The International Energy Agency released its annual report this week, and it’s a Rorschach. Drill dorks proclaim it confirms that shale oil (oil freed from porous rock, unlike conventional, liquid fields) is the way back to US energy independence and “cheap gas”… or at least, North American independence. (Funny how Mexico’s our friend when we feel like it.)
People actually in economics get the big picture. Shale oil is neither cheap, nor the future it turns out. Shale drilling and enhanced recovery costs more, inherently, than conventional recovery. And more than gas fracking- CH4 is as light as it gets, but oil’s viscous and difficult to free. Now on top of that the IEA finds US shale deposits are nowhere near what the Middle East has, like Middle East shale. As we drain our pricey oil, they’ll still be selling plain oil at low cost, and will only then go for unconventional oil. The knee will be circa late-2010s; by the 2020s, our shale oil will be back to geopolitical mediocrity, and we’ll be back to our old habit. This confirms a spring analysis from the US’ own Energy Information Administration.
No one doing costing seriously thought intricate extraction methods would bring back ’60s prices at the pump. Shale oil, like tar sands, simply pushes off the inevitable, especially now that there are Chinese and Indian drivers in the bidding. We can’t go back.