Tags: Manhattan Institute | Mills | Oil | Shale

Manhattan Institute's Mills: Oil's Plunge Won't Halt Shale Revolution

By    |   Friday, 24 October 2014 02:20 PM

Some experts have speculated that the oil price drop, which pushed U.S. crude prices to a two-year low last week, would put an end to the shale revolution.

But Mark Mills, a senior fellow at the Manhattan Institute, says that's not the case.

The pessimists maintain that a sustained price slide below $80 a barrel could force cutbacks in shale output. December WTI futures traded at $81.17 on the Nymex Friday morning.

"But price dips are common in oil and other markets subject to cyclical swings," Mills writes in The Wall Street Journal. "True enough, sellers of any product prefer high prices to low. But the current slump sets the stage for what I call America’s shale boom 2.0."

Oil extraction from shale fields has pushed U.S. production to a 30-year high.

Shale production is still profitable at current prices, Mills says. "We know this because the boom began during the Great Recession years of 2008-09, when prices fell below $50 a barrel."

In addition, "shale production is getting more efficient, which means that profits are possible at prices even lower than today," he writes. And the United States has a huge infrastructure for shale-oil development.

Meanwhile, star investor Jeffrey Gundlach, CEO of DoubleLine Capital, predicts that oil prices will keep falling.

Indeed, he sees crude slipping to $70 a barrel, which would represent a 14 percent slide from near midday Friday.

"I'm convinced that Saudi Arabia wants the price of oil at $70," Gundlach said at an investment conference Wednesday, CNNMoney reports. Saudi Arabia has recently cut its prices for customers around the world.

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Some experts have speculated that the oil price drop, which pushed U.S. crude prices to a two-year low last week, would put an end to the shale revolution.
Manhattan Institute, Mills, Oil, Shale
286
2014-20-24
Friday, 24 October 2014 02:20 PM
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