Good for humanity, bad for O&G industries.
EDIT: I'm fairly confident this is the start of the end. The US Congress extended the production tax credit for renewables for 5 years, along with Tesla's Gigafactory ramping up production, which means we're going to be awash in renewable-generated power and have the capacity to store it (in cars, and in stationary storage).
That's very hard to analyze because the issue is not just how oil is sourced and used, it is how people on average expect it to be sourced and used.
On the supply side, while producers like the Saudis are trying to undercut fracking with low prices now, they can't make people forget about fracking. If the Saudis try to raise prices again, then fracking becomes a viable competitor again.
On the demand site, the world is not going to forget about global warming. Population growth will keep slowing. Infrastructure will keep getting built and keep getting smarter.
At some point the supply and demand sides will diverge enough to knock oil from its privileged position as THE key resource for the economy. This is similar to earlier essential resources like food, clothing, water, shelter, mining, etc. We still spend a lot of money on these things, but there is no expectation that they are guaranteed growth industries.
I suspect if prices rise again, those test wells may have proved to be profitable. However, the oil companies came through and leased tons of acreage already and spent lots of money on the leases. Even if prices come back, many of the leases would have either expired or the gas companies would have to pay for their extension provisions. Given the state of the companies that started leasing (CHK: down 86% since they leased my father-in-laws old farm property), I don't think they have the money to do that. Even if the original leaser sold the leases off, which happened in many cases, the new owner would still have to pony up the extension and then start drilling again, exposing themselves to OPEC under-cutting them again.
I think its about equally likely that the end game is that the price of oil (ultimately driven by energy to extract each unit) goes up until other things that are known are more cost effective for most uses; this doesn't make it "lose its value" -- the use value remains the same and the market clearing cost per unit is high -- but it shrinks the size of the market (there may be some uses for which it is still cost effective, but not as many) and is still bad for the oil & gas industry.
And, with the cost of renewables continuing to drop, along with government incentives, I don't ever see the cost of electricity going back up. Ever.
On the other hand, Texas has so much wind power locally that they can't ship out of the state yet that some utilities give power away for free at night:
http://www.nytimes.com/2015/11/09/business/energy-environmen...
As more renewables come online (and they will, I assure you), this will further drive down the per kwh cost.
Yes, all the major banks (Goldman, JP Morgan) have models for this kind of thing.
http://www.forbes.com/sites/michaellynch/2015/09/14/goldman-...
http://247wallst.com/energy-economy/2015/11/09/jpmorgan-slig...
Eventually the price will stabilize, somewhere in the $35 - $65 range, probably.
Keep in mind: China economy cooling off, fuel efficiency standards, shifting demographics (older populations drive less).
We reached peak oil, it just wasn't supply. It was demand.
Nifty redefinition, but I take this to confirm that the Peak Oil aficionados were kooks, just as they seemed to be. They and Paul Ehrlich will eventually be joined by many others in my "confirmed kook" bucket, but so far my "strongly suspected kook" bucket seems pretty accurate too.
This is definitely a buying opportunity for those with the money to make such investments.