Did China cause North Dakota’s oil boom?

Michael Giberson

News about the Chinese economy has become a bit worrisome, for instance from the New York Times earlier this week, “China Confronts Mounting Piles of Unsold Goods“:

After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors.

Now looking backward at oil prices over the last decade, how much of growing demand for oil has come from China?

According to IEA data, China consumed about 4.7 million barrels a day in 2000 and will consume about 9.7 million barrels a day in 2012. That growth has been among the factors pushing world oil prices from near $30/barrel in 2000 to this year’s prices ranging between $80 and $110.

High prices and technological improvements, particularly since about 2007, have also motivated the addition of new supply capability which is just recently coming to market.

So here is an idea: if Chinese demand growth was a significant boost to oil prices, then maybe without that boost fewer folks would have been so excited about drilling in the farther reaches of the Bakken Shale (and the Eagle Ford in Texas, and the Marcellus and Utica shales in Pennsylvania, West Virginia, and Ohio). So what happens if demand from China doesn’t reach over 10 million barrels a day, as the IEA is predicting, and instead falls to 7 or 6 or 5 — just as new supplies are coming to market? Where will oil prices be a year from now?

RELATED:Forget the past: Gas is expensive and staying that way, experts say.”

“I don’t think we’re going back to the 1990s. It’s a different world,” said James Hamilton, an economist at the University of California San Diego…

If I disagree with James Hamilton on oil markets, he is probably right and I am probably wrong. And yet, I still disagree.

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3 thoughts on “Did China cause North Dakota’s oil boom?

  1. I do tend to disagree. America´s own oil hunger drove the exploration of the Bakken. Actually, the Bakken is the product of a oil geologist named Ed Findley. He had been living on a diet of Rahmen noodles when he was studying sample bores of the oild shale field, and relaized just how massive it was. The majors had drilled there in the fifties, but had no technology for bringing out the oil.

    It was known. But Ed Findley had a brilliant idea.
    Combine the known process of fracturing-in vortical drilling with the horizontal drilling developed by Halliburton. Findley perfected the procdess, supported by Hailiburton, and the rest is history. Now, another Texas co mpany got away from chemical – hydraulic facking by developing petro-fracking for oil and gas wells.

    It is not the Chinese but rather the new technologies for tapping oil shale, which make tapping oil shale economic which opened the oil and gas shale fields the U.S. is now opening.

    The Bakken field has an underlying field in the Williston basin- as well. Harald Hamm, Bakken field oil billionaire ad backer of Mitt Romney, estimates the Williston basin fields to have a total content of at least 25 bilion barrels. The California oil Monterey shale field is currently estimated to be at about 50 billion barrels, and crews are not even touching that yet.

    The Barashnekoff field in southeastern Siberia is also an oil shale rich area that is 80 times larger then the Williston Basis, and it too has also proven out to have two layers of oil shale. Extrapolating, the yields of the Bakken to that, some are currently estimating the reserves there to be.just under 2 trillion barrels. Russia just signed an exploitation deal with Exxon. They will train Russian oil workers on-site and in the Bakken field in the art of horizotal fracking. (That is the same reason Norwegian Stadtoel took over Brigham Oil- to aquire the expertise in horizontal fracking.).

    Now for the real kicker. Oil extraction in the Canadian tar sands was first done by strip mining and heat extraction. Now, in the 19th century, there were a number of “strip mine” of “mineral oil”
    shale mines – all over Western Europe- strip minining out of “oil shale” quarries which were heated by burning coal to extract the oil for kerosene lamps and “medicinal oils”. I personally know of three such fields where the vortical wells do not have be dirven deeply, and go immediately into several levels of horizotal driling. it is not just Chinese demand which will open the four fields I personally know about. (One has to study records of where the old 19th century “oil shale” quarries were located.

    German geologists are aware of the origins of the firstd second layers of the oil black fields. Like the Bakken, and Eagle Ford- the 2nd field formed about between 50 to 40 million years ago..Germany was once made of islands- and the seas around those isolated islands formed the oil shale fields there.

    The risk of “dry wells” is relatively low using established geo0logical knowledge of where the oil shale fields are located throughout Wester Europe. They criss cross and interesect.thorughout Germany, the Benelux an Northern France. The extent runs from the northern Alpine foothills all the way to the North and Balitic Sea.. and under the Swedish flatlands Geological study bores have fairly well established the width and depths of these criss crossing shale fields that were under the ocean eons ago btween the Northern European continetal shelf island chains.

    I became aware of this while watching a television documentary about palentologists from a German University searching for fossils in an abandoned oil shale quarry, which also went on to describe the geological formation of this dark shale, on the shallow seas, and which showed the extent of the criss crossing shale fields of orthern Europe.

    Researching in archives, I found out these oll shale quarries were originally opened in the 19th century, to obtain lighting oil kerosene, and “mineral oil- patent medicines”- and later in WW I and WW II, they were again extensively quarried and heat extracted to supply the war efforts

    The deposits are huge, however, because the shale fields are so shallow, we cannot consider water-chémical fracking to release the oil. The other questio9n hat if oil and gas are petroleum fracked, will the released oil mix with the ground water. There is always the possibility of co² sequestration fracking, and co² sequestrion” parallel horizontal bore – pressure puming the fracktured oil into the pick up lines.

    There are billions of barrels in the extensive, shallow lying European oil and gas shale fields, perhaps hundreds of billions of barrels, but the cheap and easy extraction will have to wait until cleaner extraction methods are developed.

    But this gets backs us to the thesis here. Did China cause the Bakken Boom.? No. the fields were there and Findley deveoloped the techology to extract it. It was a classic “wildcatter'” situation. U.’S. demand i more than enough to drive its opening.

    It is dawning on Germas they themselves are sitting on top of a crossword puzzle grid of very shallow shale fieds that would be easy to extract using the – Findley technology combined with petro-fracking for comparatively clean drills, but the dangers of polluting water supplies are too high at the moment.

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