Back on September 30th I posted THIS piece entitled “Hydraulic Fracking: an Economic Miracle”, in which I lauded the increased production of petroleum products from U.S. producers based on hydraulic fracking of shale oil deposits.
But various factors of late have caused the world price of oil to fall significantly. North Sea crude dipped below $90 per barrel (42-gallons) last week, and is now hovering around $91. West Texas crude is now around $87 per barrel. And while this development is causing some relief at U.S. gasoline pumps, it has also caused rising concern about whether the American shale oil producer can sustain his operations, given the fact that it typically costs 3-4 times as much to produce a barrel of shale oil as compared to conventional oil extraction methodologies. Hence the paradox — the higher the price of crude, the more incentive producers have to invest in shale oil deposits and the fracking technologies needed to extract oil from them. Conversely, the more shale oil that is produced, the less global demand there is for crude oil, so the price drops.
As Emily Latella often said, if it isn’t one thing it’s another. For more details on the current state of oil prices, check out THIS article from The American Interest.