Almost a decade ago now, the US underwent one of the history’s biggest ever energy revolutions. Commonly known as ‘The Shale Revolution’, it’s had an immense impact on global crude oil markets. But what happened and why has it had as large an impact as it has? Well, that’s exactly what the team here at TriStone Holdings Ltd, one of the UK’s most exciting oil investment companies, wanted to explore today.
What Was It?
The Shale Revolution can perhaps best be typified as the energy transformation which took place in the United States over the last decade, or so. The period of time, in which the US was catapulted to the top of the global leader boards in terms of oil and gas production, hinged on unlocking the crude oil fuel potential of ‘shale’ rocks.
What Is Shale?
To give its technical description, shale is a “fine-grained, clastic sedimentary rock”. This basically means rock formed over a large geological timeframe by the accumulation of deposits on top of one another. This compaction, when paired with an additional ‘cementing’ by salt crystals, leads to the formation sedimentary rock deposits as we see them today. Why that’s interesting to an oil investment company, such as ours, however, is that from oil shale, producers can extract ‘tight oil’ – a particular kind of light crude oil.
How Is Tight Oil Extracted?
Hydraulic Fracturing (“Fracking”)
The Shale Revolution owes the majority of its successes to a technique which you might well already have heard of – fracking. This unconventional drilling process involves injecting a mixture of water, chemicals and sand underground at extremely high pressures. This highly-pressurised mixture ‘cracks’ open the layers of rock. In turn, this causes the release of any trapped hydrocarbons like tight oil.
Why Did It Only Really Take Off, Recently?
The process has been around for years. In fact, the first hydraulic fracturing experiment was carried out in the field all the way back in 1947 by the wonderfully-named Floyd Farris. So, why did it take until the last decade for this boom in fracking to take shape? Well, as with so much in life, there’s no one singular reason, rather a combination of factors.
Reason 1 – Technology
Firstly, the technology was continually being improved and innovated. Though the basic process has remained virtually unchanged, over the last 70 years, the technology has become more advanced. In the 1990s for instance, a man named George P. Mitchell came up with a new technique, whereby fracking implemented some of the techniques used within horizontal drilling. This change greatly improved the technique’s economic viability.
Reason 2 – Market Conditions
Secondly, it was a result of the markets, themselves. From around the 2010 mark, oil prices began to consistently rise, facilitating the higher capital investment that fracking required.
Reason 3 – Existing Infrastructure
Thirdly, the US was fortunate enough to have an oil and gas infrastructure already ripe for expansion. Its long-established history within the oil and gas sector meant that shale production could be quickly and easily scaled up to cater for the increasing production. It was, in other words, a case of it being the right time and right place for fracking within the US. It’s worth noting that fracking remains strong, across the pond, even now.
How Has The Shale Revolution Affected The United States?
Given that the arrival of this revolution brought about such drastic changes to the US energy sector, it’s worth considering its impacts on a broader scale. In other words, just how exactly has the USA been affected by the Shale Revolution? Well, some of its impacts include:
- A reduction in energy prices. Estimates from the US Council of Economic Advisors (CEA) have suggested that Shale’s development has led to a 45% reduction in wholesale electricity prices. The reductions similarly seen in natural gas and oil prices mean that the lowest 20% of US households (economically-speaking) have saved around 7% of their annual income, thanks to the Shale Revolution.
- Stronger national manufacturing. The revolution as seen an increasing number of factories being built, particularly in the states of Pennsylvania and Texas.
- Decreasing coal market share. Where there are winners, there are inevitably losers. Whilst the shale industry has leapt to giddy new heights over the past few years, this has been to the detriment of the coal industry, with one in four of the US’ coal power plants having closed, since 2011. Natural gas burns much cleaner than coal, though, so this is perhaps no bad thing.
The Focus Of Our Oil Investment Company
You can find out more about the differences between conventional and unconventional drilling in our previous blog post, here. Here at TriStone Holdings Ltd, though, our oil investment company is focused on the Viola Prospect, in Kansas, USA. You can find more details about it here. This area, located in the vast central swathe of the Cherokee Basin, contains multiple sand and limestone formations with the potential for considerable upstream operations (both oil and natural gas).
Contact TriStone Holdings Ltd
So, if you’d like to find out more about our oil investment companies, then get in touch! Contact TriStone Holdings Ltd today by calling us on 0800 055 7079 or by emailing at [email protected] We’re always available for questions from our investors and members of the public.