The Age of Cheap Oil and Natural Gas Is Just Beginning

Posted by K R on

Oil price rises over the past 40 years have been truly spectacular. In constant money, the price of oil rose by almost 900% between 1970 and 2013. This can be compared with a 68% increase for a metals and minerals price index, comprising a commodity group that, like oil, is exhaustible. In our view, it is political rather than economic forces that have shaped the inadequate growth of upstream oil production capacity, the dominant factor behind the sustained upward price push. But we believe the period of excessively high oil prices has come to an end. The international spread of two revolutions will assure much ampler oil supplies, and will deliver prices far below the highs that reigned between the end of 2010 and mid-2014. Beginning less than a decade ago, the shale revolution – a result of technological breakthroughs in horizontal drilling and fracking – has turned the long run declining oil production trends in the US into rises of 88% from 2008 to 2015. Despite current low prices and the damage done to profits, an exceedingly high rate of productivity improvements in this relatively new industry promises to strengthen the competitiveness of shale output even further. Read More: Scientific American

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