Editor’s note: This commentary is by John Sales of Danville, a geological and energy generalist.
[I]f you play a swashbuckling game of poker, you had better have a lot of chips. If you are going to pass, and a car is oncoming, you better have some reserve acceleration you can depend on. America has neither.
America is engaged in a giant game of chicken with the rest of the world’s petroleum-exporting countries, without the resource depth to do it. To gain world market share, and the fast buck, by undercutting them with the fracked shale petroleum glut. It’s a house of cards built on a pile of sand.
The world price of petroleum is based on supply and demand. To invert an old saying, what comes down (the price of petroleum) has to go up, and with vengeance. Many of the world’s petroleum exporting countries, dominated by the Middle East and Russia, but also in our hemisphere, like Venezuela, have deeper petroleum energy pockets than we do. Basically, that means they have more conventional petroleum relative to fracked shale petroleum.
U.S. fracked shale production increase is spectacular, not because fracked shale technology is that good, but because so many wells have been drilled so fast.
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Each country has a different break-even price, below which they are losing money. That break-even price is considerably higher than the initial production price from a fracked shale well — when you first produce any well, geopressure (hydrostatic — weight of the water column, and often up to 80 percent of lithostatic — weight of the rock column) has that oil squirting right out in your face — the famous “gusher.” “Gusher” oil, momentarily, costs a negative million dollars per barrel to produce. But fracked shale well production falls off much faster than conventional well production does. A fracked shale well is down to about 20 percent of initial production just three years after start of production. Conventional wells may last 20-50 years — with still significant, production.
U.S. fracked shale production increase is spectacular, not because fracked shale technology is that good, but because so many wells have been drilled so fast. With 20,000 wells drilled in the Bakken in less than 10 years, and almost that many in the Eagle Ford, we have a glut of impossibly cheap oil to throw on the world market … momentarily. Well for well, a conventional well at Prudhoe Bay, the Middle East, Russia or Venezuela is 10-100 times better than a fracked shale well.
The U.S. Energy Information Administration’s own graph  shows the most likely case for fracked shale petroleum production peaking before 2020, and as early as 2017. When decline starts, it hits the fan. That agency is not the circumspect and neutral watchdog it is suppose to be — time and again it has been caught being overly optimistic, basically parroting oil company hype. Oil companies are out to sell oil just like used car salesmen are out to sell used cars. As an example, a well-done research report by an independent geologist, David Hughes, forced them to lower their initial estimate for production from California’s Monterey basin by 96 percent.
Think the rest of the world’s petroleum industry likes this? Think they’ll cut us some slack? They’ll hang us from a tree limb. Somebody had better hold somebody’s feet to the fire — drill baby drill is deadly. Putin will be laughing all the way to the bank.