It’s Official: The Shale-Oil Boom is Over

A Halliburton fracking setup in North Dakota’s Bakken play. “Whaddaya mean it’s over? We just got this thing connected!” (Wikipedia Photo)

A Halliburton fracking setup in North Dakota’s Bakken play. “Whaddaya mean it’s over? We just got this thing connected!” (Wikipedia Photo)

It comes now from the US Energy Information Agency, and is headlined by Bloomberg Business, so yes, it’s official. As Bloomberg put it, “US Shale Boom Grinds to a Halt.” Which, actually, is overstating the case by a good bit, there isn’t going to be a “halt.” Nevertheless, as sane people everywhere have been insisting for years, the shale boom is, as it always was going to be, a bust.

This — now official — assessment is in the form of a set of projections by the EIA, which, we should remember, has pretty consistently been overly optimistic in its assessment of the oil business. Remember, they were the folks who estimated that the Monterey Shale in California held 14 billion barrels of recoverable reserves — two-third of America’s total oil wealth — until they ran the numbers again and re-estimated the Monterey at 96% lower. Continue reading

Oil Money: Too Dumb to Fail

bankers

Bankers on the trading floor at CITI make a market in the latest derivatives of derivatives. (Photo by Mike Licht/NotionsCapital.com)

We interrupt the Crash of 2015 for a brief word from some people who are not participating, on the belief that the oil boat — having been hit by two icebergs, dwindling resources and plunging prices — is not sinking, it is merely bobbing in a trough between two lovely crests. We will return to the previously scheduled sinking as soon as these folks discover once again that no matter how much stupidity and cash you pump into a ship with an enormous hole in the hull, you can’t save it. Continue reading

First the Fuel Subsidies Come Off. Then the Wheels.

(Photo by okinawatakarabako.com)

“Damn! I can’t afford this! I just filled up with gas!” (Photo by okinawatakarabako.com)

A funny thing happens when countries can no longer afford massive subsidies to keep down the cost to consumers of fossil fuels: the governments stop paying, and their country stops dead, or changes governments. Cheap fuel was once a perk for anyone who happened to live in an oil-rich country. But the perk has become an entitlement, and woe betide the country who, upon discovering it is not in fact oil rich anymore, tries to balance the books by charging its people the actual cost of fuel.

Nigeria is Africa’s largest oil exporter, and third largest economy, yet it has desperate needs for investment in roads, power generation and water systems. The two principal reasons these needs have been unmet are generations of rampant government corruption, and the roughly $8 billion a year in fuel subsidies. In March, a new government won election on promises to stop the corruption and the subsidies. Continue reading

GOP and Coal Launch War on America

This is how the Republican Coal War will look, fought not with artillery but smokestacks. It’s a war no one can win. (Photo by alohaspirit/iStock)

This is how the Republican Coal War will look, fought not with artillery but smokestacks. It’s a war no one can win. (Photo by alohaspirit/iStock)

To celebrate their coming to power in the United States Senate, Republicans this week launched their answer to the imaginary “War on Coal” by declaring war on clean air, and thus on all of us. Newly elected West Virginia Senator Shelley Moore Capito introduced a bill that would make it impossible for the Environmental Protection Agency to regulate emissions from coal-burning power plants. Climate-change-denier-in-chief James Inhofe, celebrated for bringing a snowball onto the floor of the Senate in February to prove that global warming is a hoax, cheered Capito on from his throne at the Senate Environment and Public Works Committee. Continue reading

Oil: A Fit of Peak

“Rex [Tillerson, CEO of Exxon Mobil] knows his company is in liquidation and he’s terrified his stockholders are going to find out.” — Arthur Berman. Is this what Rex sees when he dreams?

Arthur Berman is perhaps the most credible debunkers of oil hype on the planet because he is a highly qualified petroleum geologist and a longtime, top-tier employee of the oil industry. In a presentation early this year, he made an offhand remark in answer to a question about Exxon Mobil CEO Rex Tillerson. “Oh,” Berman responded, “Rex knows his company is in liquidation and he’s terrified his stockholders are going to find out.” I don’t know if anyone else heard a thunderclap at that moment. The discussion moved quickly onward, but I sat stunned (as I listened to the tape). It seemed to me I had just heard spoken aloud the essential truth of our industrial age: it’s in liquidation, and the people in charge are terrified we are going to find out.

Liquidation, also known as a going-out-of-business sale, is a stunning word to use about the oil industry, unless you think about it for a minute. Continue reading

The Crash of 2015: Vultures vs. Jackals

So. How have you frackers been feeling, lately? Just checking. (Photo by docentjoyce/Flickr)

So. How have you frackers been feeling, lately? Just checking. (Photo by docentjoyce/Flickr)

The crash of 2015 has been paused temporarily by a curious circumstance: a brawl among the financial scavengers who by now should have carted away the body parts of the great American fracking boom. Against all logic, financial vultures are fighting with financial jackals for possession of the corpse, and while doing so are pumping transfusions into it even though decomposition is already well under way. Here’s what’s happening:

The Vultures believe the decline of American oil fracking is only temporary, a product of the sudden decline in oil prices that struck last fall, and that with the inevitable return to $100-a-barrel oil, the frackers will return to profitability. Continue reading

Forbes: “Shale Oil Boom Goes Bust”

This happy fracker -- a Halliburton employee at a site in North Dakota’s Bakken play -- obviously hasn’t got the memo yet. It’s over. (Wikipedia photo)

This happy fracker — a Halliburton employee at a site in North Dakota’s Bakken play — obviously hasn’t got the memo yet. It’s over. (Wikipedia photo)

Yes, Forbes, the magazine of the Masters of the Universe has uncharacteristically published some discouraging words about the only good news the American economy has had to celebrate in many decades.

Oil output from the most productive U.S. shale fields is expected to drop off next month by 57 million [sic — they mean thousand] barrels of crude daily from April to May, the U.S. Energy Information Administration said Monday. That would represent the first monthly decline in more than four years, according to Reuters.

And then there’s Bloomberg Business, a more objective reporter of what’s going on in American industry, with the headline: “Shale Oil Boom could End in May After Price Collapse.”

Output from the prolific tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May, the Energy Information Administration said Monday. It’s the first time the agency has forecast a drop in output since it began issuing a monthly drilling productivity report in 2013.

Yet even after admitting that it’s over in the shale patch, the Pollyannas insist that it’s only for a while, until reduced supply brings prices back up and everybody starts doing exactly what they were doing before. How shall we put this? Continue reading

The Crash of 2015: Reckoning Day

You have a perfect plan. Then things begin to go south and before you know it, a day of reckoning. (Photo by motorkid.com/google images)

You have a perfect plan. Then things begin to go south and before you know it, a day of reckoning. (Photo by motorkid.com/google images)

 

The next phase of the Crash of 2015 begins today. The first quarter of the year is now complete, and that means two things for the debt-logged companies trying to stay alive in the U.S. oil fracking patch: it’s time to report the value of their assets to the issuers of their lines of credit; and it’s time to repay or roll over a bunch of the debt with which they are logged.

That first one is the killer. These companies, virtually every one of which has had negative cash flow from the beginning of the so-called “oil revolution, have sustained themselves first with stock issues, then with junk-bond issues, then with subprime loans. As slack as the underwriting of those loans has been, they do actually require the existence of assets whose value at least approaches the amount of the loan. Continue reading

Old King Coal Stricken; Prognosis Grave

A coal train once supplied the city of Holland, Michigan with fuel for its electric generating plant. They converted the plant to natural gas. Their costs are down, their emissions are down, and coal is down for the count.  (Photo by wsilver/Flickr)

A coal train once supplied the city of Holland, Michigan with fuel for its electric generating plant. They converted the plant to natural gas. Their costs are down, their emissions are down, and coal is down for the count. (Photo by wsilver/Flickr)

After bestriding the mountains of Appalachia, among many other places, like the proverbial Colossus for a century and more, the U.S. coal industry has been taken to hospice, a pathetic wasted shadow of its former self, its physical condition terminal, its thought processes derailed by dementia. It’s not a pretty sight (except perhaps to the survivors of the ruin, destruction and death it has brought to thousands upon thousands of helpless people) and there are those who say its fate foreshadows that of the oil fracking  industry, which is now in the ICU, and the legacy oil bidness, which has started to have dizzy spells and occasional sudden hemorrhaging. Continue reading

The Glad News Bears

The Glad News Bears are cute and entertaining, but should not be mistaken for financial advisers or life coaches. (Painting by Frederick Stuart Church [Public domain], via Wikimedia Commons)

The Glad News Bears are cute and entertaining, but should not be mistaken for financial advisers or life coaches. (Painting by Frederick Stuart Church [Public domain], via Wikimedia Commons)

This week, the U.S. Energy Information Agency forecast that oil production in the country’s two largest fracking patches — Bakken in North Dakota and Eagle Ford in Texas — will actually decline this month. To those who have been watching the agony of the oil patch with clear eyes, this had all the shock value of a soaked weather forecaster, standing in a downpour, predicting rain. But it had no effect at all on the Glad News Bears, the relentless chanters of “Don’t Worry, Be Happy,” and “Ain’t Gonna Rain No More, No More.” Continue reading