Tags: oil | US | shale | project

Consulting Firm: Oil Prices at Current Levels Put US Shale Projects at Risk

By    |   Wednesday, 10 December 2014 01:29 PM

U.S. oil prices have plummeted 42 percent since late June, hitting a five-year low Wednesday.

That makes more than 12 percent of global oil production unprofitable if major oil companies follow through with existing projects, according to consulting firm Energy Aspects, the Financial Times reports.

Particularly vulnerable would be U.S. shale projects, which have a break-even price of $76 a barrel; Canadian oil sands, with a break-even price of $80; Brazil's deep-water deposits, with a break-even price of $75; and Mexican oil projects, with a break-even price of $70, the firm says.

January US crude futures traded at $62 on the Nymex Wednesday morning, while January Brent futures traded at $65.20 on the ICE Futures Europe exchange

"None of this looks pretty, particularly as most new production scheduled to come on line in the next couple of years is set to come from non-OPEC countries," the Times states. "Most, if not all, of this is high-cost production that has only become more expensive in recent years."

To be sure, there is a flipside to the drop in oil prices. By pushing gasoline prices lower, it leaves more money in consumers' pockets.

"This is a gigantic tax cut for the American economy," CNBC Senior Contributor Larry Kudlow told Newsmax TV.

"It's not a marginal tax rate reduction, I'm just saying it has the same impact. People will have much more disposable income to spend on other goods and services, and the middle class needs that because they've not had big wage gains."

The oil price drop will be a boon for corporate America too, Kudlow said. "Businesses need this. . . . It is very pro-growth."

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U.S. oil prices have plummeted 42 percent since late June, hitting a five-year low Wednesday.
oil, US, shale, project
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2014-29-10
Wednesday, 10 December 2014 01:29 PM
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