Perhaps it’s not evident to anyone who is not an oil-worker living in America’s biggest shale towns, but signs of the shale slowdown predicted by many analysts, and the EIA itself, are already surfacing in the form of vacant hotels, a dip in home prices, a noticeable reduction in overtime hours for oil workers, and a change in standards for hiring.
Texas’ Permian basin lost 400 jobs in the first 10 months of this year, according to the Dallas Morning News, and fracking contractor Superior Energy Services Inc. alone announced in late November that it had cut 112 jobs from its Permian Pumpco unit.
The continued decline in oil rig count particularly in the Permian and confirmations by US exploration and production companies and also oilfield services companies of accelerating slowdown in US shale oil production speak volumes about the shale oil industry.
And yet, the US Energy Information Administration (EIA) in cahoots with the International Energy Agency (IEA) and Rystad Energy continue hyping about the rising production of US shale oil.
The claim by the EIA that US production will average 12.29 million barrels a day (mbd) this year rising to 13.29 mbd in 2020 and the ludicrous claim by Rystad Energy that US production will hit 18 mbd by 2030 are not only self-delusional but a plain lie. US production could probably average less than 11 mbd this year and around 10 mbd in 2020.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
The Permian is a classic on-shore lower 48 oil play. Once the first surplus rig shows up, all costs (including many royalties and lease bonuses) fall by about 25% (it looks like this just happened). Day rates give way to footage rates. Everything settles back to normal. With fracking (a new mining technique) "normal" is going to be a little different than before, but I would bet that production will not drop much as long as the world price of oil remains relatively high.
It is often difficult for non-US oilmen to understand just how a free market oil patch works. We have not seen one in quite a while.