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Shale Oil and Snake Oil

Written by Gary North on March 20, 2012

Any article that does not discuss the supply of something without discussing its price is nonsense. The higher the price offered, the greater the supply.

The question is this: How high must the price go in order to increase the supply. . . and how long?

Here is an article that skipped the question of price and cost.

When you look at the whole picture, it turns out that there are vast supplies of oil in the U.S., according to various government reports. Among them:

At least 86 billion barrels of oil in the Outer Continental Shelf yet to be discovered, according to the government’s Bureau of Ocean Energy Management.

About 24 billion barrels in shale deposits in the lower 48 states, according to EIA.

Up to 2 billion barrels of oil in shale deposits in Alaska’s North Slope, says the U.S. Geological Survey.

Up to 12 billion barrels in ANWR, according to the USGS.

As much as 19 billion barrels in the Utah tar sands, according to the Bureau of Land Management.

Add up these figures. You get 143 billion barrels. Of this, 86 billion are somewhere, under the rainbow, way down low.

The world consumes a billion barrels of oil every two weeks (74 million bbl/d). So, these reserves would add a grand total of 286 weeks (2 weeks x 143), or 5.5 years, assuming that demand does not rise, which it will, with China and India buying more oil.

There is even better news, we are told.

Then, there’s the massive Green River Formation in Wyoming, which according to the USGS contains a stunning 1.4 trillion barrels of oil shale — a type of oil released from sedimentary rock after it’s heated.

Heated.  I see. With what? At what cost?

It also takes huge amounts of water to get oil out of shale. Where will the oil companies get water in Wyoming and Colorado? At what price?

Here is an article on this:

Billions of Barrels of Oil locked Up in Rocks, by Guy Elliott Mitchell, Of the United States Geological Survey, with 10 Illustrations

Source: National Geographic (1918). That’s right: 1918.

When someone tells you “there’s black gold in them thar hills,” but he seems unaware that this has been well known for a century, you are dealing with someone who is out of the loop.

If it were profitable to obtain all this oil at market prices, someone would have gotten it a long time ago. It’s in reserve in rocks because it is very expensive to get it out of the rocks and into a refinery .

Whenever anyone assures you that America has plenty of oil, always ask yourself this: “At what price?” When it comes to oil reserves, the correct answer is “a lot higher.”

Continue Reading on news.investors.com

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13 thoughts on “Shale Oil and Snake Oil

  1. lilbear68 says:

    cut all the BS aside ignore the govt scapegoats, its not opec, its not speculators
    the real bottom line is big oil wants more dollars per barrel because the dollars are worth less this year than they were last year

  2. You got it right on the money.

  3. Of course big oil wants more money? Don't you? Are you going to go out and start drilling wells at a minimum of a million dollars a pop?

  4. Morons.

    "Big Oil" makes 6.8% profit on that oil. At BEST. The point lost on this author because he is technologically uninformed is that there are technologies available NOW that can get shale oil out of the ground at about $35-45 per barrel that needs LESS refining than raw crude. He also seems bent on "bending" the idea that we will somehow have to supply oil to the entire world… at least that's the only way his pseudo-math comes even close to addressing the amount of oil in the ground. The publishers of this blog should read some of this stuff before they let it get "published".

    When you say "Big Oil" you forget that includes about 120,000-150,000 PEOPLE who are DIRECTLY employed as "Big Oil", and just from American companies, not to mention the support industries which accounts for about a 3-6 to one ratio. Then, add in the taxes paid, by all of these people, the gasoline bought, the food, the housing and you get an even more enormous number of people effected by "Big Oil".

    And who the hell are you to tell someone HOW MUCH they can make? Barrack Obama? When you look in the mirror do you see big ears and a teleprompter? You people need to be something more than sheep following the goat. Get a brain and use it.

  5. You only speak partial truth and obviously know nothing about drilling, my guess is you are a part of the vial left corporate greed.
    Domestic market is what we Americans need NOT GLOBAL market all the LIES THAT COMES FROM MOUTHS LIKE YOURS IS FUELED BY CORRUPTION. the American people deserve better than you and your leftwing reports.

  6. I would have to say these articles by North, seem to be written by someone from the Left and a person with no understanding of current technology, either in drilling or techniques, let alone math!

    If I wanted to read drivel like this, I can read the Huffington Post, another publication where facts are few and far between, yet fiction is offered as something of merit.

    Oil independence is an often tossed around term, yet when articles like this are written, the meaning is forgotten. We, as a country, are able to acheive independence through a combination of oil, coal, natural gas if and when these resources are allowed to be used in combination. The point really is about energy independence, something in our grasp in as little as ten years, given the right climate to allow it to happen, something Obama and many others see as a goal they despise!

    (continued)

  7. (continued from above)
    For those crying against big oil, big oil is the only operation with the resources to make energy independence happen! Energy is expensive, takes a lot of infrustructure and a lot of expertise, not possessed by either the individual or government!
    So how is the screwing of oil companies and coal and natural gas companies going to help us in the long run? Who of you, or this author, know how to get energy out of the ground, distribute it or look for alternatives that will work over time? The large loans to 'green" companies by the government is certainly not working, not today nor for the last 30 years. Billions wasted, few to little results.

    Large oil companies have stopped by oil companies for years now, they are energy companies! Anyone that does not think they understand better than everyone else the short comings of just oil drilling, is truly an uneducated person. Read one of the oil companies quarterly reports or long term statements for the future.

  8. Sure price drives supply. The same thing is true of gold? With the price of gold up, they are now reopening previously unprofitable mines.

    Big oil may have “obscene” earnings – only because they have “obscene” expenses. Fast foods make much higher profits.

  9. spelunker7 says:

    None of the exploration for new oil and gas fields that is going on today in very hostile enviroments and very deep waters around the world would be happening if the price of a barrel of oil was not around $100 U.S. Cut that price in half and all the drilling will stop. OPEC sets that price and knows there is nothing anybody can do about it at the moment. They use the river of dollars from oil sales to fund extravagant building projects, free education for their subjects, and terrorism. Obama does not want that cash flow to his Muslim brothers to stop, so he is doing everything possible to stymie development of our domestic oil and gas deposits. Nor, does he want us to enjoying the enormous supply of oil from our friends in Canada. Without his interference, we could cut our dependence on Middle Eastern oil by 50% over the coming decade. VOTE against Obama and regain our energy independece and shut off the cash flowing to the terrorists.

  10. spelunker, very good

  11. spelunker7 says:

    OPEC sets the price for oil. Big oil, whatever that is, has nothing to do with the price per barrel that they are forced to pay just like everbody else.

  12. spelunker7, grant, Chris, blh557 have all handled this left leaning article with facts which put the author, Mr. North, in an untenable position. Outing him as an agent of the left with his spouting of the same rhetoric as our "dear leader". I have suspected this to be the case for some time. I am left with no alternative other than to unsubscribe from his further propaganda.

  13. We are ALL part of Big Oil in the sense that my Pension Fund owns their stock, – my IRA has their stock, – same for my 401A & K, plus my regular Brokers Account.. I'm a little country dude, but I'm also a Big Oil Dude.. When BP took a multi-Billion Dollar "Hit" with the Gulf Oil Blow-out, – several Million street-level – average Joe Investors shared the Loss..
    You, You & You my friend are All in Big Oil, – – so remember that when Your Mouth blasts away at Big Oil, – you may end up shooting yourself in the Foot..