The Bakken Oil Reserves

Here is a poorly written, but informative, paper on the Bakken Oil Reserve. This deposit has been known since the mid-70s (Wiki says it was described in 1951, but I don't know if that was the geological formation or the fact it may contain a lot of petroleum) and it appears the oil (according to the Wiki entry on the Bakken Oil Rserver) is more difficult to extract than what oil producers like.

The impression I get is this oil reserve is only going to put an end to the rise in the real price of oil and is only going to be able to drive the price of oil down as we learn how to more productively extract it. That is, even if this oil source lives up to the hype and we get good production online in a fast manner it probably will not do much to lower the price of oil. It will do much to weaken OPEC's hand, which is not a bad thing (however remember OPEC's hand also consists of the fact a lot more people want oil now than before).

The paper I cite above notes numerous times the ability to extract oil depends to a large extent on the price of oil. If all of a sudden oil goes back to under $50/barrel then the Bakken oil is probably not going to be worth going after. However, I am skeptical we will see current oil production become dirt cheap again (or at least not without a very serious shock to the world economy) at prices like they were at the end of the '90s and early '00s (even with the recovery of the dollar).

There is a lot of variability in the estimates of the total amount of oil as well as how much of the oil is recoverable.

I was talking with a guy at the pump in Kaukauna a weekend or two ago and warned about how this area is probably home to the ultra-endangered hairy-nosed prairie dog (a tongue in cheek invention) and he laughed and said if the estimates are confirmed to be as good as the early papers indicate then no hairy-nosed prairie dog is going to stop the extraction of that oil.