US shale oil industry is collapsing

Some recent news stories I found:

These developments are right in line with what many of the shale oil ‘skeptics’ have been predicting for years. The shale oil industry is collapsing due to the sheer unprofitability and massive debt levels. The US for over a decade has been able to reverse decades of declining domestic oil production with fracking, and now we produce more oil than ever before (we are certainly still not “energy independent,” however).

The shale oil industry is wobbling under the oppressive debt load that it has racked up since 2005. Most shale oil companies can’t even cover their cost of operations, let alone make a profit. That’s the “price” we pay for cheap oil at the gas pump. The operational and capital costs for drilling, hauling countless truckloads of water and fracking sand to the rig pads, and sucking the oil out, exceed the profits from selling that oil.

Really, the shale oil industry is a product of our desperation for cheap and abundant oil. The coming collapse of shale oil and declining conventional US oil production is troubling: those in power will do- I hate using this word, but it fits here- literally anything to maintain the status quo. They will do whatever it takes so that Americans can keep driving to Walmart and buying cheap Chinese garbage forever.

Well, that’d explain all the earthquakes in Oklahoma…

It may be a bit premature to herald the “collapse” of the shale oil industry/fracking:

“In the United States, oil production last year reached its highest level in 14 years, thanks in part to output from North Dakota’s Bakken Shale, and is expected to keep rising. Natural gas production, already at new highs thanks to shale gas, is expected to grow 44 percent in the U.S. between 2011 and 2040.”

Those who are gloating over potential fracking bans might want to consider the downside of such policies.

This type of thread is true to form for the OP. At least he doesn’t disappoint.

The profitability of domestic oil production, just like everywhere else, is dependent upon the price of oil, which is driven by supply and demand.

And by politics.

I guess the OP considers shale oil to be better than fracked oil. I personally find that strange becauseshale oil production is essentially strip mining, followed by baking the shale.

This month, shale isn’t economically viable. Next month, maybe fracking won’t be. As a matter of fact, Iran just identified a new field with an estimated 53 billion barrel reserve. Maybe the Iranians will go for maximum exploitation and the ensuing price war will drop the price of crude so low that no U.S. oil production will be economically viable.

Fracking is the process by which oil is extracted from the shale rock.

No it isn’t. Fracking, or hydraulic fracturing, is mainly used to free natural gas, especially from sandstone, but also from shale. It can also be used to produce oil.

Shale oil is normally produced by chemical treatment of oil shales. Oil shale is usually mined in open pit mines or strip mines.

Right. They’re two different things. What they’re doing nowadays is extracting oil from “tight” formations via hydraulic fracturing (“fracking”) in pretty much the same way they extract natural gas from the same sorts of formations. This is what the Eagle Ford, Bakken and Barnett Shale all have.

There’s also oil derived from oil shale, which is something different- in that case, something called kerogen is bound up within the shale itself, and has to be liberated via heating or solvents or something. Not a lot of that sort of oil is being produced currently, but there are HUGE reserves(~3 trillion barrels, half of which is estimated to be recoverable) in the Green River Formation that covers parts of Utah, Wyoming and Colorado.

Nitpick: those are resources, not reserves. The latter has a technical definition meaning that they are recoverable with existing technology and the current price of oil.

The “shale oil” in the OP and the linked articles is tight oil from shale formations, the extraction of which is facilitated by hydrologic fracturing. The pedantic will insist that this is not properly “shale oil” and the deliberately obtuse will feign confusion, but that’s how the term gets used these days. The rest of us have gotten over it.

I’m having a hard time following the OP: The price we pay for having cheap oil is that we have expensive oil?

No, it’s not simply pedantry, because when one looks up something like "shale oil environmental damage,"one sees cites like this.

AIUI “fracking” is the term for injecting hot water or whatever down a borehole to get natural gas or oil. The other kind of extraction is “mining” which has a different set of environmental challenges.

The price we pay for cheap oil is that the oil companies get crushed, since the stuff is more difficult and more expensive to extract than ever. The shale oil companies are up to their eyeballs in debt, and accumulating onerous debt loads is the only way they can continue operations, because most of them aren’t making a single red cent in profit. They are nearing collapse and they will have to either be bailed out or taken over by the government.

Perhaps you’re referring to stories put out by the industry like this.

So an industry that has traditionally been boom-and-bust is now going through a bust. Well, that’s how it goes with commodities. Not just oil, but crops, metals, and every type of raw material there is.

This isn’t about Americans desire for cheap energy. It’s about commodity producers trying to get in while the market is hot, then getting caught short when the market cools down.

and i bet there’s some fiance geek at a pc somewhere trying to figure out how to short it all to hell and back and rake in a quick pile or two …

Unless they’re going to cause a severe recession by going bankrupt, the last point does not necessarily follow from the preceding. Are lots of banks going to fail if these companies go bankrupt? Are millions of people going to be put out of work? If no to both, I don’t see a need for a government bailout.

If the companies fail, they fail. Their investors lose money, some people lose their jobs (and I’m fairly sure the total employment at these companies is fairly low right now), the creditors squabble over their remains. It happens all the time in other industries, such as high tech. You don’t see the government bailing those companies out, do you?

Not pendantic perhaps but confused. Two different things might be referred to combining the terms ‘shale’ and ‘oil’. One is shale formations that contain the compound kerogen, which has to be heated to flow from the rock. At one time (ca 1970’s-80’s oil price increase) it was envisaged to do this with surface mining and ‘cooking’ of the rock. But in practical cases now it’s generally done by injecting steam/high temperature water. Then the liquified kerogen has to be further processed to synthetic crude. This is a very small factor in US oil production.

The other thing which combines those two terms is the hydraulic fracturing of tight rock, in the general category ‘shale’, to release generally light crude oil (some fracked crude oil in the US isn’t even black but clear, the predominantly light fractions can even cause safety issues in transport, whole different thing than than kerogen). That’s done with high pressure water (not heated particularly), sand and chemicals. This is a huge scale thing now, mainly accounting for the several million bpd increase in US oil production rate in recent years. Many fracked wells in the US produce natural gas, either primarily (Pennsylvania has become No. 2 gas producing state based on fracking in the Marcellus Shale formation, very little oil there) or as a byproduct of oil production (gas flared in Bakken ND and or Perminan Basin TX/NM formations from wells drilled mainly seeking oil, but which also generate some gas and no pipelines yet to transport it), but that depends on the formation. There’s no basically separate idea of fracking for gas v. fracking for oil.

This link classifies the difference as ‘shale oil’ referring to oil extracted from tight formations by fracking (the great big thing in US hydrocarbon production) while ‘oil shale’ refers to the extraction of kerogen (the minor to negligible thing in US hydrocarbon production). But basically as Ruken said the combination of words ‘shale’ and ‘oil’ in either order is now taken to refer to extraction of light crude from tight formations using hydraulic fracturing unless otherwise specified. And the thread’s dubious (IMO) premise can be taken to apply to that huge source of oil.

That’s the free market for ya. You know, the ol’ supply and demand thing? Price is low, supply shrinks.

It turns out you can also spell “supply shrinks” as “crushed” “onerous debt load” and “nearing collapse”. Nobody has to bail our or take over these companies that are trying to sell a product that isn’t profitable anymore. Amazingly, the answer might just be “stop selling unprofitable stuff”.

This. I’m not too sure what’s so different about this story that we haven’t seen 100 kajillion times since the very first oil boom and bust town of Pithole, Pennsylvania back in 1865.