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Forum Post: US Shale Oil Production -nothing more than a giant Ponzi scheme

Posted 4 years ago on Sept. 4, 2017, 1:45 p.m. EST by flip (7101)
This content is user submitted and not an official statement

US Shale Oil Production: While Hurricane Harvey did little actual damage to the Eagle Ford shale oil fields in south Texas, some production has been shut-in by the damage and flooding of oil pipelines, export terminals, and other means of moving the oil to refineries.

Observers are beginning to note that the US shale oil industry, which is being touted as the route to energy independence, is nothing more than a giant Ponzi scheme that consistently loses money no matter the price of oil. US shale oil companies have collectively lost money from 2008 through 2016 no matter what the price of oil was. Production from shale oil wells depleted by approximately 85 percent in three years leaving little behind for multi-million dollar investments. Despite the hype about new efficiencies, the 60 largest shale oil firms collectively have been losing about $9 billion per quarter for the last five years and with the well-head price of shale oil still running about $40 a barrel, it is doubtful the situation will get better in the near term.

The secret of the shale oil revolution that has increased US oil production by millions of barrels per day is that shale oil costs too much to produce. Unless shale oil starts selling for well above $100 a barrel and stays there — a situation that the US economy likely could not stand – the industry is living on borrowed time.

To expect that shale oil will lead to US into a new era in the next decade is wishful thinking given its record of profitability during the last ten years. While there may be some short-term gains in production at the expense of investors, at some point Wall Street will stop pouring billions into what was always a losing proposition.



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[-] 1 points by ImNotMe (1488) 4 years ago

''Houston, Bangladesh and Global Warming'', by Dean Baker:

respice; adspice; prospice ...

[-] 1 points by agkaiser (2515) from Fredericksburg, TX 4 years ago

All of Finance, Insurance and Real Estate is a giant Pyramid Scam, which expands at the rate of compound interest. The perpetual motion of money machine makes something from nothing, in the abstract. Ultimately ...

[-] 1 points by DKAtoday (33802) from Coon Rapids, MN 4 years ago

What? You speak sanity for once? Whats up with that? Sorry = never mind

[-] 1 points by grapes (5232) 4 years ago

I think that flip has done a "measurement" of the shale oil industry that resulted in a quantum wavefunction "collapse."

The U.S. shale oil production has inherently higher cost structure than Middle-Eastern oil production(crude lies near ground surface - digging a well for water only to be gushed by black crude means that the oil was not located deep underground in the initial oil discovery in Saudi Arabia). It presents a ceiling to crude prices. However, the ceiling is perceived as weak and breachable via great fluctuations in crude prices which the Saudis have done in recent years(making Venezuela into collateral damage in the process). The Saudis can pump more or less crude easily without incurring the U.S. shale oil industry's inertia in starting up and closing down operations. The goal is, of course, higher oil prices for all, as evidenced by the recent agreement between Russia and Saudi Arabia to curtail crude oil production. The petrodollar is dying because the U.S. has lost influence on Saudi Arabia(by "making a deal" with Iran) which has gone de facto nuclear via Pakistan. The U.S. nuclear umbrella is perceived as having many many holes near to Iran and DPRK.

Soon Japan and South Korea will likely follow suit to counterbalance DPRK. The Nuclear Non-Proliferation Treaty will be breached far more often by states (and terrorists) needing to counterbalance nuclear-armed states and terrorists. DPRK will likely sell its nuclear weapons to Iran or maybe even Islamist terrorists. Red China next door to DPRK will probably see the first ever mutually assured nuclear exchange with its many nuclear-armed neighbors: Russia, Pakistan, India, North Korea, Japan, South Korea, ROC, Iran, or perhaps Uyghurs, Tibetans, ...

This reminds me of the good old warrior state of Germany which had borders with so many hostile neighboring countries(many of Germany's own "Great" making). Sure enough, old Germany got involved in the most devastating wars ever again and again. The Valkyries had haunted since at least ancient Roman times although the Peace of Westphalia put back some common sense for common people. Red China will become the New Old Germany of the early 1900's but using nuclear weapons instead, quite an upgrade! The future is but past in the shadow. Both follow Bayesian formula.

The U.S. is also doing its part very well by tweeting down, via fiery farts, the security walls of Je-rich-o. Free-for-all battle royale is expensive.

[-] 1 points by agkaiser (2515) from Fredericksburg, TX 4 years ago

The US oil industry won't be the least profitable American beneficiary of the expensive "battle royale." We can follow the money to the real casus belli!

[-] 1 points by grapes (5232) 4 years ago

Oh yes, the greed for money is the casus belli. No one questioned the U.S. for handing over to Japan after World War II a few tidally exposed bare reef rocks and uninhabited islands in the South China Sea. Then reports came out that there could be vast oil and gas reserves in the sea surrounding them. Troubles began.

The various countries agreed to within 200 miles from their own shores as exclusive economic zones to carve up the seas and oceans. These zones overlap in the South China Sea. We got Big Problem when islands were artificially created there to bolster claims of sovereignity.

This is NOT the first time that undersea hydrocarbons had become an issue. North Sea had a similar problem but I don't recall there being any militarized hydrocarbon platform with an aircraft landing strip in the North Sea at that time.