An article in Wednesday’s Wall Street Journal was headlined “Warning Is Sounded on Shale” (print edition). The first sentence explained: “U.S. shale companies are churning out crude oil at a record pace that could overwhelm global demand and reverse the oil market’s fragile recovery, a top energy-market observer said Tuesday.”
After reading this, I thought to myself, how is this a problem? I understand companies in the energy business might prefer prices to be higher (and life easier), but shale-oil companies increasing the supply of oil sounds great for customers and consumers.
According to the article, the flexibility of U.S. shale companies to increase production reduces the likelihood of price spikes like we had in 2011 to 2014, when oil was over $100 a barrel. This helps consumers. It especially helps those consumers who have to pay a relatively high percentage of their income for heat and electricity. If your energy costs are only 1% or 2% of your budget, a 50% increase is eminently manageable. But if energy costs are 10% of your budget, as they are for poorer people in much of the United States, a 50% increase, or even a 25% increase, in energy costs is a problem.