InvestorQ : What is shale production and how is that impacting oil prices?
Suhani Mirza made post

What is shale production and how is that impacting oil prices?

Answer
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Ayushi Kampani answered.
2 years ago


Shale is oil extracted in the US and Canada through a process called fracking by tapping on very deep reserves. Interestingly, in the last few years, the US has emerged as the Swing Producer of oil. Three things have changed for the US in terms of oil production. Firstly, the availability of cheap funds due to low interest rates and advanced directional drilling technologies have enabled the US to fruitfully extract and produce crude oil from shale wells. Secondly, the US has managed to perfect its oil technology to the extent that it has been able to extract more oil per well and also reduce their breakeven for oil by almost 50%. Thirdly, the 40 year old US ban on exports of oil has been lifted and surplus oil will soon flood the global markets in a big way. These three factors have made the US the Swing Producer of oil and also the key determinant of crude oil prices. As long as the US is able to increase its oil production exponentially at low break-even rates, its influence on global crude oil prices will continue to trump the influence of the OPEC.