The Shocking Data Proving Shale Oil Is Massively Over-hyped

Hello Les,
If you are walking the walk that is good enough for me regardless of what you believe about the science.

If any one wants to continue debating the climate stuff let's move it to the climate thread and get this one back to its regularly scheduled subject material!


I don’t think that individual prediction is needed. Rather, I think that what is needed is to model each particular industry, and what impacts that industry.
One of the posters, here, is the captain of an offshore rig. He can tell you what goes into the industry, and probably can tell you the impact of various events, including war, a rise in the price of steel, and so on.
I am a project manager at a prestressed concrete plant. I can tell you what goes into our products: the steel, the fly-ash, the rubber tires (not our own product, but they are an important component of highway sound walls, which is in our range of products), the cement, the plastics, the corn syrup (not really, but sortof… as inhibitor), and so on.
If you model the situation, then you can tell how the various industries would be affected as various events develop.
That then improves your understanding of the overall situation.
I can already tell you that there is a wonderful way of handling differential relations of this type: the Parker-Sochacki solution to the Picard iteration.

Chris or anyone else,
I am just wondering if this crash in oil prices could even potentially jump start the global economy now that 'quantitative easing' has proven a spectacular failure?

In the Crash Course the sawtooth peak oil pattern has high prices crashing the economy, which crashes the prices, which stimulates the economy, which raises the oil prices which…cycle continues just never getting the economy to its former highs.

I'm not certain there is anything nefarious from the TPTB in this beyond the Saudi desire for market share but how long would this accidental energy subsidy to the global economy need to last to even potentially yield another upturn in the real economy?

Even if this happens, I think Chris convincingly has demonstrated that future demand will not be supportable at anything near current prices. I am just wondering what the signs would be of a nascent real recovery somewhere outside of the make believe stock market?

The US, China and everyone else better be topping off their strategic reserves at these prices because it is likely prices could shoot higher faster than they have dropped.


A question for anyone who wants to answer: Do you know how the oil price is set?
I bet you don't. You think it's from genuine supply and demand fundamentals? How does that jive with recent admissions that basically every market is manipulated? Wouldn't oil, being one of the most important markets, be heavily manipulated?

As far as I understand it, the Exchange Stabilization Fund sets prices. This is basically the Fed, or whatever entity you want to call it, you know, the western banking cabal that controls the printing press and therefore every western (and thus global, for the time being) market.

They historically wanted to suppress oil price to paint a rosy picture of abundance and to help western consumers blossum and grow like flowers drinking nectar (oh wait, flowers produce nectar, bees drink it). They did this by printing up zillions of dollars and injecting them into the right places in derivatives etc. to drive the oil price down. But they couldn't just do this by itself or we'd have oil shortages as producers go bankrupt. So they also printed up zillions and injected them where they helped the oil producers "produce" without going bankrupt (the US tight oil ponzi schemes talked about so much lately). They also printed up zillions of dollars to help western debt serf slaves consume more oil (the easy credit / bond bubble of the last 30 years). This is all in the name of making the economy better.

So if they can make the oil price whatever they want, for a certain length of time at least, it seems pretty pedantic to me to be pointing after the fact and saying, "well you said she said!". And no one should go on record saying, "oil or gold price will never reach $XX dollars again!". Because anything is possible.

As far as I understand it this is how prices are set in the global markets. If someone has more insight into this then please let me know…

One thing I can guarantee though is that these low prices are not sustainable; they are an anomaly. And I also firmly believe that there is not a chance of a snowball in Hell that these price drops are all a result of some mysterious global economic crash triggering a bunch of asset deflation… where is all the deflation in other markets? Does anyone other than The Automatic Earth honestly believe that the bankers could lose control of the oil market like this, especially since so much of the marginal producers will go bankrupt and if anything, oil price has been too low even at $90 ?!?!?

Here is my hypothesis: the gold supplies have almost run out. This is consistent with Rob Kirby's insistence that the real gold price for tonnage in Asia is $2000. Anyone think the elite bankers don't know this, if true?!?!? And they are just going to sit back and say, "Oh well, I guess it will run out and we'll see what happens"???

No way, they are taking steps to maintain what power they can. Intentionally crashing this market like this is being done of purpose; to what end, I'm not sure. I'd guess because they want to buy up all the remaining oil assets on the cheap, just like I'm sure they have filled up their own private Fort Knox's with physical on the cheap as a result of their own price smashings.

They have started the controlled crash of the global economy, and I think it will get progressively less controllable as it progresses.

As long as we continue to focus on the short term, oil prices will be a function of who and how well those in the oil patch move capital around. In the longer term, EROEI is what will be needed to cope with shrinking (?) oil supplies. There is still plenty of oil out there in the many strata layers that we are currently exploiting. The question is "Can we afford it?". 
The last "Fracked" well job I was on required 11 -  400 barrel tanks to hold the invert and other drilling fluids, two tankers of hydrochloric acid, a fleet of trucks to haul out the produced water and, of course, all the drilling infrastructure to get the job done. This was for an existing well that was about 15 years old and produced about 50 barrels a day. There were probably a total of 50 guys involved driving trucks, operating pressure units and associated fracking equipment, and support staff. Production was bumped up to 450 barrels a day. Yes, we have the technology and it is going to get better. But as your interview with Mr. Hughes explains, for how long.

Most of the energy industry pundits can argue over the pros and cons of this subject, but it will eventually come down to "where is the capital coming from". I tend to side with the Nat Hagens, Jeff Rubins, Richard Heinbergs of this debate, but realize (to quote Keynes) " In the long term, we're all going to be dead!". It is the young, up-and-comers that will be dealing with most of this debate and not us old farts that got us into this predicament in the first place.Yes, the next 20 years are going to be different than the previous, but maybe we won't notice the difference.

I had to search for this a bit, but it is a good article…

It certainly is not as detailed as the Podcast with David Hughes.  However, it is much more in depth than I often give the mainstream media credit for.



This podcast was excellent, btw.  In a world where many of us have concerns about peak oil, and the price of gas crashes around us, this podcast really put a lot into perspective.  I was so impressed with the level of detail, I tried to share some of the specifics with my high school economics class.  We are covering resources right now. I love accessing info from PP to help my students and my teaching along…


According to Max Keiser, back to June, energy companies' junk bonds yielded less than 6%. At that time, JNK was at its high. Shale energy companies financed their drilling easily. Capital spending reached a high gear then.
Most worked in manufacture (I do) know well that it is a nightmare - after you have done capital spending, suddenly, without warning, your market evaporate (for instance, suddenly a new product replaces yours). Now, the shale energy industry suffers similarly - suddenly, they have no hope to make money yet all debts related to capital spending remain outstanding.

They can survive for a while but cannot survive if oil price remains low for prolonged period (even if oil rebound from here to $65, they cannot survive).

As US produces 2/3 of her oil consumption domestically, as many produced at high cost (shale, deep water, etc.), low oil price is not a good news to US as to China and Japan.

Chris you briefly discusses some of the issues about plunging oil prices by there is another serious issue that hasn't been touched on yet: Geopoltical risks. As Oil prices plunge its increases the chances of collapsing semi-stable gov'ts and causing uprising of more militant groups like ISIS.1. Russia is now close to another crisis, partially to do with the US's covert attack on Russia by destabilizings Russia's boarder states (ie Syria and Ukraine). Should Russia collapse into a 1990's type collapse, there are risk that a more militant or radical gov't will take over. There is also the risks that Russia's nuclear assets fall into hands of rogue miltant groups or terriorist. The US gov't has one objective: to break the back of Putin's gov't, but it fails to consider the consequences, As it did in Syria, Libya, etc. The outcome will like cause an other round of anachcy.
2. Further destabilization in the Middle East. The ME is barely hanging on with just a few gov't that haven't fallen into a state of anarchy. If either Iran, Saudia Arabia, or Pakastan falls it will almost serious problems for the industrialize world.All three of these nations likely have access to nuclear weapons that could have a devistating impact. Iran and KSA are also major exporters. If either state fails Oil production will collapses quickly. Its clear that the US and its allies and completely loss any sense of control in the Middle East. Falling prices will put ever greate pressures on the remaining stable nations. The US is simply not going to prevent further stabilization.