Well on the back pages I should be safe, I am a retired Petroleum Engineer, and I will attempt to explain the oil price cycle.
Oil prices increase, oil companies lease land, add staff, borrow money and drill wells. As production increases, it eventually equals demand. Prices then start down, since you have a lag time between drilling and production, you soon have more oil than needed and prices crash. To preserve leases and with the belief that the crash is short term, drilling continues.
This makes the prices go down more. This drives companies to the brink and some into bankruptcy. They quit drilling and lay off people. Oil companies give up. With the natural decline of wells, and the increased demand (Ford stops building cars, to build gas hogs) since gas prices are low, production and demand equalize. Then, demand exceeds production, prices go up and the process repeats.
I went through this 3 times in my career, the old timers (all dead now) said it was the same for them. My Dad said "the bigger the boom, the bigger the bust". This time might be different (I hope). In the past we depended on government oil companies (Aramco) and offshore to scale up. Multi year lead times. Now with shale oil, I can drill a well in one month, then complete it a month later (let the cement reach its max compressive strength). Production follows quickly, only a short clean up needed. The cycles have been about 10 years.
Hydraulic fracturing has been going on since the end of WWII. We bought surplus Allison engines and finally had the horsepower to fracture. Almost all wells are fractured (damage, frac and pack, or production enhancement). If we damaged water wells as often as people say, we would be sued out of existence. The current fracs are simple and small, compared to the Cotton Valley in the late 1970's. Millions of pounds of sand, at 15,000 to 20,000 psi in single stages. Nothing like that right now.
There you go, gas prices explained.
