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Tom Kirkman posted an update 6 years, 1 month ago
U.S. Shale’s Dirty Secret is *actually* its ever-increasing debt.
But this article ignores the debt issue, and instead shunts over to the smaller problem that the majority of refineries globally simply cannot handle large amounts of the very light crude oil (and condensate) of U.S. shale oil.
Which means that eventually, the seemingly inevitable surplus of light crude produced by independent U.S. shale oil producers may turn around and bite them in the butt, if refineries globally get maxed out in their capacity to process the light crude.
That means that the price differential between very light crude from U.S. shale oil and Middle East oil may increase, financially hurting mostly the U.S. shale oil producers. And most other countries, not so much.
U.S. shale oil producers, you can over-produce at your own peril.
As William Edwards is fond of saying, you can’t fit 10 gallons into a 5 gallon bucket.
Or more apt to this scenario, you can’t fit 20 million barrels a day of very light crude oil into a global refining capacity of only 15 million barrels a day of very light crude.
https://oilprice.com/Energy/Energy-General/US-Shales-Dirty-Secret.html
U.S. Shale’s Dirty Secret | OilPrice.comOil analysts are constantly discussing the success of U.S. shale in gaining market share from OPEC, a narrative that does not hold up to closer inspection
@tomkirkman I know that US refineries are regulated and there hasn’t been a new refinery constructed in a long time. But, internationally are there new refineries coming online that can increase global refining capacity? This seems like a under talked about bottleneck in the supply and demand formula.
@ritafarr refineries can be modified to process additional types of crude, but it is expensive to modify.
If there becomes a significant surplus of very light crude and condensate from U.S. shale oil, then the prices should go down, and that would offer financial incentive for more refineries to adapt to processing U.S. shale oil and condensate.
It seems unlikely to me that there will be any *new* oil refineries built any time soon in the U.S. due to huge red tape, environmental regulations, and of course the NIMBY backlash from wherever anyone would propose to build a new refinery.