Oil Has To Plunge Even Further Before The Shale Industry Gets Seriously Damaged

Even after a massive plunge in oil prices, which have dropped more than 50% in less than six months, analysts are saying that it won't be enough to put much of the US oil industry out of business. 

Goldman Sachs researchers say that oil prices would have to drop to $40 per barrel for six months, down another 15% from their current level, to "keep capital sidelined". That's the level at which Goldman says high yield defaults might start. 

The prices are already starting to hit some of the more expensive extraction companies:

However, most aren't in this position yet, and it'll take some time before they are:

In short, this means that it's not the spot price, but the price in around a year that's relevant to most producers. The energy minister of  United Arab Emirates, one of the countries hoping to retake market share and squeeze out domestic US oil, has actually referenced the fact that prices will have to be held low while the companies are still hedged.

Despite the massive drop in prices, most non-OPEC producers are still cost-effective at a much lower price. Non-OPEC oil sources produced 56.55 million barrels of oil per day in 2014. About half of this has an operating cost of less than $20.

Goldman Sachs, Business Insider