US Shale Oil And OPEC: SeekingAlpha

Jennifer Warren over at SeekingAlpha is reporting:

In this arguably "new" hydrocarbon-plenty era, economics will drive investment decisions. Exploiting the shale oil and gas is relatively expensive. And a subtle but sticky-priced floor is likely emerging given supply realities. Given that U.S. production would be hit hardest by any serious decline in oil prices, E&P firms have been hedging portions of production, up to three years ahead in cases. Between U.S. firms' financial hedges in place and OPEC's lever of production cuts, if needed, the volatility that oil could face is becoming lessened to a degree by new supply realities. In other words, the price volatility from negative supply shocks of years past is temporarily muted because of U.S. oil production.

In the nearer term, demand shocks and dampeners, such as economic crisis or recession and U.S. policy paralysis that squanders a decent recovery, are more of a catalyst for oil prices to fall. The EIA reports that "energy use in non-OECD countries is projected to grow by 2.2% per year, and the share of non-OECD energy use is expected to rise from 54% of total world energy use in 2010 to 65% in 2040." Growing developing countries will mop up excess supply. Further out on the horizon is the impact of greater fossil fuel consumption and whether the closed system of the earth's ecosystem can handle it.