12.02.2021

Gas Prices

US Shale Patch’s Lackluster Recovery is a Problem for the Post-COVID Oil Market

"US crude output fell by about 2 MMbpd in 2020 to an average of 11 MMbpd."

A pretty good explainer on shale oil's slow recovery. A couple things.

1. For everyone blaming Biden for the current higher gasoline prices, notice that the fall in output happened in 2020 while Trump was in charge. The root cause was COVID but Trumps crappy response didn't help. Regardless, that ain't Biden's fault.

2. Like the article says, I assumed that shale oil production could be stopped and started easily which would keep the price of oil within the $40-60 range, if the price went below 40$ wells wouldn't be profitable so production would be cut and if the price broke 60$ wells would quickly come back online.

Well, cutting production at prices below 40$ worked as expected but production hasn't increased as fast as expected since the price rebounded. Existing drilled wells have been completed adding to production but drilling has slowed leaving overall production lagging.

Maybe there's just more time lag than expected and we'll be back to normal soon. Maybe the fear of Biden policies has put a damper on drilling. I don't think there have been any actual changes in the national policy so I'm leaning toward just a time lag while we see where COVID and Biden policies are going.

Short of a Middle East war, I'd expect oil to get back to the 40-50 ranges in the next few months.

 

No comments:

Post a Comment