What does Luke Gromen mean when he talks about “shale rolling over”?
It has something to do with the global petroleum market and U.S.-based shale-oil’s role, but I don’t know precisely what he means. 🤷♀️
Discussion
He means productions slows. Less supply means higher prices if demand doesn't drop with it. (No longer in equilibrium) But when he says rolling over, he is implying supply shortage and higher prices.
Thanks! Makes sense. 🙏
It's very capital intensive so you need higher prices to incentivize more capacity and supply. So if priceses fall, they won't be incentivized, which means supply falls until prices rise enough to incentize them to bring on more supply. More supply -> prices fall and there you have the cycle. More or less.
He is very a very "If, then" type of thinker so I don't want to put words in his mouth but I think he thinks oils going back up to $150 if/when oil rolls over.