The situation for the U.S. Shale Bubble is about to go from BAD to WORSE…
Is the mighty Bakken Shale Oil Field finally peaking? Well, according to the data from the folks at the North Dakota Department of Mineral Resources, oil production in the Bakken has been flat for the past six months. And, to make matters worse, production has been flat even though oil prices increased from a low of $42 in January to the mid $60’s in April.
So, something seriously wrong is going on in North Dakota. What a difference in the Bakken’s recent oil supply compared to the field’s heyday when production surged from 300,000 barrels per day in 2011 to over 1.1 million barrels per day in 2014. Furthermore, the oil price the shale companies in the Bakken are receiving is now $48 a barrel versus the West Texas Intermediate price of $57.
If we look at the past seven months, the North Dakota Bakken has only added 36,000 barrels per day (bd) of new oil production compared to 114,000 bd during the same period last year:
As we can see in the chart above, the output from Sep 2017 to Apr 2018 enjoyed an upward trend, while the Sep 2018-Apr 2019 has been flat. You can see this better in Enno Peters chart from ShaleProfile.com. I highly recommend followers check out his site as he provides updates on the top shale oil and gas fields in the United States using state data from over 100,000 wells.
These charts from ShaleProfile.com show the annual change production by different colors. Here we can see that Bakken oil production increased steadily from 2011 to 2014, plateaued in late 2014 and 2015, declined in 2016, raised in 2017-2018, and has plateaued once again in 2019. The likely culprit for the plateau in Bakken oil production has to do with the lower oil price and the reduction of investment funds available to the shale companies that continue to spend more money than they make.
And if you remember this chart from my previous article, most of the shale companies suffered negative free cash flow in the first quarter of 2019:
Numbers don’t lie, and according to this new article, Shale Pioneer: Fracking Is An “Unmitigated Disaster,” the situation for the U.S. Shale Bubble is about to go from BAD to WORSE. This is not good news because the increase in U.S. shale oil production has accounted for nearly three-quarters of total global oil supply growth over the past decade:
Once U.S. shale oil production peaks, then it’s highly likely that Global GDP will peak as well. Thus, if the Fed and central banks really start to print money, then the results will resemble more like what is taking place in Venezuela. Furthermore, as Venezuela’s oil supply plummeted over the past few years, it has impacted other energy sources. For example, according to the data in the BP 2019 Statistical Review, Venezuela’s electric generation dropped 15% last year versus 2017.
Unfortunately, most people have no idea what happens to an economy when oil production peaks and declines. Peak oil will impact the supply of all other energy sources such as natural gas and coal. And, the notion that going green and using electric cars are going to save us is pure FOLLY when we realize Solar and Wind are nothing more than fossil fuel derivatives. Without the burning of fossil fuels, the world cannot produce Solar and Wind power plants, or electric cars.
Moreover, the amount of plastic in the manufacture of an electric car by 2020 is forecasted to increase to 772 lbs (source: IHS Chemical). Plastic comes from petroleum, mostly natural gas plant liquids. While some plastic is recycled, the car manufacturing industry will need even more plastic to produce gasoline and electric vehicles in the future.
So, it seems as if the “Green Energy Advocates” fail to consider “ALL ASPECTS” of the global supply chain when they state that switching to renewable energy is the answer. Again, when U.S. and global oil production finally peaks, the public has no clue how disruptive it will be to the economy.
Lastly, if the oil price continues to increase due to geopolitics in the middle east on top of central bank money printing, we could see overall U.S. oil production rising in many of the shale oil fields. However, when the recession (depression) finally arrives, then the U.S. Shale Oil Bubble will likely POP for good.
IMPORTANT NOTE: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.
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