BLOOMINGTON, Ind. — FTR has released data showing that U.S. oil production is not falling despite the weak oil prices and a dramatic reduction in new drilling activity.
The answer to this conundrum comes in two flavors, according to FTR Senior Transportation Economist Noël Perry.
First, Perry said, competition and excellent engineering continues to drive the break-even price for fracked oil steadily lower.
Where several years ago that price sat at $65-$75 per barrel, the most optimistic observers put the price below $30 per barrel now and the pessimists have it below $50. Second, the same engineers are learning how to mitigate the very steep fracked well deterioration curves.
It used to be assumed that a fracked well would lose more than 10 percent of its production per month. Now the number is much less and the existing wells are still producing copious amounts of oil.
The result is that although there has been an almost 50 percent reduction in new wells started, total production numbers are still strong, Perry said, adding there is no need to start expensive new wells if the old wells are still producing. That said, the declining costs of new wells will ensure that oil production continues.
“Energy pessimists have been predicting the end of petroleum since the Club of Rome published their seminal study almost 40 years ago,” Perry said. “I reported that the energy crisis was over at least two years ago. Market dynamics are making fools of the doomsayers again.”
Energy pricing and carbon reductions will be some of the hot topics discussed at FTR’s annual Transportation Conference, held September 15-17 in Indianapolis.
To learn more visit www.FTRconference.com.
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