Longtime energy analyst Phil Verleger recently sent us a copy of a paper he just published called “Only in America.”In it, he outlines why the shale revolution that’s taken place in the country over the past decade can never happen anywhere else — not even China or Russia.
And it has nothing to do with geology.
First reason: Our nimble energy industry. From Phil:
“Firms that succeed in the US recognise that oil and gas extraction here resembles a production line. They use inexpensive microcomputers or personal computers (PCs) rather than multimillion-dollar supercomputers to identify the best drilling locations. It takes many relatively low-cost wells—drilled not by PhDs in geology but by experienced, hopefully well-trained high school graduates—to bring these reserves into production. In the United States, these individuals manufacture natural gas and crude in this manner. It is not found through huge expenditures on a few wells.”
Second reason: our futures markets:
“Participants in the business recognise they are operating in a low-margin activity where controlling costs and maximizing revenue are essential. As a consequence, they have flocked to natural gas futures, a financial instrument and market unique to the US.”