There’s always more than one side to a fight, and the oil boom raging in the United States is no exception.
There’s the overly optimistic, the crowd that’s pessimistic to a fault, and the group that can see both sides of the coin for what they’re worth, sort out the hyperbole, and use it as an edge.
When the Post Carbon Institute released its latest report, aptly titled Drilling Deeper: A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom, we were given an extensive look at both sides of the coin.
Ominous titles aside, the truth to our oil boom lies somewhere in between… and it’s our job to find out how we can take advantage of it.
Abandon All Hope, Ye Who Drill
To start, the report pointed out that the Energy Information Administration painted a rosy picture for U.S. production growth over the next 26 years.
In the EIA’s latest Annual Energy Outlook, which was released back in early May, the high oil and gas resource case shows U.S. oil production growing to 13.22 million barrels per day in 2040. In the reference case, it projects production peaking in 2019 at 9.6 million barrels per day.
But let’s be serious — does it really come as a shock to learn about the major obstacles ahead for drillers attempting to extract our tight oil resources?
The answer should be a solid NO!
Truth is, we can’t possibly expect tight oil production to increase steadily without fail for the next 30 years.
Does anyone else remember the Prudhoe Bay oil field? Discovered back in the late 1960s, Prudhoe Bay is one of the largest discoveries in North America, originally holding an estimated 25 billion barrels of oil. Once the TAPS pipeline was completed in 1977, oil started flowing south out of Alaska’s North Slope.
Of course, it took just 12 years for the Prudhoe Bay oil field to peak.
And we all know the fate of North Slope oil production, which has been in an irreversible decline ever since…
Click Chart to Enlarge
Even today, it’s imperative that people realize U.S. oil production is in decline virtually everywhere other than the tight oil plays. And as the Post Carbon Institute pointed out in Drilling Deeper, nearly nine out of every 10 barrels of U.S. tight oil production are extracted from just seven areas.
Some of the conclusions they draw include tight oil production significantly underperforming the EIA’s reference case by as much as 28%. Moreover, two of the big three plays — the Bakken and Eagle Ford — will be producing just one-tenth of the projected rate predicted by the EIA.
So are we looking at the death of oil?
It’s doubtful.
Although tight oil wells do have a steep initial decline rate, all I can say is, “Welcome to today’s oil boom.”
Depending on the headline you’re reading, we’re either at the beginning of a decades-long oil boom or on the cusp of a total and utter collapse of the U.S. oil industry.
Again, the correct answer lies somewhere inside that gray haze in the middle.
Harder, Faster, Deeper, and More Expensive
Whenever the oil market is stuck in bear market territory, which is precisely where we find ourselves presently, you never want to drive forward by looking in the rearview mirror.
Truth is, there are still a few win-win areas left for investors in the oil markets.
One theme you’ll hear me reiterate over and over again is that cheap oil as we used to know it is gone. Yes, right now, West Texas Intermediate is trading around $80 per barrel; and yes, we could see that price decline further over the short term.
But the one constant that keeps our long-term outlook bullish is the fact that today’s oil isn’t the same. Here in the United States, companies are drilling deeper and spending more than ever before in our history.
To give a little perspective for our overall production… roughly 60% of oil produced in the United States comes from just three tight oil plays — where the cost can be several million dollars per well.
And the United States produced 25 quadrillion British Thermal Units of natural gas in 2013 — more than any other source of energy.
Don’t pick a side — play the winning side ‘till the advantage is gone.
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Even the most bearish estimates maintain that oil, coal, and natural gas will account for the overwhelming majority of U.S. energy consumption.
Today, those three sources make up 82% of our energy consumption.
That isn’t going to change overnight.
And even though my readers and I lean towards capitalizing on investment opportunities found within the North American energy boom, the truth of the matter is that we can find them all over — you just have to look in the right place!
A little while ago, one of my colleagues was dispatched to halfway across the globe after he uncovered a world-class discovery in the unlikeliest of places.
Now that he’s back stateside, what he found was remarkable.
And you’ll have his full report — outlining every last detail of this incredible oil heist — on your desk soon.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.
P.S. For those of you who want to delve into the Post Carbon Institutes’ report, Drilling Deeper: A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom, you can find the full report by clicking here. I highly recommend checking it out.
