Fracking has made the American oil industry big. But there is a first gap in the shiny façade fracking – is America's success story now over?
By Angela Göpfert, boerse.ARD.de
Take a mixture of water, sand and chemicals and press under high pressure into the rock layers – this is America's secret recipe for the rise of the oil superpower. Thanks to the fracking boom, the US became an oil exporter in just a decade becoming an oil exporter. No country in the world produces and exports more oil than the US.
It is unlikely to change much, according to the latest "World Energy Outlook" by the International Energy Agency (IEA). As such, US production must slow down compared to recent years. But in 2030, growth in the US still tends to reach 85 percent of the increase in world oil production.
Even though it was a short time, it was glimpse after the continuation of the US fracking explosion. For example, only this week the US Department of Energy (EIA) raised its forecast for US oil production next year to 13.29 million barrels per day.
Dream about OPEC?
The scenario that OPEC petroleum cartels might not quite believe. OPEC Secretary General Mohammad Barkindo underlined on Thursday that he was confident that the US oil industry must lose momentum by 2020.
Now, in the case of OPEC, one can assume wishful thinking. After all, for years he tried desperately to push up oil prices by cutting subsidies. If there is a decline in US production, it could just let go of new production cuts – and pump more oil into the market without having to fear a dramatic collapse in oil prices.
Investment falls, production falls?
In fact, there are independent experts and bare facts who oppose the uncontrolled continuation of the boom fracking. Thus, the number of active wells has dropped by around 20 percent since last year. "This could immediately affect US production," said David Iusow, expert at financial services company IG Group.
In addition, according to a study by international law firms based in Texas, Haynes and Boone, the industry also faces "declining lending opportunities". In other words, creditors are slowly turning money into the fracking industry.
"If you can't cut costs, you have to invest less to cut costs, and that's our stage now," Jesse Thompson, an economist at the Federal Reserve Bank of Dallas, recently told Bloomberg news agency. Experts also report rising unemployment in the fracking industry.
Output decreases with time
Experts also show the economic characteristics of wells and shale oil formations. Shale oil production fell sharply in the first years. After an average of three years, only about 75 percent of the initial production volume can be produced.
In addition, fracking companies are now very good at identifying the best savings in oil fields. There, of course, will be drilled first. Subsequent drilling locations become less productive.
The US Department of Energy is too optimistic?
Critics argue that the US Department of Energy (EIA) only extrapolates current data into the future – and underestimates the factors mentioned. Therefore they consider the AMDAL estimate on US oil production to be too optimistic.
"The potential for disappointment is greater than the market so far," said Shin Kim, oil expert at S&P Global Platts.
US oil stocks shunned
The stock price also paints a picture of the US oil industry, which is in no way competitive with the positive estimates of US fracking and international energy authorities.
The stock prices of small and medium-sized fracking companies and newspapers from big oil companies have been under pressure for months. The main asset manager withdrew from this sector, as revealed by the Bank of America / Merrill Lynch Monthly Manager Survey.
The pork cycle in the oil market
Incidentally, it was not the first time the US bubble had burst. "The fracking boom seems to want to surpass the second peak," said Robert Rethfeld, market expert at "Wellenreiter-Invest". "The second boom phase (2016-2018) is likely to end for the same reason as the first (2012-2014): High prices encourage investment and excess production, resulting in saturation in world markets, which lowers prices."
But if prices fall, it becomes increasingly difficult for fracking companies who are often indebted to work profitably. The logical consequence is a decrease in production and market adjustments, which makes companies that lose money go bankrupt or bought. This in turn lays the foundation for the next boom phase.
Now everything depends on OPEC
In this case, oil prices will rise again with a delay – provided OPEC does not take advantage of the hours and increase its output. Therefore, oil experts, as well as buyers of heating oil and motorists, must wait for the OPEC meeting in Vienna on December 5 and 6