- Question
Is shale oil a sustainable business model?
The drilling of shale oil has been hailed as revolution that has brought cheap gas and oil to American and made America a net exporter of oil and natural gas. However, there is serious debate as to whether shale is a sustainable business model given the high number of bankruptcies in the sector. What are the positions on the shale operating model?
Shale oil is not economical except at extremely high prices
Shale oil and natural gas are extremely capital intensive, and buying land, drilling and extracting the oil is far more expensive than drillers will admit to. Proof of this is that we have seen hundreds of shale oil companies go bust and almost no shale oil companies produce any free cash flow.
Shale drilling is bad for the environment, independent of any poor financial outcomes
Shale oil destroys the landscape and leaves a large pockmarked surface polluted by chemicals. The long run environmental problems of shale make it a poor business model, as communities are left to pick up the pieces.
Shale is a viable, sustainable business model given improvements in technology and prices
This position holds that shale oil is a viable, sustainable business model given advances in technology and prices. It argues that drillers' rapid learning has pushed extraction costs below the market price of oil, creating jobs and driving US production to record highs.