https://www.forbes.com/sites/timwor...w-resource-economics-works/#563c3d90118f
Nov 18, 2016, 02:43am
The Midland Basin Wolfcamp Shale Is Not Worth $900 Billion - That's Not How Resource Economics Works
Tim Worstall
There is much excitement at the USGS announcement of their discovery of vast shale oil resources in the Wolfcamp area of the Midland Basin in Texas. At 20 billion barrels it's said to be the largest continuous field ever discovered. It most certainly has a value and we are all of us richer as a result of the discovery of this most useful material. However, this isn't worth $900 billion, that's just not how resource economics works.
But that is the insistence at The Guardian:
"A huge deposit of untapped oil, possibly the largest ever discovered in the US, has been identified by the US Geological Survey (USGS) in west Texas.
The USGS estimated that 20bn barrels of oil was contained within layers of shale in the Permian Basin, a vast geological formation that stretches across western Texas and an area of New Mexico. The discovery is three times larger than the Bakken oilfields of North Dakota and is worth around $900bn.
The enormous deposit, in the Midland Basin Wolfcamp shale area that includes the cities of Lubbock and Midland in Texas, is the largest continuous oilfield ever discovered by the USGS. The area also includes 16tn cubic feet of natural gas and 1.6bn barrel of natural gas liquids."
Everything except that valuation there is just fine. But that valuation is horribly wrong. Because what they've done is just look at the market price of oil, multiply by the volume and say that's the worth of it, the value.