I don’t know who owns those wells, but use this picture as a visual that shale companies in bankruptcy haven’t stopped pumping oil. Photo by James Ulvog.
The concept that one should not bet against human ingenuity is key to realizing we won’t run out of oil and there won’t be a sustained runup in prices anytime soon. A few articles showing why I say that. Articles also show the severity of the catastrophic mistake made by the Saudi government.
- There is a difference cutoff for the breakeven price of the company Saudi Aramco and the country Saudi Arabia. US shale producers can crank out tons of oil at prices far below what the Saudi government needs to survive.
- Huge Kashagan oil field in Kazakhstan starts producing
- US shale producers in bankruptcy proceedings are producing almost as much oil as the they were before prices collapsed. They didn’t close in their wells.
10/17 – Gary Sernovitz in op-ed at Wall Street Journal – Trimming Oil Output Won’t Keep OPEC States Afloat – Main idea I draw from article is that if OPEC reaches a deal to cut production, and if they get Russia to go along, and if the cut is enough to push prices up the amount they want, and if none of the producers cheat, then it still won’t keep the petrostates funded at the level they need to keep all their social programs going.
That is a lot of ifs and even if they all happen, it won’t matter much.
Amongst the many reasons this is the case, two stand out to me.
First, for the history of oil production, the easiest and cheapest oil to come out of a field is the first drawn. After that, the oil gets more difficult and more expensive. The opposite is happening in the fracking fields. The breakeven price is lower today in Bakken, Permian, and elsewhere than two years ago and the breakeven price looks to be going lower. That means the frackers can keep functioning with low prices and thrive with moderate increases.