The media is replete with stories of low oil prices killing the shale revolution. This is not going to happen, and here’s why: the world remains dependent on US shale oil production growth.

We at Princeton Energy estimate that oil demand should grow at around 1.6 million b/d per year at $80/b, on a Brent basis, with that demand improvement becoming evident from the second half of 2015.

Now, where would supply growth come from to meet that demand?

It could come from Brazil and Iraq for starters. Brazil’s offshore program is finally finding its legs, and production has been increasing at a pace of perhaps 200,000 b/d per year. Iraq, assuming it does not implode into civil war, could provide as much with some luck. And perhaps another 200,000 b/d could come from various other sources, for example, from the US Gulf of Mexico in 2015. And that’s about it for conventional production growth.

As a practical matter, since 2005, about 90% of total supply growth has come from North American unconventionals, including Canadian oil sands and US shale oil and natural gas liquids, with US unconventionals providing about three-quarters of North American supply growth overall. If this were to fall to zero, then all other sources could provide only, say, an increment of only 600,000 b/d, about 1 million barrels per day short of our projected demand growth.

Therefore, if shale growth were to fall to zero, then the global economy would be facing a material shortage of oil by the second half of next year, with high prices the result.

More likely, however, low prices will only trim the growth of US unconventionals, reducing the increase to “only” 1 million barrels per day by early 2016, of which US shale growth would represent around 800,000 b/d. Growth of 800,000 b/d per year is phenomenal, paltry only in comparison to the 1.6 million barrel per day pace seen in the US in the last six months.

Thus, the equilibrium needed is not the collapse of US shale oil production, but the deceleration of its growth to about half of recently observed and frankly stratospheric levels.

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And of course, all this assumes no conventional production is likely to roll off due to low oil prices. I have argued elsewhere that high oil prices have been sustaining more conventional production than unconventional production, and low oil prices could see conventional production to fall well in excess of one million barrels per day by the end of next year. But even if we assume that low prices will have no effect on conventional production, the world will still need pretty smart US shale oil production growth.

Of course, the return of Libyan (and possibly Iranian) production will depress prices for a while. Indeed, Libya has been adding barrels over the last six months at the pace of unconventional growth—no wonder prices have tanked.

But this process cannot continue indefinitely. Even if Libya brought production fully back on line, the effect would be fading by the second half of 2015. The easing of supply outages affects timing of production, but does not change the fundamentals over the longer term.

So you can’t have it both ways. If low prices crush US unconventionals, then production growth will be inadequate, oil prices will pop right back up. On the other hand, US unconventional growth could remain strong by any reasonable measure, even if reduced from its recent torrid pace—but then oil prices have to stay high enough to stimulate this production.

So let’s not fret too much about the US shale business. The global economy remains highly dependent on its growth, and that’s not going to change. Within a few months, the market will provide the prices necessary to support the growth of North American unconventionals.

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