This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

What Monterey Shale Formation Could Have Meant to California

NEW YORK ( TheStreet) -- Estimates of recoverable oil in the Monterey Shale formation have been drastically cut, putting an end to the dream that oil revenue would save California's ailing economy.

This week, the U.S. Energy Information Administration cut its estimates for the amount of recoverable oil in the region by 96%, from 13.7 billion barrels to 600 million.

Geologists had previously believed that the Monterey formation was America's largest reserve of shale oil and gas, with about two-thirds of the country's shale oil reserves.

"From the information we've been able to gather, we've not seen evidence that oil extraction in this area is very productive using techniques like fracking... Our oil production estimates combined with a dearth of knowledge about geological differences among the oil fields led to erroneous predictions and estimates," said EIA petroleum analyst John Staub.

The key word in the announcement is "recoverable." Twelve billion barrels didn't disappear; however, the EIA has decided that getting to them would be a lot harder than previously thought. This marks the second time in two years that the EIA has cut its estimate for the amount of oil it thinks can be produced from the Monterey Formation.

News of the Monterey formation's diminished oil capacity is disheartening to state officials, considering that extracting the reserves would have added millions of jobs to the local economy.

California, which has an unemployment rate around 7.3%, was estimated to add up to 2.8 million jobs by 2020 and boost government tax revenue by $24.6 billion a year while extracting the billions of barrels of oil.

Industry lobbyists had long said the Monterey formation reserves were a game-changer for U.S. oil and gas production.

The Monterey formation stretches beneath Los Angeles to north of the Bay Area, while a large portion stretches east toward the area around Bakersfield.

Political debate could halt extraction of oil in the area because fracking takes a lot of water, and California is in a severe drought. Energy companies using millions of gallons of water to frack oil and gas wells while farms remain parched would have been difficult to justify.

Although there is a lot less oil to be extracted in the region than once thought, extraction of even one million barrels may be on hold for a while as Californians attend to more realistic avenues of growth and investment.

>>Read More: American Air President: Don't Call Us 'Nickle and Dimers'

>>Read More: Boeing Wants to Be More Like Apple in Its Strategic Planning

>>Read More: It's Time to Look Abroad to Enhance Your ETF Portfolio

Follow @macroinsights

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,387.21 -291.49 -1.65%
S&P 500 2,029.55 -27.54 -1.34%
NASDAQ 4,681.4970 -90.2660 -1.89%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs