The Energy Collective: The Shale 'Revolution' Is About Gas Prices & Oil Production

I’d like to make a quick point about the “shale revolution,” which may be old news to those immersed in North American energy policy but might be helpful to those just starting to think about the wider implications of increased North American production of oil and gas.

Increased production of oil & gas from shale formations using hydraulic fracturing and horizontal directional drilling is often referred to as North America’s shale revolution because of the way it has transformed oil & gas production, reserves, production, and pricing. But the “revolutionary” part of these changes mostly boils down to two big changes: 1) natural gas prices, which were rising, are now falling, and 2) oil production, which was falling, is now rising.

Increased production of natural gas has had a dramatic effect on natural gas prices because natural gas is hard to transport. If you can’t send natural gas by an existing pipeline to an existing market, your next best option may be to cool it into a liquid at −162 °C, load the liquid onto a giant, insulated, quarter-billion dollar vessel and ship it across the ocean, where it can be regasified and burned.
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