Though
the central banks of the world are printing money like mad, the
petroleum watchers are predicting a downturn in the price of oil.
The
reason: demand for energy will fall as the global economy cools off
in the face of willy nilly inflation.
Such
economic giants as China are joining western Europe in a sea of red
ink and slowing demand for energy to support expanding manufacturing
activity.
(click here to access Federal Reserve report)
Aside
from purely economic factors, the truism that an energy surplus won't
last for long applies, here. Drilling in huge new oil reserves in
shale rock formations across the U.S. - in the North Dakota Bakken
formation, the Marcellus Shale of the northeast and New England, and
the Eagle Ford in South Texas – is driving natural gas prices down
to rock bottom, falling from $14 per thousand cubic feet in 2008 to
today's $2.75, an 80% decline.
Though
West Texas Intermediate Crude jumped from $97 to $99 per barrel on
September 14 when Ben Bernanke announced a third round of
Quantitative Easing (QE3), it soon dropped to $96.51 on the 17th.
The
next trading day, oil dropped to $95.25 a barrel. On the 19th,
oil dropped again… Crude plunged more than 3.5% to $91.73 a barrel,
even though the Bank of Japan announced a new round of QE3 in that
nation.
“It's
impossible for a surplus of energy to last for long,” savvy
analysts always say because history proves the point. The cheaper an
energy commodity becomes, the more uses consumers find for it.
Supplies
are at a record high and growing. That will merely exacerbate dips in
the price of crude resulting in lower the pump costs for gasoline and
diesel.
Here
is how it plays out in the shale play of south Texas:
According
to Texas geologists and energy executives, “Past discoveries have
been in relatively small, scattered fields, while this play underlies
most of Southeast Texas. It is essentially a massive, nearly
continuous oil and gas field. Petrohawk Energy is one of the primary
lease holders and their vice president, Richard Stoneburner, reported
for one of their key areas, “The gas-in-place numbers are so
exceptional because the shale is some 250 feet (76m) thick over a 50
by 25 mile (40 by 80 km) swath and is 100% net pay.” The play could
easily be many times bigger in size.
“Mr.
Tucker Hentz, an active Eagle Ford researcher with the Bureau of
Economic Geology at The University of Texas at Austin, says “The
Eagle Ford started out like the other shale plays, concentrating on
the gas potential of a prominent, widespread shale formation. Oil
production from the shale in the Maverick basin area has led us to
start looking at the depth, thickness, and rock characteristics of
the unit across its subsurface area of occurrence. This will give a
first approximation of the potential gas-producing areas.”
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