by Mitch Kokai
Senior Political Analyst, John Locke Foundation
THE COSTS OF digital processing, storage and bandwidth drop about 33% per year. That’s why you can buy a 50? flat-screen HDTV for $300 (I paid $3,000 for one in 2008, and it still works great), a laptop for $200 and several brands of smartphones for $100.
Cool as these cheap prices are, they’re not digital tech’s neatest trick in the last ten years. Hint: It’s not the iPhone, Facebook, Snapchat, Uber, Airbnb or Netflix television, either. Digital tech’s most impressive, shape-shifting win in the global economy has occurred in oil-and-gas production. Since 2008 the cost-efficiency of fracking oil and gas from shale rock has improved 400%, according to Mark Mills, a senior fellow at the Manhattan Institute and a Forbes.com contributor. …
… Mills says the amount of oil and gas trapped in the earth’s shale rock is, for practical purposes, limitless–or at least for the next few decades. The trick, of course, is producing that oil and gas cheaply. It takes a combination of deep directional drilling (e.g., 2 miles down, a 90-degree turn and another 2 miles down) and fracking (streaming a water-and-sand mix at high pressure to fracture the rock).
Enter digital technology, which has worked its Moore’s Law miracle on drilling. Drilling became so accurate in the early 2000s that it created North Dakota’s Bakken boom. But drilling improvement hasn’t stopped. Digital technology never does. What was a shale-oil break-even drilling price of $80 per barrel is now $50, and it’s headed for $40 and possibly $20.