The Coming Collapse Of U.S. Shale Oil Production

The death of U.S. Energy Independence will occur when the collapse of shale oil production begins.  And when U.S. shale oil production finally peaks and declines, it could fall much more rapidly than we realize.  The rate at which U.S. shale oil production declines in the future is based on two key factors, remaining reserves, and the oil price.

Before I get into the remaining shale oil reserves, let’s first consider the price.  When the oil price collapsed from mid-2014 to a low at the beginning of 2016, frackers cut drilling considerably.  From March 2015 to September 2016, total U.S. shale oil production fell approximately 600,000 barrels per day (info  However, this decline was not due to the peak in production, but rather, because the low oil price made drilling shale oil uneconomical.

What happens when U.S. shale oil production finally peaks along with much lower oil prices?  Well, that will be the PERFECT STORM for the U.S. shale oil industry.  As I have mentioned in several articles and videos, when the current economic market cycle of 9-years finally rolls over, we are going to have one heck of a market correction.  When the broader markets crack lower in a big way, they will most certainly pull down the oil price along with it.

To get an idea of the total U.S. shale oil production, here is a chart from Enno Peters at

This chart shows U.S. shale oil production as of April this year.  Total U.S. shale oil production is shown to be a little bit more than 5 million barrels per day.  Each color in the chart represents a year’s worth of oil production.  What is interesting about the chart above, is the huge decline rate of domestic shale oil production.  And as each year passes, the degree of decline steepens.

Now, to get an idea of how U.S. shale oil production will decline in the future, I have included a series of charts by Jean Laherrere.  You can check out the entire document by Laherrere and Hall at Forecast For U.S. Oil & Gas Production.  Jean takes the past production profile and bases future production on remaining oil reserves using a Hubbert Linearization formula.  For example, the North Dakota Bakken shale oil production will fall back to a little more than 100,000 barrels per day by 2025, based on a total of 4 billion barrels of total reserves:

This chart is a bit dated as Bakken oil production is slightly higher than what is shown in the chart, but I believe the downside slope is a realistic forecast.  Here are two more charts showing the future forecast for the Eagle Ford and Permian Basin:

Jean shows the Permian Basin peaking sometime in 2019.  Of course, the peak might be delayed a bit, but as we can see, Permian shale oil production will decline in the same manner as it increased.  Furthermore, if we do see a collapse in the oil price, it could impact how quickly Permian shale oil production declines.

If we look at the total U.S. shale oil production profile, Jean shows a collapse of 75% by 2025 using :

By dissecting the dotted green line at 2025, it shows 1.3 million barrels per day.  Assuming a peak of 5 million barrels per day, that is a 3.7 million barrel per day decline, or 75%.  Again, these charts are estimations based on total U.S. shale oil reserves at 20 billion barrels.  If you look at the BROWN LINE, it shows the cumulative shale oil production at over 10 billion barrels (right side scale).

Even though the U.S. hasn’t peaked yet in total shale oil production, we have surpassed the halfway mark in total shale oil reserves.  If the shale oil industry can add more economical reserves, then the peak could be delayed a bit.  However, if the oil price crashes and remains low during a deflationary recession-depression, then the peak and decline of U.S. shale oil production will likely be even more severe.

Still Losing Money Production Shale Oil In The Permian

While the Permian Basin is now the largest shale producing region in the United States, companies are still struggling to make a profit.  For example, the largest producer in the Permian, Pioneer Resources, suffered a negative $248 million in free cash flow during the first half of 2018.  

Pioneer Resources spent $1.6 billion on capital expenditures in the first half of 2018 to increase production by 21,000 barrels per day of oil equivalent.  According to Pioneer’s Q2 Press Release, their Permian oil production increased from 251,000 Boe (barrels of oil equivalent) at the beginning of 2018 to 272,000 Boe in the Q2 2018.  That is one hell of a lot of money to increase production only increase production by a mere 8%.

So, Pioneer continues to spend more money on capital expenditures than they receive from cash from operations.  And the reason for that is the severe decline rate that plagues the shale industry.  If we look at the following chart, we can see just how steep the decline rate was based on 2017 production:

The light blue color represents shale oil production brought on in 2017.  If no new wells were drilled in 2018, then overall production would have declined by 500,000 barrels per day in just the first five months of 2018.  Folks, it takes a tremendous amount of capital expenditures just to replace that 500,000 barrels per day lost.  This is precisely why Pioneer continues to throw good money after bad.

Some might say, “Why does Pioneer continue to stay in business and why does it have a $175 stock price?”  Well, that’s a good question.  For one thing, Pioneer has issued a net $5 billion in new stock since 2010 to fund business.  While some shale companies issue debt, Pioneer decided to take advantage of its high stock price by diluting shareholder value to continue the Great U.S. Shale Ponzi Scheme.

Moreover, the $5 billion in net stock issuance helped plug up the hole of the $6.4 billion in cumulative negative free cash flow at Pioneer since 2010.  

The tell-tale signs are all around for everyone to see.  However, Americans will still be shocked when U.S. shale oil production collapses 75% by 2025.  The collapse of U.S. shale oil production will have a profound impact on the American way of life.

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44 Comments on "The Coming Collapse Of U.S. Shale Oil Production"

  1. So, basically the whole world is in a game of musical chairs and the music is about to stop. Several chairs are missing, likely oil, equities, bonds, student loans, & real estate — yet, 99% of the world is clueless, ill prepared, or willfully ignorant while scrolling Facebook instead.

  2. Michael Kohlhaas | September 4, 2018 at 12:51 am |

    Just wonder if I will see the whole crap go down while I’m still alive.

    • Well MK, give or take a few years, Steve’s analysis gives you an upper timelimit of max 10 years before some serious SHTF chaos will break out due to energy alone. My gut tells me that things are starting to bubble beneath the surface all over and on many fronts – many people sense now that something (though they don’t know what) is serious wrong with the status quo, and day by day more awake and start to see, until this ship starts rocking hard – at that point the masses will panic and think “oh $#ee†…” but it will be too late for them.

      • Michael Kohlhaas | September 4, 2018 at 8:44 am |

        Dow down slightly, Dollar up, gold down heavily, gold miners getting shredded. But you talk about a time frame of another 10 years, so in total 20 years after the financial crash in 2008? And this based on your gut feeling? I’m a believer now! 🙂

        People on this blog don’t know what’s coming!

        • Michael,

          There has never been a 20-year economic market cycle. This is not based on a GUT FEELING, but rather, looking at the markets over the past 100+ years. Most cycles are between 7-8 years, and some last up to 10 years.

          If you think the Fed and Central Banks can continue to prop up the markets for another decade, then that is a LOUSY GUT FEELING. But, you are free to feel and believe it.

          Right now the metals are still finding a low. Thus, precious metals sentiment is getting worse. This does not mean GOLD & SILVER are no longer worthy investments, rather, it means the FICKLE PUBLIC PRECIOUS METALS INVESTOR gets very emotionally negative, which is expected.

          The amount of leverage, margin, and debt in the system is beyond belief. So, if you really think this can go on for another 10 years… please make sure you come back in here when the markets Tank and let us know how WRONG WE WERE.


          • Michael Kohlhaas | September 4, 2018 at 9:41 am |

            Hi Steve,

            if I feel like I’ll come back every day and tell you guys how wrong you are. By the way, I didn’t say the markets will be propped up for another 10 years – CHX13 did. He has a gut feeling, I don’t.

          • Michael,

            Actually, you misunderstood what CHX13 was saying. He was saying a 10-year upper limit before the CHAOS begins, not another 10 years.


          • Michael Kohlhaas | September 4, 2018 at 9:53 am |

            Sorry, my bad!

          • There has never been a 20-year economic market cycle!

            That is not strictly true Steve. Here is the example. Use a long term, quarterly chart and apply it in this way to the Dow Jones. The period I am talking about is between P/E 30/9/1982 and P/E 30/3/2001, 19 years.
            Working from the Low Point of P/E 30/9/1982, 770 Pts. Plot a line to increase by 100% Exponentially every 20 Qtrs. i.e. 100% every 5 years.
            You will find the Dow Jones sat upon this trend line for 19 years. It might have had its up and downs, BUT it didn’t fall significantly below that trend line for 19 years and it didn’t break away from this trend line permanently until midway through 2001.
            In my world I would call that a very strong trend!!! 100% x 5 years!
            When you consider the Dow Jones is sitting upon an exponential trend line increasing by 100% every 10 years to the present, 86 years; I would consider the above long term, exponential trend of 100% every 5 years for 19 years very significant.
            You might ask why is that so? Well the current exponential trend which started back at P/E 31/3/2009 is currently sitting upon an exponential trend increasing once again by 100% every 5 years. The past precedence is there in the recent past; so, one could assume if history repeats itself this trend could theoretically continue through to 2028.
            The big difference between these two trends; the earlier trend was driven by cheap energy; the current trend is driven by printed money.
            Not a criticism Steve just a fact!

          • Graham you are missing an important crash (+-30%) in 1987 and a crash in debt in 1994 (+-25% for the 30 year)

      • What is wrong with the status quo is the inflated numbers of Remaining Reserve and how they were calculated.

  3. A brilliant post mr. St. Angelo. Thank you !
    Problems are piling up for frackers: sweetspots are becoming scarcer and scarcer, the price of oil doesn’t seem to increase enough (and it may never do) and Trump’s tariffs are making chinese steel more expensive. In addition the chinese have struck back with tariffs on yankee LTO. The only bright point for frackers is that with a stronger US dollar their foreign purchases may become cheaper. But we don’t know if the US dollar is going to keep rising, in fact any recession in the USA may weaken this most overvalued currency. Frackers can only hope that a crisis in the Middle East sends oil prices to the ceiling in which case they would have some time to breath (of course that would disrupt the economy but this is another story).
    As long as people don’t understand the importance of EROI they are not going to understand how calamitous fracking is. And what’s even worse they are going to be perplexed by the speed at which this “trade” is going to disappear and the promised US energetic independence becomes a joke.
    Luckily we have blogs like this to understand the fundamental role that EROI plays on our lives.

  4. By the way, in the energy sector we should speak about energy and not about volume. What I mean is that it’s quite interesting to measure how much volume of oil is going to be produced but it would be even more interesting to measure the net energy of this oil. It seems quite clear to me that as the EROI of fracking gets worse and worse at some point the whole sector will disintegrate as a house of cards. To avoid this the only “solution” would be to find another energy source to subsidize fracking, let’s say coal or natural gas, but I don’t think these energies will be available. Unless the USA resolve to dismantle large chunks of their economy in order to support fracking the fracking sector is going to fall like a rock.

    • As long as the thermodynamics of net EROEI are still greater than one, theoretically energy production can continue as long as the EROI through Ponzi scheme financing continues.

      The natural laws of physics will ultimately trump any man-made laws of economics.

  5. Here is an interesting link for anyone who is interested.

    In that article is this link – (It does have English in there too.)

    Now before I hear complaints about what has this got to do with oil, the best way to describe it is this – The entire world and everything that happens within it are a huge intricate and tangled web of events, where seemingly unrelated events are all somehow interconnected and are often the cause or a desired result. Often these events are instigated by the same group of very powerful and evil people.

    Admittedly some people are not ready for the information provided above but personally I found it useful to fill in a few gaps, especially how directly geoengineering is related to oil. Nobody ever bothered to ask where all that obscene amount of water came from for fracking… well there’s a good answer to that.

  6. Nice Post

    Thanks for the link to Jeans info.

    One thing missing is the financial affect. Using Hubert’s curves assumes that the system stays intact. That’s a wrong assumption. Once the financial reality hits thre won’t be a trailing decline because the industry will be bankrupt. Shale is not going to follow conventional oil well decline and abandon patterns. It can’t.

  7. This article from the NYT basically confirms what Steve has been saying:

    “These companies have survived because, despite the skeptics, plenty of people on Wall Street are willing to keep feeding them capital and taking their fees. From 2001 to 2012, Chesapeake Energy, a pioneering fracking firm, sold $16.4 billion of stock and $15.5 billion of debt, and paid Wall Street more than $1.1 billion in fees, according to Thomson Reuters Deals Intelligence. That’s what was public. In less obvious ways, Chesapeake raised at least another $30 billion by selling assets and doing Enron-esque deals in which the company got what were, in effect, loans repaid with future sales of natural gas.”

    • Rodster,

      Thanks… yes, I have received a lot of emails from followers on that article. Gosh, once Shale Oil production peaks and declines, especially on the back of falling oil prices, it will get seriously ugly.


  8. I just had a brainfart thinking about old MBS during the subprime era. The investment bankers laughed at the short sellers, the buyers of CDS on mortgages, saying everytime someone buys one, they go out and securitize more mortgages. Isn’t this the rub with shale oil? They go out and find more shale oil to “invest” in? Someone must be shorting oil, and they’ll go out and fund more of these crappy companies by way of more shale oil bonds…

  9. “a profound impact”.

    This impact will result in abysmal social conditions.
    Everyone is searching for the trigger event. Look no further than bonds.
    Another word for bond is debt. They are one and the same.
    These bonds have found their way into the derivative sector and are pervasive throughout the global OTC capital markets, by way of structured financial products.

    These products have been snapped up by pension funds, in their desperate search for yield. Now these very weakly, financially structured funds are facing serious capitalization shortfalls. We may count on the economic cliff side collapse, when the pension payments cease.

    • DisappearingCulture | September 4, 2018 at 4:35 pm |

      “Everyone is searching for the trigger event. Look no further than bonds.”

      Could be bonds; corporate or government. Could be an “emerging market” crisis. Could be something under the radar or out of radar range. I just realized I hadn’t read or heard “black swan” in a while. Like the term is out of style.

      • Its the debt.

        Emerging Markets borrowed heavily, with debt denominated in US dollars.
        The ‘catch’ is, this debt has been issued by big western banks, who promptly rolled it into derivative tranches.
        The EM countries now stand in imminent danger of defaulting on this debt, because of the strength of the US dollar in conjunction with the weakness of their countries currencies.
        If they default, the derivatives default, which brings down the banks and the end of the global credit sector. Gold & silver do a moon shot!

      • What about a different scenario?
        If people are being herded into US stocks, whether through IRA/401Ks or actively as investors, isn’t that in a sense building up a huge reservoir of cash behind those equities, especially if capital is fleeing from the rest of the world into US equities? The government would like this process to continue as long as possible it would seem. Although the equity market is only one half the size of the bond market, (which in turn is dwarfed by the derivatives market), what would happen if a sudden event designed to sell off the stock market was triggered? Maybe a sell-off of the bond market, yes, but only at the long end. There would be a stampede of this money into the last bastion of paper/fiat safety, as reflected by money markets, which from there, it could be harvested, like shooting fish in a barrel by the central bank or government to pay off the debts and reset the system.

        The question is how could the government or central banks get a surgical strike at equities and keep them from rebounding? I have considered that treasury bond “check valves” (ESF?) have been already been installed to allow money from equities to flow one way into US Money markets. There has never been such a thing as a “failed” UST auction. It is not unusual for equities to drop 50%, and therefore an event could be sold to the public as “nothing to worry about” as this would be just another drop like in 2000 and 2008, but from which the market recovered- but not this time. As the public finally realized the gravity of the situation, there would be no rebound, and instead, the stock market would dive even deeper into its financial grave. The argument that the government needs the stock market to remain buoyant to fund the pension plan system is true, but if the stock market crashes, then obviously the government would have no problem convincing the people their pensions are safe with the new money market government system.

  10. Let’s pretend that we are all right, as if we all have pieces of a giant jigsaw puzzle…
    The picture of the completed puzzle does not match our pieces! (Steve St. Angelo having the most pieces especially with EROI !)
    Nothing fits!
    What happens when you change the picture to a “21st century” time of war?
    Do ALL the pieces fit?
    The PURPOSE of combat is to “CUT OFF” your adversary’s resources and finances forcing them to capitulate.
    But in the 21st century there are no adversaries everyone loves each other!
    Hmmmm that’s right ,sorry, let’s put back the old picture and try to figure out what’s wrong with US!
    We MUST stay in the box that we have been given.
    Got pictures of any cute cats?
    Want to see what I had for dinner?
    Hey check out this new game!
    How many likes did you get on Farcebook?

    • But wait !
      What if we put back the picture of a “21st century” time of war.
      Then what is the simplest and most effective form of War?
      a “war of attrition” the oldest method as given in the “Art of War” by Sun Tsu and used by the Roman Legions against the Gauls.
      You continue to undermine, devalue or decimate their resources so that they must capitulate without ever engaging in battle!
      But that would be ridiculous!
      The idea that all the other nations and world powers resources; their land, gold, silver and oil would become near worthless! The idea that gold would be less than $800 and silver less than $7 is totally insane!
      Is it?
      As the value of their resource begin to drop, what will they do? SELL
      Which does what to the price?
      Which forces everyone else to do what?
      But of course this is totally absurd!
      Oh I forgot it’s US! Sorry!
      Well then; Gold is going to break loose any time now and going to $50,000 and
      Silver is getting ready to blast off to $900 and
      Solar cells and Wind generators and…. and….
      the rules of economics and principles and laws of reality since antiquity NO LONGER ARE TRUE!
      There is no warfare! Everyone LOVES EACH OTHER!
      Quick go to Youboob and watch the cat videos!
      and be sure to like the ones where the cat eats dinner at the table and plays games on a cellphone just like a human! oh it’s on Farcebook too!

  11. I don’t believe there will be a US oil crisis. Lindsey Williams has been consistently right about oil. The oil companies know where the oil is but timing, politics, and geo-politics influence domestic policy. He was a chaplain and given executive access in a pipeline oil company. He says they will eventually announce the world’s largest oil reserve ever in Alaska. Also, I listened to him state a good five years before they first fracked that “there is an enormous amount of oil under North Dakota”. Anyone here familiar with the good Pastor?

  12. You hear of another country every week in seriously bad financial and currency conditions. India, Pakistan, Argentina, Turkey, Italy, Indonesia, Brazil, Chile, South Africa, Iran,and so on.. comprises of a lot of people already in dire straits. South America is imploding below us. How can anyone not see the reality? Precious metals still falling in value? Really? How long will the dollar save us all?

    • And don’t forget Venezuela and Mexico. As mr. St. Angelo has already explained PEMEX is almost a bankrupt company due to Mexico’s peak oil.
      There are so many countries suffering from the energy crisis, the last in the news is Argentina, that it’s completely shameful how mainstream media continue to hide the reality of peak oil. I think the reputation of journalists and economists is going to diminish a lot because of all these false hopes they have given to the population.
      When the New York Times or the Washington Post will begin to explain the concept of EROI ?

  13. Up thread Vitruvius brings up a good point. It is my understanding that most shale oil has too high API and while you can produce gasoline you can not refine diesel or jet fuel from this junk oil.

  14. I bet Trump and wall street don’t even know that

  15. William Scavone | September 5, 2018 at 7:21 am |

    I believe supply could drop substantially because of these factors, but without a drop in demand with much less supply, how could the price of oil drop? If oil production is going to collapse by 75%, how can it bring about “much lower oil prices”? What ever happened to the supply & demand factor creating price?

    • With high oil price, people have less money to spend on other things. Demand falls, less demand for oil, oil price collapses. After a brief spike that is. High priced oil is unaffordable; we cannot afford it. So now we borrow like madmen because we cannot afford $80,- oil. And producers need $110,-

      So there’s the pain. More debt is like aspirine, the headache will get much worse though, until your head explodes.

  16. Critical mass and tipping point. When critical mass is reached people will awake to their new paradigm. They stop spending, vote differently and start participating in society in different ways.

    “Regime transitions belong to that paradoxical class of events which are inevitable but not predictable. Other examples are bank runs, currency inflations, strikes, migrations, riots, and revolutions. In retrospect, such events are explainable, even overdetermined. In prospect, however, their timing and character are impossible to anticipate. Such events seem to come closer and closer but do not occur, even when all the conditions are ripe—until suddenly they do.

    Scientists at Rensselaer Polytechnic Institute[1] have found that when just 10 percent of the population holds an unshakable belief, their belief will always be adopted by the majority of the society. The scientists, who are members of the Social Cognitive Networks Academic Research Center (SCNARC) at Rensselaer, used computational and analytical methods to discover the tipping point where a minority belief becomes the majority opinion. The finding has implications for the study and influence of societal interactions ranging from the spread of innovations to the movement of political ideals.”

    Things are heating up, as soon as more people wake up, things will change, rather rapidly. In my opinion we don’t have to wait 10 years. Prosperity is in decline, we add boatloads of debt to compensate real growth, and there’s simply not enough cheap energy to get us out of this one.

    Critical mass will be reached soon. Problems piling up by the month, people read and are not completely stupid.

    • DisappearingCulture | September 5, 2018 at 2:57 pm |

      “Scientists at Rensselaer Polytechnic Institute[1] have found that when just 10 percent of the population holds an unshakable belief, their belief will always be adopted by the majority of the society.”

      The very fact “always” is included in their statement means they are wrong at some of the time [fortunately]. The absolute of always isn’t believable to me. I don’t accept their expertise on such matters.
      10% [I think significantly more] of the population is describable by one or more of the following: Dumb, ignorant, not sane, emotionally unstable, undisciplined, irrational, etc.
      Heaven forbid that the majority of society might start to believe what a lower echelon of society believes. If so they too are feeble minded.

  17. Steve, this is probably off topic, but here foes.
    What the heck is Brandt Oil>
    I’ve seen blurbs on other sites with links to what I’m “assuming” are sales pitches.
    Also, I don’t send money online. Could you list a mailing address so I could send something?

  18. Chris in Arkansas | September 6, 2018 at 5:56 am |

    We often equate oil demand to fuel and energy requirements. Oil demand is also driven by product demand – plastics, lubricants, etc. Each of these markets is huge. That’s where a lot of our oil coming out of the ground in Arkansas goes. My wife tests oil quality for use in these products. The oil she deals with comes via trucks directly from holding tanks at the wells and each load is tested for bid by raw materials manufacturers. Some goes to fuels producers. Any major downturn in our economy will hit demand for these products hard and lower demand for local oil. It will add to any downward pressure on oil prices. We have thousands of these independent wells across the US so the immediate impact of an industry downturn isn’t just felt by shale oil producers. Local communities will immediately suffer as well. I don’t see this as a trickle down issue as pricing is in real time. It will lead to massive layoffs in oil production and downstream manufacturing at a faster pace than we’ve ever seen before. It’s one of the reasons I’ve chosen to work in a more or less recession proof industry even though I could make more money elsewhere.

    • Would these be NGLs in Arkansas? I assume there’s very little or no tight oil production there but some lighter hydrocarbons come from conventional wells don’t they?

      I’m under the impression that most of the tight oil from frac’ing is higher API rated and makes good feedstock for plastics and lighter fluid and not very useable for trains, planes, and ships.

      • Chris in Arkansas | September 8, 2018 at 4:26 am |

        Yes some are NGLs but there is decent crude coming out of Arkansas as well. We often don’t think of these wells as contributors to domestically drilled product as they are a very small operation compared to productive fields. But combine their output across the states and they become a major contributor but their product is often going to midstream refiners and manufacturers so measuring their contribution can be difficult.

  19. Guys, it doesn’t matter, the central banks can create infinite credits out of thin air as we manage an energy decline and transition into a new system.

    We’ve already passed into a post truth, fictional world in many ways. I don’t like to say this often, but I’ll mention this to you guys since you are perceptive. Everything is fake now. Because everything is fake, nobody can really discern reality even if they wanted to. As such, it is absolutely given, 100% certain, that nothing will be done about any of our problems. It’s all BS now. Even as you lay dying in the hospital, they’ll just put a Hallmark movie on the screen.

    See my point. Everything is now divorced from reality. It makes no difference, at all, whether any of us lives or dies anymore. And in many ways, you people agreed to this system. You still watch TV and movies right? I rest my case.

    • dolph,

      Now…. tap your shoes three times together and say out loud, “Everything will be OKAY because the Central Banks will continue to Print money until the Energy Tooth Fairy Comes to Save us.”


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