US Shale Oil An "Illusion" (Productivity)

[Economy 52,951]

http://peakoilbarrel.com/grand-illusion/

 

The increased productivity, lower production costs, and improved technology came just in time to save US frackers from low oil prices right? Well partially, but not exactly.

 

While it is true that drilling methods have been improved over last 2 years, it only accounts for a small portion of lower costs and productivity gains. Most of the "gains" actually are illusions and not gains at all

 

First of all with low oil prices, less productive wells no longer make economic sense so theyve been decomissioned or shut down. If take out the less productive wells, then they no longer bring down the average of production per well on official data. It makes it appear as tho frackers have managed to increase recovery rates per well when in fact they havent.

 

Secondly most lower costs are a result of service providers and equipment manufacturers have cut prices for oil companies since lower demand forces them to compete among eachother to service oil companies.

 

In reality shale efficiency has gradually improved but not surged as the data might mislead. Most of the gains are temporary and reflect an industry in survival mode. If and when oil prices recover most of the data will show the gains reverting.