Five years ago at the beginning of the US shale oil revolution, drillers started to load up on debt to fund their operations and acquire new acreage, as vast areas of North America started to open up for exploration. There has been a spectacular rise in US oil and gas output. Latest estimates suggest that by the end of the decade the US will have outstripped even Saudi Arabia and Russia in terms of oil production. But, according to Max Keiser, an American economic commentator based in London, $660 billion was borrowed to do the job, predicated on oil at $100+ a barrel. Everyone knows approximately what the current price is, and the future looks very dodgy.

Deutsche Bank reckon that, with the price at $60 per barrel, a dangerous debt bubble in a notoriously volatile segment of corporate credit markets has been created, and there could be a 30pc default rate among B and CCC rated high-yield US borrowers in the shale oil industry. This poses a wider systemic risk in the world’s biggest economy. By encouraging ever more drilling in pursuit of lower oil prices, the US Department of Energy has unleashed a potential economic monster and pitched these heavily debt-laden shale oil drilling companies into an impossible battle for market share against some of the world’s most powerful low-cost producers in OPEC.
 
America’s shale oil is expensive to produce and the industry is comprised of numerous small companies who were forced to leverage their operations with debt to fund the high cost of drilling by fracking. Should oil prices fall for a prolonged period of time many who have been forced to borrow at a higher rate could be forced out of business and ultimately default. Already, of the 12 largest shale oil basins in the US, 80pc are barely profitable with prices of oil below $80 per barrel, let alone $55. More worrying is that these projections don’t include interest payments on debt made by shale producers. The consequence is a sell-off in debt and equities in this energy space in the last few months as the market has become increasingly concerned about the risks of an oil price war with members of the OPEC. (An edited version of an article by Andrew Critchlow, Daily Telegraph 14 Nov 2014 and information from David Watts of The Times, London, about investment figures).

This is the price of so-called “liberty”, which the representatives of big business whitter on about. Instead of planning ahead and approaching an opportunity in a planned way, with national targets and a strategy, we get another boom-or-bust over-reaction which, if it just involved the uber-capitalists wouldn’t matter. But it threatens us all. Epicurus would suggest “enough is enough”. We tried a planned economy; it didn’t work too well, but at least the people were clothed, fed and educated. Now we are all at the mercy of people who don’t give a damn and gamble big time, probably walking away scot free when the balloon goes up.