# US shale oil industry is collapsing **URL:** \ **Category:** In My Humble Opinion\ **Created:** [November 10, 2019, 9:05pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255 "2019-11-10T21:05:06Z")\ **Posts on this page:** 10\ **Page:** 2
**Author:** ![Marcus\_Flavius](https://avatars.discourse-cdn.com/v4/letter/m/a4c791/32.png) [@Marcus\_Flavius](https://boards.straightdope.com/u/Marcus_Flavius)\ **Post date:** [November 12, 2019, 5:04pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/21 "2019-11-12T17:04:29Z")
> [@Cheesesteak](#): > > 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”. The shale oil industry isn’t producing consumer trinkets, they’re producing a product which is ABSOLUTELY VITAL to the modern way of life. They will not be allowed to just fail, I can just about guarantee you that. ---
**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\ **Post date:** [November 12, 2019, 5:40pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/22 "2019-11-12T17:40:30Z")
> [@Marcus\_Flavius](#): > > The shale oil industry isn’t producing consumer trinkets, they’re producing a product which is ABSOLUTELY VITAL to the modern way of life. They will not be allowed to just fail, I can just about guarantee you that. You keep saying things this and no one is interested because it’s obviously BS. There’s plenty of oil and gas on the market right now, and for the most part energy is fungible. If these producers go bankrupt because commodity prices are too low, then we don’t need them right now. If commodity prices rise because of increased demand then someone else will buy the assets and start producing the oil and gas again. You have an outdated vision of the energy market and refuse to be educated as to why you’re wrong. We can point out the flaws in your argument, but we can’t comprehend them for you. ---
**Author:** ![YamatoTwinkie](https://avatars.discourse-cdn.com/v4/letter/y/cc9497/32.png) [@YamatoTwinkie](https://boards.straightdope.com/u/YamatoTwinkie)\ **Post date:** [November 12, 2019, 5:40pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/23 "2019-11-12T17:40:57Z")
> [@Marcus\_Flavius](#): > > The shale oil industry isn’t producing consumer trinkets, they’re producing a product which is ABSOLUTELY VITAL to the modern way of life. They will not be allowed to just fail, I can just about guarantee you that. But the reason why they are failing is because they can’t currently compete with the glut of cheap oil from elsewhere. As they fail, supply goes down, and price goes back up, allowing other (more efficient) shale oil producers to remain in the market. If supply dropped low enough, prices would spike, and they would _all_ get back in. You can make an argument that it is good for the US from a strategic/defense standpoint to prop up the domestic oil industry, or maybe to insulate it from price manipulation by coordinated activities from oil cartels, but the ABSOLUTELY VITAL oil you’re describing isn’t going to disappear unless the demand for it drops. This is basic economics. ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [November 12, 2019, 5:50pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/24 "2019-11-12T17:50:36Z")
> [@Corry\_El](#): > > Not pendantic perhaps but confused. Two different things might be referred to combining the terms ‘shale’ and ‘oil’. If the OP was calling shale oil production what I understand to be “fracking,” then I’ll gladly stipulate to it, just to make sure we’re all on the same page. Because it doesn’t change my point of view in the least. > [@Marcus Flavius](#): > > The shale oil industry isn’t producing consumer trinkets, they’re producing a product which is ABSOLUTELY VITAL to the modern way of life. They will not be allowed to just fail, I can just about guarantee you that. The industry won’t fail. Individual companies will fail. Then oil prices will rise. Other companies with other backers will come along, and there will be a boom again. Then prices will fall, and there will be a bust. Then, maybe 50 years or so down the road, someone will discover how to collect all the plastic in the ocean, convert it back into petroleum, and shale oil production will be tossed into the technological landfill along with vacuum tubes, steam engine locomotives, and hand-cranked phonographs. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [November 12, 2019, 6:09pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/25 "2019-11-12T18:09:23Z")
> [@Marcus\_Flavius](#): > > The shale oil industry isn’t producing consumer trinkets, they’re producing a product which is ABSOLUTELY VITAL to the modern way of life. They will not be allowed to just fail, I can just about guarantee you that. They’re digging stuff out of the ground. If that particular stuff ever becomes ABSOLUTELY VITAL it will still be there for some other company to dig it out for us. Right now, despite the fact that we need oil, we don’t need THAT oil because it’s more expensive to tap. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 12, 2019, 10:35pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/26 "2019-11-12T22:35:24Z")
> [@Marcus\_Flavius](#): > > The shale oil industry isn’t producing consumer trinkets, they’re producing a product which is ABSOLUTELY VITAL to the modern way of life. They will not be allowed to just fail, I can just about guarantee you that. Other companies will buy them then, Or the fields will sit unproductive until they are profitable again. Investors who jumped on the bandwagon too late and lose their shirts are not a critical problem. The same thng happened with minicomputers in the '70s and PCs in the '80s. And a million other examples I won’t bore you with. ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [November 12, 2019, 11:02pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/27 "2019-11-12T23:02:24Z")
> [@Kent\_Clark](#): > > The industry won’t fail. Individual companies will fail. It’s remarkable how people don’t understand this. Esp. in an industry with so many tangible assets: leases, wells, equipment, transport facilities, etc. Yeah. Cycles happen. A lot of businesses don’t do cycles well. They ride the ups and go belly up on the downs. Someone else ends up with the assets. Look at the airlines and their cycles. Some like PanAm and TWA “went away” but their planes and stuff just ended up in other people’s hands. Others like Delta more or less survived bankruptcy (but the stockholders got a raw deal). Right now, the “boom” period of drilling all over the upper Great Plains has died down. That’s bad news for some companies. But the oil wells are still there. They are still pumping. And so it goes. ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [November 12, 2019, 11:33pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/28 "2019-11-12T23:33:59Z")
I have to say, \*\*Marcus Flavius \*\*has provided the most spirited defense of any part of the petroleum industry that I have ever seen on the SDMB. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [November 12, 2019, 11:36pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/29 "2019-11-12T23:36:44Z")
> [@Kent\_Clark](#): > > If the OP was calling shale oil production what I understand to be “fracking,” then I’ll gladly stipulate to it, just to make sure we’re all on the same page. > > Because it doesn’t change my point of view in the least. OP has a wacky take on energy topics IMO, but in this case his/her usage is the standard one. ‘Shale’ now basically means fracked oil, light crude released from tight formations which are geologically speaking shale. Recovery of kerogen from shale is a footnote at this point. If not specified otherwise, ‘shale’ now means fracking. Anyway besides semantics seems nearly everyone but OP is on similar page. It’s worth noting that ‘American shale producers’ have tended to disappoint their investors in recent years, not generally fulfilled projections of improving output per well or $ spent. WSJ has had a series of good articles about that last year or two. And now are cutting back investment (a WSJ article just today), which should see US oil production flattening to perhaps no growth in 2020…but not collapsing. However if, hypothetically, we _were_ talking about kerogen recovery projects, a tiny fraction of oil production, we could say project X works at oil price Y and not below, so if prices are generally holding below Y, there’d be no such projects and that’s that, because the few possible projects would have next to no feedback effect on the price. However talking about ‘shale’ in the common current usage of the term (ie fracked oil), there’s a huge feedback effect. If US ‘shale’ production dropped by a large %, world oil prices would now go up by a potentially large %, ceteris paribus, short term, and make the remaining ‘shale’ operations greatly more profitable. Which ‘shale producers’ are in the business of knowing, so they aren’t all going to decide to cut back massively at once. Also others noted correctly that individual companies going bankrupt has a minor effect on production. Usually they just restructure, wiping out the equity holders and making the former bond holders the new equity holders, and carry on. Even when they liquidate, somebody else will buy the producing assets, properties, drilling rights etc at a new lower price that makes sense. Also, not mentioned that I saw, the oil majors are a bigger factor now in ‘US shale’ than they used to be, and they aren’t going anywhere short term. ---
**Author:** ![phreesh](https://avatars.discourse-cdn.com/v4/letter/p/9fc29f/32.png) [@phreesh](https://boards.straightdope.com/u/phreesh)\ **Post date:** [November 13, 2019, 8:25pm UTC](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255/30 "2019-11-13T20:25:19Z")
> [@Colibri](#): > > No it isn’t. Fracking, or [hydraulic fracturing](https://en.wikipedia.org/wiki/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](https://en.wikipedia.org/wiki/Shale_oil) is normally produced by chemical treatment of oil shales. Oil shale is usually mined in open pit mines or strip mines. I just want to really underline what others have already said. While you may be technically correct, when anyone who isn’t a dedicated academic says ‘shale oil’, they are referring to oil extracted from shale via hydraulic fracturing. A lot of natural gas is typically unlocked at the same time, but oil is the target commodity. If you think that the massive boom in shale oil extraction is due to a massive increase in open pit or strip mines, you couldn’t be more wrong. Maybe you oppose shale oil extraction for good reasons, but those good reasons can’t accurately complain about an explosive growth of open pit or strip mines because that isn’t happening at all. [Previous page](https://boards.straightdope.com/t/us-shale-oil-industry-is-collapsing/843255.md?page=1)