The Crash Course, Revised Edition

CHAPTER 18Shale Oil

Full confession: Back in 2010 when the first edition of this book was penned, I did not even remotely foresee the shale oil story becoming so dominant. For some reason I assumed reason would prevail. I had analyzed and scrutinized the data and saw that the shale companies were losing money hand over fist and thought to myself, “Well, this will have to end soon.”

I am ever hopeful that things will make sense and reason and rationality can be counted on, especially when it comes to money. What I did not foresee, at all, was the immensity of the losses “investors” were willing to bear in the shale oil industry. Hundreds of billions of dollars went there to die. I'd be more than fascinated to see a fully detailed accounting of those losses because I have my suspicions that more than a few of them were “officially absorbed,” if you catch my drift.

A huge factor in that willingness to take losses was something else I didn't foresee: the Federal Reserve driving interest rates to zero and pegging them there, forcing many entities and individuals to recklessly “chase yield” wherever they could find it. The paltry 5% yields on offer from the shale patch were vastly better than anything that could be found elsewhere so … they piled in. Big mistake for them, but a lot of fun for the frackers and drillers!

Shale Oil—Amazing Technology, but Expensive Oil

I am truly in awe of what the shale patch drillers and frackers can accomplish. The technology is simply brilliant ...