william the wie
Gold Member
- Nov 18, 2009
- 16,667
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The shale boom was financed with what is now called sub-junk debt and oil prices of $90-140/bbl but what was most ignored was that fracking is an increasing returns technology like computer chips used to be. Drilling oil is assumed to be old tech so everyone is in for a huge surprise in the not too distant future. And I am wondering about the political consequences due to the miscalculations over what is going on in the shake out which is why this thread is in CDZ instead of energy.
OK, let me start with the blindingly obvious which is nonetheless ignored:
The optimum debt level depends on the price as in at $28/bbl oil can only support 20% of the debt of $140/bbl oil so the proven reserves of E&P oil companies that borrowed at the peak price are being written off as worthless. At the @ current price of $49/bbl can solvent oil companies drill those fields profitably, almost certainly. Will they? If the price is right yes. Will putting @ 10.billion bbl on the market cause the current price to drop to something like $18/bbl? Hell yeah!
Natural Gas is selling for less than $5/bbl equivalent. Can this be used as a substitute for crude? Yes and with the new methane leak regulations it will be. Can you say flirtation with $5/bbl? Obama's push to make methane leaks a memory will almost certainly bankrupt every green energy initiative in the world.
Am I missing anything obvious?
OK, let me start with the blindingly obvious which is nonetheless ignored:
The optimum debt level depends on the price as in at $28/bbl oil can only support 20% of the debt of $140/bbl oil so the proven reserves of E&P oil companies that borrowed at the peak price are being written off as worthless. At the @ current price of $49/bbl can solvent oil companies drill those fields profitably, almost certainly. Will they? If the price is right yes. Will putting @ 10.billion bbl on the market cause the current price to drop to something like $18/bbl? Hell yeah!
Natural Gas is selling for less than $5/bbl equivalent. Can this be used as a substitute for crude? Yes and with the new methane leak regulations it will be. Can you say flirtation with $5/bbl? Obama's push to make methane leaks a memory will almost certainly bankrupt every green energy initiative in the world.
Am I missing anything obvious?
