Economics Essay on Mitchell and the Barnet Shale

2021-06-04 12:32:23
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Wesleyan University
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The latest oil prices are given by the Journal of Petroleum Technology.

Although the journal does not cover any information of Brent and WTI, it highlights the average of oil prices as $2.28 for gasoline and $2.16 for diesel, though they keep on varying due to factors such as supply and demand, restrictive registration, financial markets, political factors and weather amongst other aspects.

Summary of the economic aspects in the article Mitchell and the Barnet Shale

Government factor

In its revolution, the Mitchell and Barnet shale experienced great favours and contribution. The main government policies did not affect the carriage and the market structure, in any negative way (Gold, 2015). Consequently, both the federal and the state governance bodies reinforced and greatly oversaw sound expansions and enhancements of the industrial and commercial platforms. They did this through various strategies such as conducting critical and formidable researches, government subsidy collective exploration ventures as well as upholding private-public enterprises.

Consequently, the government funding through subsidies and mutual exploration in the gas sector lead to a speedy flourishing of Barnet Shale. The fuel predicaments in the 1970s provoked the setup of a common legislative and executive assembly lead by the then President Ford, who formed the energy research and development administration or commonly known as ERDA, and whose main objective was to enhance the elevation of the then eccentric research systems in the gas industry.

On taxation, the government gave tax inducements and exclusions for the upcoming and new fuel developments. These tax benefits generated up to a maximum of about $ 10 billion in the early 1980s, and savings of around $ 760 million by early 1990s. Mitchell and Barnet Shale among other gas industries hugely benefited from these tax credits

Labour and operation costs.

In the mid-1990s, Mitchell Energy somehow convinced the NGPL to invest in its operations, through a contract merger, which also comes with other reimbursements' however, this promoted a shift of the previously vended fuel, within the guidelines of the agreement to spot valuing. This caused an imminent effect which leads to the decline of the gas price by at least one dollar. However, Mitchell maintained even though the Barnett group were compelled to expedite tumbling outlays combined with cumulative investments. Eventually, the Barnett attained suitable financial factors that enabled it to strategize on developmental drives in tits interior expansion, especially in the wake of 1992 and 1994 where it outfitted its operations to the northern part of Texas. Nonetheless, despite the convention merger and spot valuing, its expansion strategy fundamentally grew into a breakthrough plan based on a common financial philosophy. Consequently, the merger enhanced justification for upholding and preserving the drive, given the enormous percentage of the gas was being handled and administered via the firm's plant (Kutchin, 2001). This, however, led to a stiff competition with other fuel firms, an idea that prompted the Shale team to research and be able to realize that fluctuations in merchandise valuing could diminish the corporate economic benefits. It, therefore, took firm actions to reduce such occurrences. Throughout its operations, this gas merchandise giant has had a decline in both the boring and accomplishment costs, which are always signified in the company's decline curve representations up to a middling fuel reserves of up to 1.0 bf in the last twenty-five years.

Market structures and Capital Markets

In the scope of the finance, there has always been an unclear deliberation on whether big and minor industries are more prospective to revolutionize. The issue about fuel industry development in the United States has not been an exemption. The Mitchell and the Barnet Shale was at one time very minor compared to the gigantic energy industries that had already picked in the market arena. Given that fuel and gas manipulation is one of the most capital-rigorous businesses, the Barnet and Mitchell shale evolutional antiquity sturdily proofs that trivial natural energy industry lacks fundamental aptitudes, fiscal or the procedural aspects to guarantee considerable and extensive uncertain investments in the shale energy expertise. Certainly, it was only the massive sovereign energy industries that enjoyed enormous and immense reserves in the very initial junctures of energy advancement, with the United States of America taking a big lead in that. The main fuel businesses, bigger, compared to the sovereign ones, had the capability but failed to intrigue their investments in Shale early enough. This platform was much less striking, especially for the large energy firms in venture choice compared to conservative fuel and gas. Mitchell and Barnet's shale were greatly assisted by the already founded energy companies in its growth, although verifying the specific degree of provisions, firms in the boring and hydraulic shattering after the Barnet oil is somehow complex (Wiseman, 2017).

In the capital markets, claims have been made that they play a critical part in the growth and expansion of Shale energies. After the kick-off of the Shale energy boom, commercial institutions pumped a lot of capital towards the boring, thus substantially easing the number of compacts of the bigger energy firms. The Mitchell and Barnet shale mostly depended on the capital market such as the bank credits, public stock contributions, public bond donation and private engagements, so as to generate money for the drilling of fuels and gas as well as for development purposes.

How would an economic evaluation help with the subject of the article?

The economic scrutiny of the Mitchell and Barnet Shale assists in the orderly, methodical documentation, quantification and assessment of the inputs and the results of the operations of the firm. It also indicates the consequent exploration of various factors that affects the running of the shale operations, therefore facilitating engineering of proper strategies and loss-mitigation plan for the energy company (Wiseman, 2017).

Give one example or more from the article relating to the supply market and demand markets.

The article does not illustrate any knowledge or statistical data on the Mitchell and Barnet shale's supply market and demand markets in any certain manner. However, it exemplifies how George Mitchell put efforts in the years the 1980s and 1990s. He focused on the need to discover and articulate additional springs of natural energy so as to compliment the firm's draining reserves of natural fuels. Those springs acted as a very important money generating assets facilitating the company to supply natural gas Pipeline CO. this undertaking facilitated conveyance of energy and gas to various places in and outside Chicago (Kutchin, 2001).

On the demand aspect, the article indicates that there were other energy companies, some bigger than Mitchell and Barnet shale. This suggests that there was stiff competition between them, especially the fact that it was happening at the prime period of the industrial era. This obviously adversely affected the prices and therefore demand of gas thus generating a prospect of the decline of market share. Consequently, Mitchell and Barnet shale's fuel prices were at times expected to shoot in levels on the production's deregulation in the 1980s. On realizing the budding upside, Mitchell compelled the Shale's committee in the 1990s to approve of funds so as to generate energy from Shale mainstay establishments in northern Texas. In spite of deregulation, the energy prices were considerably stumpy in the industries initial stages, so as to generate sufficient funding bearing in mind the qualms, perils and expenditures involved.

One thing in the article that would be affected by the time value of money.

The main aspect that would be greatly affected by the time value of money is the boring technology used in the drilling of the fuel. The article elucidates on the high and large amount of money being directed toward the drilling and conveyance of gasses, comparing the drilling technology used in the initial stages of development of Mitchell and Barnet shale, it is clear that more valuable' money was used than it would be used today. Most of those technologies were auto-manual or semi-automatic suggesting that apart from the physical machine operation, a lot of human resources to be required, thus high cost of production. Most of the current technologies are far much automated and only require few people to operate, and therefore unlike the earlier technologies, the current ones are cheaper and effective. This suggests, that the boring technologies that were initially used has been affected by the time value of money and can no longer compete with the growing economic dynamic in the gas production.


Gold, R. (2015). The Boom: How Fracking Ignited the American Energy Revolution and Changed the World (1st ed.). Simon & Schuster.

Kutchin, J. (2001). How Mitchell Energy & Development Corp. got its start and how it grew (1s ed.). [Woodlands, Tex.]: Universal Publishers.

Wiseman, J. (2017). The Fracking Revolution: Shale Gas as a Case Study in Innovation Policy | Emory University School of Law | Atlanta, GA. Emory University School of Law. Retrieved 23 February 2017, from


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