Currently, massive supplies of shale oil from the USA are holding back a boom in prices for North Sea crude though the latter is nevertheless recovering to around $50 per barrel. However, the shale oil boom cannot last, for three reasons.
First, the supplies are actually quite limited:
‘Shale’s best days are coming to an end. U.S. shale oil production, which reshaped the global energy equation, will begin to wane in less than a decade as reserves are drawn down and well output decreases, the [US] Energy Department reported.’
Second, fracking requires vast quantities of ‘frac sand’ to be pumped along with other materials into wells to break up shale rock and produce oil. Fracking needs a small uniform round form of sand that is not common, is rarely found anywhere near the oil basins, and it’s running out fast. Already, costs are climbing to levels that could easily send fracking from boom to bust even before the oil runs out:
‘I think people are looking at the potential demand numbers, and, for the first time, people are scared that there will not be enough sand to meet the demand…… The increased demand will push sand prices up by 60 percent, hitting the $40 per ton range over the next 18 months…..the real concern is the logistical challenges that come with moving high volumes of sand. Some producers are using a unit train – roughly 75 or more rail cars in a line – on each well…that presents some significant logistical challenges that could hamper production.’
Third, fracking kills workers and people living near the pipelines or wells. See this most recent example:
‘Two months after a Colorado home exploded near an Anadarko Petroleum Corp. well, the reverberations are still rattling the oil industry, driving down driller shares and raising fears of a regulatory backlash. The April 17 blast, which killed two people and injured a third, was followed a month later by a second deadly explosion at an Anadarko oil tank in the state.
Activists in the USA have failed to stop fracking on safety grounds but this will matter little as compensation and insurance costs rise driving prices up and investors away.
So, one way or another the glut produced by US shale oil cannot last and we can look forward to lucrative increases in the export value of North Sea oil as Asian demand soars and we increasingly power our own economy with renewable energy. See: