ON-Lion Letter

"With petroleum prices down 50 percent over the past year, many analysts and pundits are predicting the end of America's shale oil boom," begins a May report by Mark P. Mills from the Manhattan Institute for Policy Research's Center for Energy Policy and the Environment (CEPE).  "High prices, shale skeptics argue, created a bubble of activity in unsustainably expensive shale fields.  As shale-related businesses contract, consolidate, and adjust to the new price regime, a major shale bust is inevitable, they add, with ghost towns littering idle fields from Texas to North Dakota.

"It is true that the oil-price collapse was caused by the astonishing, unexpected growth in U.S. shale output, responsible for three-fourths of new global oil supply since 2008," Mills continues in Shale 2.0:  Technology and the Coming Big-Data Revolution in America's Shale Oil Fields.  "And as lower prices roil operators and investors, the shale skeptics' case may seem vindicated.  But their history is false:  the shale revolution, 'Shale 1.0,' was sparked not by high prices -- it began when prices were at today's low levels -- but by the invention of new technologies.  Now, the skeptics' forecasts are likely to be as flawed as their history.  This paper explains how continued technological progress, particularly in big-data analytics, has the U.S. shale industry poised for another, longer boom, a 'Shale 2.0.'"

Mills is a senior fellow at CEPE, chief executive officer of the Digital Power Group, a tech-centric capital advisory group, and a faculty fellow at Northwestern University's McCormick School of Engineering.

"[I]f the U.S. is to fully reap the economic and geopolitical benefits of Shale 2.0," he concludes, policymakers should:  1. "[r]emove the old, no longer relevant, rules prohibiting American companies from selling crude oil overseas;" 2. "[r]emove constraints, established by the 1920 Merchant Marine Act, on transporting domestic hydrocarbons by ship;" 3. "[a]void inflicting further regulatory hurdles on an already heavily regulated industry;" and, 4. "[o]pen up and accelerate access to exploration and production on federally controlled lands."

The Lynde and Harry Bradley Foundation in Milwaukee substantially supports the Manhattan Institute's CEPE.

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