Hard Asset Investor: Have your views evolved on oil at all following the boom in U.S. production over the last couple years? Has it tempered your bullishness? Or do you think this is just a blip in the big picture?
Rogers: It’s certainly caused a big supply increase in the U.S. We cannot ignore that or avoid that. But as I said before, all other oil reserves around the world are in steady decline, whether it’s 4 percent a year or 6 percent a year, I don’t really know. I know those are the various estimates. And the interesting thing about shale oil and gas is that in countries like Poland, the majors have abandoned drilling there because they have found it’s not quite economical.
We’re also finding that these wells are very short-lived. For example, with natural gas, what happened was everybody started drilling. And they rushed out and had a wonderful time. But now it’s four or five years later, and we’re finding out these wells decline very quickly. And so people are finding it’s not nearly as much fun as it was in the beginning, especially in the beginning when a lot of them had to drill acreage quickly to maintain their leasehold obligations.
I think the reserves may not be what we thought. And some of the gas companies have reported decreases in their estimated reserves because the wells dry up pretty quickly.
The same is happening with oil. The oil boom started later than the boom in shale gas. And we’re finding that those wells decline at the rate of, depending on who you believe, 38 to 69 percent in the first year. I don’t have a clue, because I've never drilled a shale oil well. But we do know that those are fairly short-lived, too. So this has been great fun, and it may last a while. But I would suspect it’s not quite the boom that the press seems to think it is. We’ll find out.
There is a big difference between oil and gas. Gas is not worth anywhere near as much and as a result the low price has caused shuttering of wells in high cost areas. Reserves are not based on how much gas is in the ground but how much is commercially available. Lots of gas companies have had to write down the value of the reserves.