Still Bullish on California Oil?

Keith Kohl

Written By Keith Kohl

Posted May 30, 2014

Let’s face it, last week’s EIA’s revision of the amount of recoverable oil from the Monterey Shale formation in California was devastating.

Their downgrade from 13 billion to 600 million also ended the hope that developing the Monterey Shale would lead to an extra 2.8 million new jobs, and as much as $25 billion in tax revenue for The Golden State.

But, as I told you a few days ago after the news broke: don’t believe the hype… yet.

In fact, oil companies in California finally got a bit of good news yesterday.

The state’s legislature blocked a ban on hydraulic fracturing and horizontal drilling with bipartisan support. For the record, this is the second time the legislature has prevented a ban on the method that has worked economic miracles in North Dakota, Texas, and Pennsylvania.

And clearly the government was not ready to let go of the possible $25 billion in extra tax revenue…


As you can see above, California’s unemployment rate is uncomfortably high, and it would be nice to see it drop back to pre-recession levels below 5%.

And once drillers find the right combination of chemicals and technology, I fully expect reserve estimates to increase.

Granted, the Monterey’s outlook seems bleak right now, but the fact remains that the state could seriously put this resource to good use. As it stands now, 40% of California’s energy consumption comes from its transportation sector, which as you is fueled by refined petroleum products.


So while people start ignoring the Monterey Shale again, smart investors will keep it on their radar because it still has plenty of support.

And once drillers see successful results and reserve estimates go up again, those same naysayers will rightly call into question California’s shale crisis.

Until next time,

Keith Kohl

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