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From my layman understanding and someone please chime in here to correct if possible, this has been coming for more than a decade, is almost entirely due to sha

From my layman understanding and someone please chime in here to correct if possible, this has been coming for more than a decade, is almost entirely due to shale, and is unfortunately almost entirely doomed due to the cost of fracking. “Barring something like a war, US tight oil is essentially done for the time being” is the vibe I’m getting at the moment, and IIRC predates COVID by a year or so.

BlueTemplar 6y ago
It was always expected that the tight oil bonanza would be temporary, a few decades at best, a way for the oil industry to be "scraping the bottom of the barrel" and to have its "retirement party". And of course, if one believes in climate change, it should never having been allowed to proceed. To make matters even worse, AFAIK USA's tight oil industry, taken in aggregate, has never been profitable so far, and at this point it doesn't seem like it will ever be. So this is yet another an example of bad investing, a financial bubble yet to pop, propped up by Wall Street money, which itself comes from the relief money that went up to prop up the "too big to fail" banks after the previous financial bubble popped.
- boringg 6y ago
  Oil and gas is a capital destroying market by its very nature. Always a bad investment in the long run.
  - alisonkisk 6y ago
    Writing off capital as unusable is also capital destroying.
  - i_am_proteus 6y ago
    The entire global industrialized economy only exists because of petroleum fuels.
    - Retric 6y ago
      The industrial revolution significantly predates oil. Oil become a huge deal because it’s extremely plentiful and produced a huge range of waste streams people found a use for. Essentially the primary use would drive new extraction which would lower the price of every other output. However, there are drop in replacements for everything oil does outside of arguably aviation.
      - newsclues 6y ago
        The industrial revolution and the 20th century consumer culture would not have left the mark on the world it did if not for the fuel on the fire of petroleum. Pumping gas is a big deal. It gave us private cars and suburbs and endless roads and parking lots that would not exist if we had to rely on coal.
      - i_am_proteus 6y ago
        There are drop-in replacements for aviation, too, in the form of biofuels. Nonetheless, the modern industrialized economy was built on the back of shipping that was only initially possible via petroleum fuels.
        Retric 6y ago
        Before oil we had coal ships, coal trains, coal steam shovels, coal tractors, etc and even electric trolley from both hydroelectric and coal power plants. Before electricity we had air pressure tools, and before that rotating shaft power from water wheels. I bring that up because IMO people overestimate how much and how quickly things have changed.
        BlueTemplar 6y ago
        And sail ships, still plentiful in the early years of the 20th century.
        beerandt 6y ago
        The tech isn't as important to the economy as much as the ability to scale, given current (or historic) technological costs. Transistors theory and gate logic haven't fundamentally changed in decades, but would you say computing hasn't quickly changed? Alternatively, we can bombard lead with protons to make gold, or generate net energy via fusion reactions, but alchemy nor fusion are currently economically impactful on the global market, except maybe as a line item for research. People underestimate the importance of efficiency and economics when looking at things in a purely technological perspective.
  - BlueTemplar 6y ago
    I see your point, but that's not what I mean by 'no profit' in that specific case. I mean in comparison with traditional oil drilling, which is (was) a filthy rich industry.
    - leereeves 6y ago
      Tight oil can't be profitable while OPEC has significant conventional oil extraction, because when US tight oil extraction is profitable, OPEC produces more to lower the price. But its existence prevents OPEC from strangling the US economy too much, until we can transition to other energy sources.
credit_guy 6y ago
> and is unfortunately almost entirely doomed due to the cost of fracking. Not sure I'm understanding correctly this. Are you trying to say the cost of fracking is too high, and the US oil production will go down rapidly? I don't think that's the case. The cost of fracking is not constant, it keeps going down due to technological progress. See for example [1]. Also interest rates have come down lately (because Covid and such), and they'll very likely stay down for a while. This stimulates industrial activity, and Oil and Gas Exploration and Production (E&P) is just such an activity. More precisely, lower interest rates means E&P companies have an easier time rolling over their loans, and also their funding cost is lower. That funding cost is a component of the "cost of fracking". To be honest though, there is no such thing as "cost of fracking". Some analysts talk about this, but if you try to get into details you'll see it's a bit of finger in the air. Here's [2] a handbook put together by the OCC (bank regulator) that explains how the lending in this space is done and risk-managed. There's no such thing as "cost of fracking", and you'd think the oil producers bankers and their regulators would know a bit about this topic. [1] https://www.reuters.com/article/us-usa-oil-electric-fracturing-focus/low-cost-fracking-offers-boon-to-oil-producers-headaches-for-suppliers-idUSKCN1VX112 https://www.reuters.com/article/us-usa-oil-electric-fracturi... [2]https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/oil-gas-exploration-prod-lending/index-oil-gas-exploration-production-lending.html https://www.occ.treas.gov/publications-and-resources/publica...
u678u 6y ago
Yes without fracking shale this would never have happened. I dont really like pumping toxic chemicals into the ground but politically and economically its great.
- Synaesthesia 6y ago
  It's not great it's enabling extraction of fossil fuels which ought to remain in the ground.

BlueTemplar 6y ago

It was always expected that the tight oil bonanza would be temporary, a few decades at best, a way for the oil industry to be "scraping the bottom of the barrel" and to have its "retirement party". And of course, if one believes in climate change, it should never having been allowed to proceed. To make matters even worse, AFAIK USA's tight oil industry, taken in aggregate, has never been profitable so far, and at this point it doesn't seem like it will ever be. So this is yet another an example of bad investing, a financial bubble yet to pop, propped up by Wall Street money, which itself comes from the relief money that went up to prop up the "too big to fail" banks after the previous financial bubble popped.

boringg 6y ago
Oil and gas is a capital destroying market by its very nature. Always a bad investment in the long run.
- alisonkisk 6y ago
  Writing off capital as unusable is also capital destroying.
- i_am_proteus 6y ago
  The entire global industrialized economy only exists because of petroleum fuels.
  - Retric 6y ago
    The industrial revolution significantly predates oil. Oil become a huge deal because it’s extremely plentiful and produced a huge range of waste streams people found a use for. Essentially the primary use would drive new extraction which would lower the price of every other output. However, there are drop in replacements for everything oil does outside of arguably aviation.
    - newsclues 6y ago
      The industrial revolution and the 20th century consumer culture would not have left the mark on the world it did if not for the fuel on the fire of petroleum. Pumping gas is a big deal. It gave us private cars and suburbs and endless roads and parking lots that would not exist if we had to rely on coal.
    - i_am_proteus 6y ago
      There are drop-in replacements for aviation, too, in the form of biofuels. Nonetheless, the modern industrialized economy was built on the back of shipping that was only initially possible via petroleum fuels.
      - Retric 6y ago
        Before oil we had coal ships, coal trains, coal steam shovels, coal tractors, etc and even electric trolley from both hydroelectric and coal power plants. Before electricity we had air pressure tools, and before that rotating shaft power from water wheels. I bring that up because IMO people overestimate how much and how quickly things have changed.
        BlueTemplar 6y ago
        And sail ships, still plentiful in the early years of the 20th century.
        beerandt 6y ago
        The tech isn't as important to the economy as much as the ability to scale, given current (or historic) technological costs. Transistors theory and gate logic haven't fundamentally changed in decades, but would you say computing hasn't quickly changed? Alternatively, we can bombard lead with protons to make gold, or generate net energy via fusion reactions, but alchemy nor fusion are currently economically impactful on the global market, except maybe as a line item for research. People underestimate the importance of efficiency and economics when looking at things in a purely technological perspective.
- BlueTemplar 6y ago
  I see your point, but that's not what I mean by 'no profit' in that specific case. I mean in comparison with traditional oil drilling, which is (was) a filthy rich industry.
  - leereeves 6y ago
    Tight oil can't be profitable while OPEC has significant conventional oil extraction, because when US tight oil extraction is profitable, OPEC produces more to lower the price. But its existence prevents OPEC from strangling the US economy too much, until we can transition to other energy sources.

credit_guy 6y ago

> and is unfortunately almost entirely doomed due to the cost of fracking. Not sure I'm understanding correctly this. Are you trying to say the cost of fracking is too high, and the US oil production will go down rapidly? I don't think that's the case. The cost of fracking is not constant, it keeps going down due to technological progress. See for example [1]. Also interest rates have come down lately (because Covid and such), and they'll very likely stay down for a while. This stimulates industrial activity, and Oil and Gas Exploration and Production (E&P) is just such an activity. More precisely, lower interest rates means E&P companies have an easier time rolling over their loans, and also their funding cost is lower. That funding cost is a component of the "cost of fracking". To be honest though, there is no such thing as "cost of fracking". Some analysts talk about this, but if you try to get into details you'll see it's a bit of finger in the air. Here's [2] a handbook put together by the OCC (bank regulator) that explains how the lending in this space is done and risk-managed. There's no such thing as "cost of fracking", and you'd think the oil producers bankers and their regulators would know a bit about this topic. [1] https://www.reuters.com/article/us-usa-oil-electric-fracturing-focus/low-cost-fracking-offers-boon-to-oil-producers-headaches-for-suppliers-idUSKCN1VX112 https://www.reuters.com/article/us-usa-oil-electric-fracturi... [2]https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/oil-gas-exploration-prod-lending/index-oil-gas-exploration-production-lending.html https://www.occ.treas.gov/publications-and-resources/publica...

u678u 6y ago

Yes without fracking shale this would never have happened. I dont really like pumping toxic chemicals into the ground but politically and economically its great.

Synaesthesia 6y ago
It's not great it's enabling extraction of fossil fuels which ought to remain in the ground.