USA Shale Oil Better Stabalizer Than Oil Sands, Makes OPECs Life Difficult

[Economy 52,951]

http://www.investopedia.com/articles/investing/052015/us-shale-becoming-global-swing-producer.asp

 

In the Mid 2000s Canada emerged as the only Nation outside OPEC with large enough reserves and stability to grow production as world supplies remained tight. And indeed hundreds of billions have been poured into Canadas Oil Sand Development

 

US Shale which started just a few years later however has become a better market stabalizer to the world given that it is more flexible

 

Canadas oil sands run on extremely long cycles. It can take 5-7 years to clear land and a lot of money to set up infrastructure for mining operations. But because oil sands go deep, it can also take up to 50 years to depleate an oil field once a project is complete and up and running. 

 

As a result of this, no matter how high oil prices are, oil sands production can only grow at a steady rate because it takes forever to get it up and running. On the otherhand If oil prices drop and new construction projects stop, already existing fields will prevent production declines because they take so long to depleate.

 

US Shale is the exact opposite. Drilling a new well can be completed in just a few weeks so when prices rebound, US production can rise much faster. Shale fields also depleate quickly meaning if prices drop and investment in new wells falls, it wont take long for US production to fall.

 

Canada was only able to respond to long term trends. The US on the other hand can play the role of a swing producers responding to market changes, this makes life for OPEC now a living hell.