Wednesday, April 1

Petroleum's New Day: Fracking Overturns Need for Long-Term Investment Planning

"But in the states, pumping oil doesn't necessarily require much long-term planning. "

This portends revision in a key marker that oil and currency traders reference to keep the international monetary system lurching along.  Good call by Jordan Weissmann.

American Oil Production Grew by the Most in Recorded History Last Year
By Jordan Weissmann, Senior Business and Economics Correspondent
Slate Magazine
March 30, 2015
As Tom Randall notes at Bloomberg Business, these charts [at Slate website] show how U.S. producers essentially crashed the price of oil by dumping a massive amount of product on the market. But I think they also tell us something slightly more subtle about how unconventional oil exploration has fundamentally changed the oil world. 

American drillers have been able to mobilize at practically unprecedented speed, in part because hydraulic fracking doesn't require enormous lead time. Because of that, OPEC may simply not be able to manage the price of oil as it's done in the past. It can cut its production to bring up prices, but that will quickly bring on another stampede of small drillers to Texas and North Dakota—and fast. 

The fact that Saudi Arabia has chosen to maintain its production, cratering prices with hope of dissuading future oil exploration, was probably in part a recognition of that reality. 

At the same time, the pace at which frackers can start pumping from their fields is one reason why it may be very hard to do lasting damage to U.S. oil infrastructure. The bust of the last few months might discourage some long-term investment contingent on years and years of high prices. But in the states, pumping oil doesn't necessarily require much long-term planning.


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