually, they should worry if the Democrats maintain control of the Senate, with all the potential for EPA and Keystone XL mischief that will bring.

    It would be quite ironic if the one piece of good economic news for working folk — lower gas prices — so lessens economic worries among voters that the Democrats manage to win the key “battleground” races, given that the Democratic party is universally and enthusiastically against all forms of energy that do not require government subsidies (and, thus, government control).

  • Jacksonian_Libertarian

    So you’re saying that falling oil prices are a bad thing? That’s nuts! That the oil producers are going to be competing for my energy dollar is a very very good thing. It’s good for me and every consumer, as well as the oil producers that will be forced to improve their Quality, Service, and Price in order to stay in business. Since US shale producers are already massively improving their production methods and lowering their costs of production as a recent graph on this blog made clear, they will have a huge head start on conventional producers elsewhere at staying competitive.

  • neshobanakni

    What would the world price be if one producer suddenly lost all capacity? Say … Iran?

  • David B. Pecchia

    Energy independence is not a myth, it is just that it will only happen in pretty awful conditions: If crude prices get high enough, then consumption will fall and domestic production will climb. There is some price such that they will be equal.

    • Edward Callahan

      The same applies to just about any good or service. Adam Smith called it the law of supply and demand and it is generally a reliable guide to predicting prices. Unless the lefties succeed in repealing it through taxes, regulations, subsidies and other distorting economic tactics used in the name of “fairness”.

  • old guy

    I wonder how much of this may be due to established oil countries pushing down the price so fracking becomes “too expensive”
    Paranoid – a bit but based on 60+ years of observing, not too paranoid.

  • GlobalTrvlr

    Shale oil wells are more expensive in the exploratory and drilling stages, but once in place, what is the breakeven on the variable cost? We now have a ton of shale oil wells in production, would they be curtailed with the lower prices or just new wells?

  • Edward Callahan

    “Oil from shale formations costs $50 to $100 a barrel to produce,”. This fact basically means that the world price of oil will be capped at aprox $90-100. Above that, American shale oil becomes economically viable and hence available to fill in supply shortages (after a short time gap) if the Saudis try to manipulate supply again. A far better situation than we had forty years ago.

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