It came out this week that Permian Basin players are getting $1 for every $1.33 that they spend. Yet we see the notion that “shale oil” has made the USA the top producer and swing player. Imports are “down” to 25% of our consumption.
Actually imports make up about 50% of our production because we import oil and export the light liquids that are a glut upon the industry. Those light liquids cannot be refined into gasoline, and to make gasoline must be blended with the heavy tar sand oils of Canada. This relationship apparently has been badly misunderstood by the popular press, and therefore, the public.
The term “shale oil” is also a misnomer. Much of the production from horizontal drilling and fracking comes from traditional Mississippian formations that are not shale per se. They are predominately limestone and other non-shale rocks. Thus, this is conventional production from unconventional technology. And actually the technology isn’t unconventional, it is simply advanced compared to that of thirty years ago.
The profit of the players relates to their ability to sucker foreign investors into funding their little charade while throttling the vendors providing services on the one hand, and the mineral owners on the other. The mineral owners are getting screwed by excessive post-production expenses and their leases are treated as cash cows to be milked by the oil companies. The result is mineral owners are suing and winning in court. Many settlements and judgments have already been handed down and the mineral owners need to mobilize against the oil companies and demand the state legislatures re-instate the minimum 12½% royalty FREE from any post-production expenses.