The Age of Cheap Oil is Over; Shale is “subprime energy”

The companies doing shale plays are having troubles

Shale is both expensive and not nearly as plentiful as been propagated. The great shale revolution is greatly distorted by mountains of Wall Street generated debt, it might most accurately be described as “subprime” energy. Take for example the greatest shale company, Chesapeake, loaded with debt that’s created unprofitable and unsustainable prices. They’ve found it hard to make much profit in the last couple years – for an oil and gas company, that truly is a revolution.

In order to survive with over 13 billion dollars in debt, over the last couple years, Chesapeake shed billions of dollars in assets. Just last week, the prestigious oil industry publication, “The Oil and Gas Journal” announced Chesapeake’s latest divestiture, a rather unintentionally amusing and revealing report on the business and “accounting” of shale:

“Chesapeake Energy Corp., Oklahoma City, has decided to proceed with spinning off its oil field services business, currently conducted through its wholly owned subsidiaryChesapeake Oilfield Operating LLC (COO), almost 3 months after reporting that a spinoff or outright sale of the business was under consideration. COO will also convert into a corporation and change its name to Seventy Seven Energy Inc.

Upon completion of the spinoff and an expected recapitalization, $1.1 billion of consolidated COO debt will be eliminated from Chesapeake’s balance sheet and Chesapeake will receive a $400 million dividend that will be applied to pay off intercompany debt from the oil field services business, the company said.”

But, it’s not just the industry leader having trouble profiting from shale, so to the massive oil service company BHP Billiton, who in 2012 wrote down almost $3 billion in shale assets and the old oil companies such as Shell, which this year wrote down $3 billion of their own shale plays.

Importantly, its not only no one can make money on shale, but there’s not nearly as much of it as Wall Street proclaimed. Recently, the Energy Information Agency stated the Monterrey Shale in California, which was being promoted to account for two-thirds of developable shale oil in the US, only contained 4% of previous estimates, a 96% drop! Thus, there’s only one-third as much shale oil as been touted in the financial press, and that too is a highly suspect number.

Globally, the production of conventional oil – “black gold, Texas Tea” – plateaued ten years ago at around 75 million barrels per day. Meanwhile “unconventional” oil and oil substitutes such as Natural Gas Liquids, have seen the biggest growth in oil accounting. However, they are neither cheap or simple substitutes for crude.

Four decades after learning oil was a limited resource, the world, and especially its most oil dependent member the United States, now face a hard accounting. The present hundred dollar a barrel oil has created a serious drag on a global economy that for a hundred years has grown on cheap oil, while oil has kept its price, despite five years of a largely stagnant or deflating global economy.

All new oil is going to be less plentiful and more expensive. It is going to take increasing amounts of money both to find and bring to the surface. The once mighty oil companies, that strode across the global landscape like giants, are going to increasingly shrink in stature and power.

We need to undertake an all encompassing energy transition which will impact every aspect of our economy and our lives. We can look at what the energy component, particularly that which comes from oil, is of everything, from transportation, to food, to money itself, figuring out how it will be replaced with other sources of energy, accomplished by using less energy, or abandoned.

Ready or not, the great energy transition has arrived. It can no longer be ignored, a new world is in the offing.

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24 Responses to The Age of Cheap Oil is Over; Shale is “subprime energy”

  1. Mr. Rational says:

    A lot of these natural-gas liquids appear to be ethane, propane and butane.  As LPG, they are almost ready as motor fuel straight from the well.  I am really surprised that there aren’t more efforts to promote LPG vehicles.

    • mindweapon says:

      I’m not surprised. They know how quickly the LPG will run out.

      • Mr. Rational says:

        The natural gas is going to run out just as quickly, but they’re trying to build LNG export terminals anyway—capital investments good for 50 years.

        A vehicle has a lifespan of maybe 10 years, and dual-fuel is easy to do.  LPG is under-emphasized, the question is why?

  2. Cj aka Elderofzyklons Blog says:

    Reblogged this on ElderofZyklon's Blog!.

  3. ben tillman says:

    Importantly, its not only no one can make money on shale….

    This is an exaggeration Chesapeake has made a ton of money off my mother-in-law’s lease, for example, and so has my mother-in-law. It seems that everyone involved in the Eagle Ford Shale play is making money. If you accurately assess the amount of producible oil and the cost of producing it, you can make money.

  4. questioningfellow says:

    No, despite Jevon’s Paradox, we can easily convert to 200 mpg engines in cars and 400 mpg engines in mopeds easily enough, reconfigure our infrastructure for it, prepare for the upcoming Ice Age and transition to renewables and fusion within fifty years if we had but the will.

    Unfortunately we don’t, we Whites will have to go underground and wait or perish as the muds and jews play havoc.

    • Mr. Rational says:

      There is no “200 MPG engine” for a car, unless the car is an ultralight shell running at 100 kph maximum on skinny little high-pressure tires.  The Volkswagen 1L car did it with a one-cylinder diesel and hybridization, and had barely 2 seats.

      You can average 100 MPG with a plug-in hybrid and still have seating for 5 adults with creature comforts.

    • Erin says:

      If you find a way to do these things keep it under-cover until the right time. http://prezi.com/nida8hyppltr/alternative-energy-cars/ Be sure to click on See the full transcript to see how this gentleman who built the first compressed air vehicle in ****1838****!!! was imprisoned in a mental institution, had his design stolen then later sent off to a concentration camp where he remained until death and his idea was forgotten.

      Don’t be naive about the ways of the world.

      • Mr. Rational says:

        There are no secrets about compressed air.  Someone who obsessed about powering things with air may well have been insane.

        If you actually bother to calculate the energy in a tank of compressed air, you’ll immediately see why compressed-air cars didn’t get very far.  TL;DR version:  air tanks make lead-acid batteries look really good in most ways.

        This is why you should learn thermodynamics.  Sifting the rare nuggets of truth from the mountains of energy BS is part of Mindweaponization.

      • Erin says:

        ok…my point was just that if a White man uses his great mind to find a solution, I hope he won’t sell it to the highest bidder but will put it to use for White survival.

  5. Mr. Rational, we’ve had 200 mpg engines since the 1920s. and the capabilities for water/steam injections since the 1970s. read and weep. http://jimstonefreelance.com/slapintheface.html. All of your “objections” are based on sneaky omissions and half-truths (Not saying you are lying, only you took to heart a lot of BS along with the “Meat”)

    • Mr. Rational says:

      Mr. Rational, we’ve had 200 mpg engines since the 1920s.

      O RLY?  Then why didn’t Germany and Japan use them to power their war machinery in WWII, when it was literally a matter of their survival?  Why didn’t Europe roll them out in response to the oil price shocks of the 1970’s?

      Even if you know nothing about the actual thermal efficiency of modern engines, the slightest bit of critical thinking shows the “200 MPG engine” claim to be bogus.  If it existed someone would be using it to gain an economic or military advantage, patents be damned (and patents expire).  You’ve just proven yourself incapable of critical thinking.

      As it happens, I do know something about the thermal efficiency of modern engines.  Toyota is pushing the Prius engine to 38% efficiency, in a vehicle rated around 55 MPG.  If it could achieve 100% efficiency (an impossibility), it would still only reach ~130 MPG in the Prius body; with 1920’s vehicle aerodynamics, it would be far less.  Low-speed marine diesels have all sorts of advantages of low friction and low heat losses, yet they are just barely breaking 50%.  Your “200 MPG engine” never existed.

      Don’t make any further claims about such things until you have taken and passed an intro thermodynamics course.  If you cannot calculate the entropy increase and irreversibility in combustion, you don’t have a clue.

      • oogenhand says:

        “Why didn’t Europe roll them out in response to the oil price shocks of the 1970′s?”

        Because Jews like an Islamized Europe.

      • mindweapon says:

        That’s quite a calculati9on on the Jews’ part. They sure don’t seem to like an Islamicized Middle East! Now they will turn Europe into hostile territory for them.

        The Europeans could end up flipping this on them, by becoming highly anti-Jewish European Muslims to drive the Jews out of Europe under the banner of the half moon.

      • oogenhand says:

        That could work. But learning Arabic would be necessary.

      • Mr. Rational says:

        Oogenhand, explain the Japanese then.  And WWII Germany, when fuel shortages led directly to the demise of the Luftwaffe.

      • Mr Rational, I agree, the Cotton wick 200 mpg engine was not feasible for Germany at the time. (not that I regard Germany as a heroic push against the YKW’s there were over 150,000 of them in Germany’s army for example)

        Aside from that, no, Nobody is allowed to “get” these vehicles without MAD. THAT is how important they are and yes, they are real, otherwise, we all would be subsidized and forced to drive them if Peak Oil was a reality. This is strictly for the Aftertime, once Jews have comfortably ensconced themselves as Overlords.

        It is sort of like the current bruhaha over “Food scarcity and prices” in the US. Most of it can be traced to the San Jouaqin Valley, where Jews and their Shabbots have turned one of the richest farmlands in the world back into a desert by releasing all the agriculteral reservoirs non-stop.

        anyways, enjoy.

        http://www.jimstonefreelance.com/threestepengine.html

      • Mr. Rational says:

        QF, existing small diesels hit 40% efficiency or so.  You cannot do better than 100%, or 2.5 times as good (entropy increases in combustion actually limit you to less than 60%).  Fuel cells are also about 60% efficient.

        Incidentally, your reference cites steam tables but obviously doesn’t know how to use them.  That is why more people need to take at least an intro thermo course.

  6. So much, then, for the premise of the story of “Ellis Wyatt” in Ayn Rand’s Atlas Shrugged. Shale oil was the premise.

    • Mr. Rational says:

      Oil shale (shale that’s full of kerogen) and shale oil (shale that’s full of oil, but impermeable so hard to extract) are two different things.

      One of the Balkan countries has a powerplant that burns oil shale.  If I understand correctly, they throw it into a furnace like lumps of coal.  You can do things with it, it’s just really expensive and dirty.

      • mindweapon says:

        Interesting. Well, in fracking they don’t bring up the whole piece of stuff, they just suck the gas or oil out of it.

        You should realize that the superhighway to Disneyland and Walmarts Warehouse on Wheels things will be over soon enough, right? As it is, a lot less people drive than used to do so, and this will continue to decrease.

        There’s a crisis in this country of what to do with all the extra people, for whom there are no jobs. I think there are jobs — growing food. Duh! But that’s just too obviously true for people to comprehend.

        Why true? Because Industrial Agriculture has shown that it will poison us. People who say, “Let’s reform Industrial Ag so Monsanto and Con Agra and Archer Daniels Midland give us wholesome, organic food grown by well paid Americans!” THat’s just laziness. That’s just, “I don’t want to have to do anything except be in favor of something. My vote counts! I voted today!”

        You want to vote for not being poisoned? Grow your own.

        The farm store in my town is booming.

      • Mr. Rational says:

        The roads won’t go away even if petroleum does.

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