Shale has unquestionably impacted global crude oil prices, quality mix, and trade flows. But shale is too small, too slow, and too competitive (if shale chief executives tried to collude, they would face prison) to play the swing producer role. Other than abhorring boom-bust price cycles, shale and swing producers share little in common.
Looking ahead, shale is unlikely to sustainably grow enough to quench the world’s raging thirst for oil. Three years of lower oil prices have boosted demand, and the vaunted energy transition from oil to electric vehicles will arrive much later than advertised.
A world economy growing at the nearly 4 per cent rate the IMF projects will require nearly 2m barrels a day of net supply growth per year, which means adding 4-5m b/d of new gross supply considering declines from existing fields. Even if shale grows 1m b/d annually, it will not unilaterally meet global supply needs.
Thus, barring an economic downturn, by early in the next decade the world economy will need but lack new oil production from longer-cycle conventional projects cancelled or delayed since the 2014 bust.
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Honeyguide Energy Partners
Finding value in lower-middle market of oil & gas assets