As we've written about often here at PeakProsperity.com, much of what's been 'sold' to us about the US shale oil revolution is massively over-hyped. The amount of commercially-recoverable shale oil is much less than touted, returns much less net energy than the petroleum our economy was built around, and is extremely unprofitable to extract for most drillers at today's lower oil price.
To separate the hype from reality, our podcast guest is Arthur Berman, a geological consultant with 34 years of experience in petroleum exploration and production.
Berman sees the recent US oil production boost from shale drilling as and short-lived and somewhat desperate; a kind of last hurrah before the lights get turned out:
The EIA looks at the US tight oil plays and they see maybe five years before things start to fall off. I think it is less, but I am not going to split hairs. The point is that what we found is expensive and we have got a few years — not decades — of it.
So when we start hearing people pounding the table about how the United States should lift the ban on crude oil exports, well that is another topic if we are just talking about free trade and regulation, but what in the world is a country like ours doing still importing 5+ million barrels of crude oil a day and we have got maybe 2 years of supply from tight oil? What are we thinking about when we claim we're going to export oil? That is just a dumb idea. It is like borrowing money from a bankrupt person.
I'll tell you what they're thinking about: the companies are thinking it is easier for them just to sell the oil directly overseas than it is to go through all the hassle of having to blend it with heavier oil and refine it here in the US and then go sell it overseas, as they have to do today.
Anyways, I think you just have to be realistic. Let’s give ourselves credit for ingenuity. We have done something that a few years ago probably almost no one thought was possible. But let’s also be realistic: this is the most mature petroleum province on earth. We are squeezing blood from a stone and as long as prices are high, we will squeeze a little more. And that’s it.
I like to talk about these shale plays as not a revolution, but a retirement party. I mean, you know, this is the kind of bittersweet celebration you have when you are almost out the door and are going to sit around the house and watch Duck Dynasty whatever for your remaining days. It's not really cause for a celebration. It is cause for some sobering concerns and taking stock about what does the future have in store for us as a country, as a world?
Click the play button below to listen to Chris' interview with Arthur Berman (55m:44s)
by davefairtex