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Page added on July 10, 2013
The Shale Oil Revolution Is Already Ending And Oil Prices Are Going To Surge
AllianceBernstein’s Bob Brackett has weighed in on the debate over whether the global shale revolution is merely hype.
And his answer is: yes —in part.
As far as U.S. shale gas goes, it’s pretty much living up to the talk: the newer plays are seeing strong recovery rates over large acreage, meaning gas will keep flowing.
That is not the case for shale oil.
Productivity of the newest plays to come on drillers’ radars have not come close to what’s been coming out of the Bakken in North Dakota and Eagle Ford in Texas.
And even for those two, he says, peak recovery rates of new wells drilled have been declining and flat, respectively.
As a result, drillers are moving on to less productive basins and lower-quality acreage.
“The prime locations have already been drilled,” he writes.
All this means crude prices will have to go back up:
In order to maintain current levels of overall production, marginal conventional production must be maintained with high oil prices. We expect marginal cost inflation will continue as well productivity declines, resulting in an oil price forecast that differs significantly from the forward curves. We forecast $96/bbl WTI for 2013, $101/bbl WTI for 2014, and longer term prices above $120/bbl and rising after 2017.
Brackett extrapolates the struggle to find high-yielding, low-cost acreage to the rest of the world. The marginal cost of drilling is going to keep rising…
Bob Brackett/AllianceBernstein
…Which means Brent price growth won’t see a dent from shale production. Quite the opposite, it’s going up to $160 by the end of the decade:
Bob Brackett/AllianceBernstein
In sum:
Bob Brackett/AllianceBernstein
8 Comments on "The Shale Oil Revolution Is Already Ending And Oil Prices Are Going To Surge"
rollin on Wed, 10th Jul 2013 12:13 pm
All forecasts appear to be price rises. If the lately forecast depression occurs, no one will be able to afford petro products even at todays prices. So price will have to fall and deflation will need to occur or all major commerce will halt.
Arthur on Wed, 10th Jul 2013 2:12 pm
Prices of gas in Holland have come down from 196 cent/liter max to 170 now. Reason: structural demand destruction caused by less driving due to high prices in the recent past.
Tanada on Wed, 10th Jul 2013 3:21 pm
Rollin, even if a depression does take place the price of oil will have to stay up to meet current demand, it would have to be a devastatingly deep one for demand to fall much further. Oil prices are based on the last barrel you have to buy to meet demand, not the first one. If it costs $80.00 to buy that last barrel then that is what you have to pay for all of them.
BillT on Wed, 10th Jul 2013 3:30 pm
rollin, most major commerce IS going to fall as the price continues to climb. The only way it can drop is for there to be a world wide depression. If that happens you will still not be able to afford it. That is why it is called peak oil.
It’s just possible that the end of fraking is happening sooner than some believed. If you have to drill more and more wells just to keep in place … eventually drilling goes into a classic ‘hockey stick’ and collapses. I’m glad I don’t have any money in the Market. I can sleep at night.
Plantagenet on Wed, 10th Jul 2013 3:42 pm
These oil price forecasts are lower than the current oil price. The ninny who wrote this article is predicting oil prices will go DOWN!
rollin on Wed, 10th Jul 2013 6:13 pm
BillT, you essentially repeated what I said. When the depression happens, business and people won’t be able to afford the price. Normally prices fall then as do wages. If that does not happen the depression would have a very long tail.
Tanada, do you even know what a depression is or how it works? Industry and business shuts down, massive job loss, and demand for products falls off a cliff.
“Buddy,can you spare a dime?” comes from the great depression. Those that do have jobs tighten their belts out of fear so don’t spend on anything they don’t absolutely have to. Demand would drop close to fifty percent.
Mike on Wed, 10th Jul 2013 6:36 pm
It’s basically a race to see who goes bankrupt first, the consumers or the energy companies . But seeing as the governments will probably nationalise all energy producing sources in the next decade it doesn’t really matter.
J-Gav on Wed, 10th Jul 2013 8:07 pm
Right, Mike, the energy companies are a bit like the banks in the crash of 2008, when everybody was wondering who had the biggest turd in his attaché-case, so banks stopped lending to each other … On the other hand, maybe govts will nationalize energy more and more but that doesn’t necessarily mean bankruptcy is immaterial. The powers that be will see to it that consumers feel the sting first and hardest, while at the same time enduring official excoriation for the profligacy they indulged in at the behest of … those same governments.