Shale Oil Production and its Impact on Oil Prices

In a recent interview on All India Radio News, Battelle Senior Research Leader Srikanta Mishra weighed in on a number of oil and gas topics, including America’s production of shale oil, its impact on oil prices and whether there is merit to conspiracy theories swirling throughout the industry.

Here are our top five takeaways from the conversation.

What is the United States’ role in the drop in oil prices?

Over the last three or four years, the benefits of shale oil and gas have really helped the U.S. become the world’s leading producer of crude oil and natural gas. The balance between supply and demand plays a key role in determining oil prices. The slowdown in the Chinese economy and the general recession, the drop in commodity prices, the slowdown in real estate all over the world – all of these have contributed to a slight lessening of the demand, while the supply continues to be unabated because of the shale revolution in the U.S.

Will our status as the No. 1 producer remain?

The production of shale oil and gas is not as long-lived as conventional reservoirs – the peak happens very quickly and then drops off very quickly. The dominance of the U.S. as far as oil and gas production is concerned is not likely to be as long-lived as was the case of Saudi Arabia. The world order that we see right now is not a sustainable one.

How long will these lower prices last?

In the near term, I think there will be some volatility in oil pricing. The downward pressure of the oil prices will continue to be there. But there are a number of countries that have break-even prices in the $40, $50, $60 per barrel range. And if they are forced to produce while oil prices are at $30 a barrel, I think countries will go bankrupt. I’m not sure that that is something that is likely to happen unless there’s a major catastrophe. So I do expect oil prices to rebound, maybe to the $50 range in two to three years.

Is there any merit to conspiracy theories that OPEC countries or other oil-producing countries want to end the shale gas industry?

Conspiracy theories are always floating around. I think you can find different ways of looking at different situations and then come at theories as to why something happened. Conspiracy theories are really exciting and people tend to believe them, but I’m not sure I know how real those are.

Are the technologies used in shale oil and gas production harmful to the environment?

I think increasingly people are coming to the conclusion that environmental safeguards need to be incorporated into the shale oil and gas development process. There are many things that can be learned from America’s experience in terms of what are the hazards to the environment from shale gas related drilling and completion and production and how to manage and mitigate these risks.

Listen to the full interview.

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