Fracking--“It takes all the running you can do, to keep in t

[dan_s]

This is true. Horizontal shale wells (on average) decline by more than 80% in two years. They also produce close to 80% of their EUR reserves within two years. I discuss this in my "Energy Markets in 2013 and Beyond" presentation, which I will be making in Dallas on Wednesday.

The good news is that high initial rates make the wells payout very quickly, usually in the first year. At today's high oil prices, the economics on the Bakken, Eagle Ford and Permian Basin oil wells is outstanding.

The bad news is that the more dependent we become on the shales for oil supply, the more wells will be needed each year just to keep production flat. [This is great news for the onshore drillers and oilfield service firms.]

The idea that the U.S. will be energy dependent is (IMHO) a false hope. I do not see it happening in my lifetime. We do produce all the coal and natural gas we need, but oil is a totally different story. The U.S. will always need to import a high percentage of its oil

Today the U.S. produces about 7.5 million BOPD and we consume over 14 million BOPD. I believe U.S. production will peak in the 10-11 million BOPD range around 2020 then start a steady decline. We simply will not have enough rigs to drill the huge number of new wells needed to offset declines. Plus, the "sweet spots" in the Bakken, Eagle Ford and Permian Basin are being drilled first. The wells won't be as good in the "Tier Two" acreage.

That said, the price of oil will continue to move higher. Demand for oil will continue to increase and the "cheap stuff" is all but gone.

The only way the U.S. can become energy independent is for the country to move rapidly to more natural gas for transportation fuels. Right now I do not see that happening.

PS: The reason gasoline prices are coming down now is because refiners can blend more butane into the gasoline during the winter. Butane is very cheap these days. Why? Because winter gas can have a higher evaporation rate and still meet government standards.