There's a lot of blah, blah blah about when (not if) the American shale oil boom is going to go belly-up.

I call your attention to the Bloomberg editorial America's Going To Lose The Oil Price War (January 12, 2015).

That doesn't mean that once Brent hits $40 — and that is the level Goldman Sachs now expects, after giving up on its forecast that OPEC would blink — shale production will automatically drop by 1.5 million barrels per day. Many U.S. frackers will keep pumping at a loss because they have debts to service: about $200 billion in total debt, comparable to the financing needs of Russia's state energy companies.





Graph from Dealbook, hat tip to Tim Iacono

All that is very clear, so let's get the heart of the matter. Here's the ending text of the Bloomberg editorial.

A wave of bankruptcies in the U.S. shale industry will probably drive [oil prices] up because it will be perceived as a negative factor for supply. How high it will go, however, is unpredictable. It may actually rise enough to enable consolidation in the U.S. shale industry, giving it second wind and driving OPEC countries, Russia, Mexico and Norway into greater difficulties — or it might just even out at a level that would make the U.S. forget about its shale boom. That would have dire consequences for the U.S. economic recovery.

Here it is, the first reference I've seen to a shale oil bail-out.

It may be time for the U.S. government to consider whether it wants to up the stakes in this price war by entering it as a sovereign country. That might mean bailing out or temporarily subsidizing the shale producers. After all, they are competing with states now, not with businesses like themselves.

Bailing out shale operators is tantamount to bailing out the banks which finance them (opening text and graph). That NYT Dealbook article makes a prediction:

Yet with the price of crude oil falling below levels sufficient for some energy companies to service their huge debts, strains are being felt and defaults are likely. While it may take some time for the crunch in the oil industry to translate into losses, one thing already seems clear: The energy banking boom is over.

Or maybe not, if the government is absorbing those bank losses.

I believe we've seen this sort of thing before