Accelerating changes in the oil industry are leading to two major emerging trends.

Tuesday morning, the International Energy Agency (IEA) in Paris reported that global investment cuts in forward capital commitments for new projects continue to intensify, with the current total in excess of $20 billion. Extrapolations made by other analysts quickly put another zero on the amount if extended out a few years.

With crude languishing at $45 a barrel in New York and less than $50 in London, this is the latest signal that the low prices for oil are initiating a pullback in projects. But it is the range of the cuts this time around that is interesting.

And this development is spurring a second, more extreme effect on the sector…

The U.S. and Canada Delay New Drilling Projects

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We have already witnessed postponements in more expensive unconventional drilling in the United States and corresponding delays in Canada on new oil sands projects.

These were the first expenditures to come under pressure. Deeper, horizontal, fracked drilling is much more expensive than conventional, shallower, vertical production. With the average shale project requiring outlays of $5 million or more per well, average prices would need to be in excess of $70 a barrel to break even.

Shale and tight wells provide most of their volume upfront, usually in the first 18 months. And while production could continue at a lower rate for much longer, the problem of realizing a sufficient return on investment (ROI) persists. With the bulk of the oil coming up when prices are low, ROI declines significantly… and the attractiveness of the project along with it.

As New Shale Sources Enter the Picture, Saudis Will Fight for Market Share

The American shale and tight oil sector had been one of two main targets for the OPEC decision last Thanksgiving to maintain production (the other being the Saudi concern over Russian inroads into the Asian market). Increasing production from the new sources was projecting major shifts in market share. OPEC needed to curtail that.