“The revolution has spread to domestic oil production. And it may track the path it followed with natural gas. We just don’t know yet. But it looks promising.”
Former Obama OMB director Peter Orzag writes for Bloomberg:
The U.S. oil market could be on the verge of its own fracking revolution, similar to what the natural-gas market is already experiencing. As a result, domestic production is now projected to rise significantly over the coming decades, reducing the relative share of imports in U.S. oil consumption.
Advances in horizontal drilling and hydrofracking, in which highly pressurized liquids are injected into underground rock, have been used increasingly over the past few years to extract natural gas. The result has been a substantial increase in recoverable reserves — accompanied by a lot of controversy over fracking’s environmental effects — and an associated decline in the cost of natural gas…
So, will this push oil prices down overall, as shale gas has done to natural-gas prices? For years, analysts have worried that known oil reserves have peaked, so that prices will keep rising. Tight oil could change that dynamic. As the energy analyst Seth Kleinman, a colleague of mine at Citigroup Inc., argues, the price effects of the shift to tight oil “may be more immediate and subtle than the supply-and-demand balances hint at.”
The year ahead, he says, “could really see the death of the peak-oil hypothesis, something that has been underpinning a lot of the structural bullishness on oil.” (The terminology is thus borderline ironic, since tight oil could make oil markets much less tight.)..
Peak oil has to be considered with the added phrase “at a given price”.
There isn’t a lot of oil left that is profitable at $2/barrel. So $2 oil has peaked.
There’s a whole lot of oil profitable at $50/barrel.
And at $200/barrel? whoa baby.
Eventually, the value of oil will be exceeded by its cost and the age of petroleum will end quietly and without a government edict.
The oil companies have been using fracking on existing oil fields for over 40 years. The original wells only get about 20%-30% of the existing oil out. Theu then go in and frack existing wells and use adjoining wells to inject salt water to force oil into the central well. Later on CO2 is used instead of brine. The only new thing will be the horizontal drilling, but they have been using that in the oil patch for over 20 years also. The results of this are just now being felt.
They should have to post at least a million dollar bond to pay for all the earthquake damage. If they activate that huge fault in the Midwest, a million dollars won’t even begin to cover the costs!