US Officials Blow Up Oil-Boom Myth

Go ahead and drill some more. The oil, says the IEA, is simply not there.

Go ahead and drill some more. The oil, says the IEA, is simply not there.

The story broke last night. 9 pm. By now every mass media website should have it as the lede and every cable channel should be wall-to-wall with it. Why? Because it is a mortal blow to the five-year myth that America is in the midst of an oil-and-gas revolution that will return us to world supremacy, make us an exporter again, and bring us closer to energy independence.

Of course, some of us knew that these were all lies, all the time. But gullible people, especially gullible investors (who were the targets of the hype) bought the bogus claims. Chief among these — the biggest, most persuasive lie — was that the Monterey Shale in central California held a vast treasure in oil reserves,

14 billion barrels, two-thirds of America’s shale oil reserves, just waiting to be harvested for profits, 2.8 million jobs and $25 billion a year in extra tax revenues. That has been the oil-bidness mantra since a 2011 study by an “independent” company came up with the numbers.

Turns out their “independent study” consisted of reading oil industry press releases and adding up all the numbers therein. Turns out the main pillar of the oil-boom hype required a little fine tuning. Last night the Los Angeles Times reported that the U.S. Energy Information Administration has done the research, run the numbers and says go ahead and use the former estimates of the potential of the Monterey Shale — just reduce them by 96 percent!

One of the problems is that the Monterey Shale is not like the Bakken in North Dakota and the Eagle Ford in Texas, which are neatly stratified layers of oily shale. The Monterey has been tumbled and rent by eons of seismic activity (Oh, did we mention? It runs alongside the San Andreas Fault.) that had driven much of oil deeper and intermixed the oil-bearing shale with harder rock.

According to the EIA the maximum amount of oil that could be recovered with present technology from the Monterey Shale is a paltry 600 million barrels; not even a three-month supply for America’s thirsty Hummers. The boom is bust.

This is far from the only bad news the frackers are getting. From stunning decline rates in Texas to near-bankruptcies in Pennsylvania to sobering projections for North Dakota, it turns out that reality is not just a show on TV. Reality is that the hyped up “boom” in oil and gas is just a bump on the slide to no more cheap oil.

They are going to spin it, subdue it, and hope we don’t notice it, and they’re going to spend enough money on it that they will probably succeed. But in truth (do we remember where that is?) the story that broke last night is the story that broke their fantasy and offered us if we’re willing to take it a new look at reality.     

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