First off, I’m not an expert on oil. I know just enough to be dangerous. So, I’m just thinking and linking out loud here.
I have a friend that lives in Shreveport, Louisiana and he leases out a big chunk of his land to Chesapeake Energy so that they can drill for shale oil. I don’t know all the details, but as I understand it drilling into shale to get out the oil is complicated and expensive, but it becomes economically viable on his land once the price of oil is north of $85/barrel.
So, I was reading some wikipedia entries – obviously not the last word, of course – and come up with some stats and then a question.
However, shale oil reserves are estimated to amount to 2.8-3.3 trillion barrels. The problem being that this oil is only economically viable to extract at prices between $70 and $95/barrel on average. http://en.wikipedia.org/wiki/Shale_oil
So, assuming that the price of oil increases to north of $100/barrel over the next few years… isn’t the viability of extracting shale oil going to put a ceiling on oil price increases… eventually? I realize that it would take a while to get shale oil extraction up to meaningful levels relative to traditional oil extraction, but if it’s economically viable, folks are going to extract it like crazy. If we’re using about 30 billion barrels of oil annually on a global basis (and of course this number is growing), and if shale oil reserves are over 2x that of traditional reserves (adding 75+ years of reserves at current consumption)… doesn’t that put some kind of a ceiling on oil prices over the next 10-20 years? Granted that ceiling might be $150/barrel, which is no fun, but still. That’s problematic but not the end of the world.
