The Shale Oil boom is over, the Shale Oil industry is running out of sweet spots
- "Workforce constraints and rising costs continue to plague U.S. drillers.
- Shale drillers in two of the largest shale formations in the country are running out of sweet spots to drill."
For the last two years, the shale oil industry, like the broader oil and gas industry, suffered the consequences of pandemic restrictions like other industries and had to curb production massively. And the industry is still dealing with some remnants of the fallout from the lockdowns, such as workforce and raw material shortages.
Yet these problems seem to be on the way out, and production is recovering from the low of 9.7 million bpd it reached in May 2020. Yet it has not reached pre-pandemic highs, and it is unlikely it ever will. Because in addition to some lingering effects of the pandemic, there are such things as natural depletion, government policies, and, indeed, investor pressure."
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"In a recent analysis of the state of the U.S. shale oil industry, resource investors Goehring and Rozencwajg highlighted these three factors as drivers of the transformation of the industry from its pre-pandemic boom to today’s significantly more measured pace of both production and investment in future supply.
Natural depletion is not something that gets talked about very often when it comes to U.S. shale. In fact, most reports about the industry like to note the resource wealth of the U.S. shale plays, especially the Permian, but fail to add that these plays have been exploited for quite some time now, and in some of them, drilling is not as lucrative as it used to be.
In fact, Goehring and Rozencwajg note that drillers in the Eagle Ford and Bakken formations have largely run out of profitable drilling spots and production in these two plays is likely to plateau soon and start declining."
