"US shale oil wells deplete rapidly, and producers have to keep drilling new wells to maintain or increase their output. So, while production has been rising even as the number of rigs actually drilling has been falling, it won’t take long for the massive cutbacks in activity to show up in lower production.
It isn’t just the US shale oil sector that has been hit hard by the plummeting prices.
The International Energy Agency forecast last week that investment in oil production would fall by about 15 per cent, or $US100 billion this year.
Around the world almost all of the major oil and gas producers are scrambling to cut back on their spending and to reduce costs.
The technology and processes for extracting shale oil have been improving both rapidly and significantly and as the productivity of the sector has improved, break-even levels have been tumbling.
The nature of the industry also means that production, unlike most conventional oil resources, can be cut back and then turned on quite quickly.
A new well can be drilled within a week and at a cost of about $US1.5 million, which is reducing and which fell nearly 20 per cent on average last year."
