Lower Oil Prices Forces Reassessment of US Shale Boom

With dropping oil prices – hitting $79.78 on Oct. 16, the lowest price since June 2012 – analysts are re-evaluating the economic forecast of the shale oil boom in the United States.

According to Bloomberg:

The U.S. benchmark price dropped to $79.78 a barrel on Oct. 16, the lowest since June 2012. At that level, one-third of U.S. shale oil production would be uneconomic, analysts for New York-based Sanford C. Bernstein & Co. led by Bob Brackett said in a report yesterday. Drillers would add fewer barrels to domestic output than the previous year for the first time since 2010, according to Macquarie Group Ltd., ITG Investment Research and PKVerleger LLC.

Philip Verleger, who runs PKVerleger but was the former economic advisor to President Gerald Ford as well as the director of energy policy for President Jimmy Carter, said:

The cash flowwill go down as the prices go down, the amount of money advanced to these people to continue the drilling will dry up entirely, so you’ll see a marked slowdown in drilling.

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