The refrain is familiar by now: In recent years shale-gas production success overwhelmed demand that was already depressed by the recession, and natural gas prices cratered. Understandably, observers wonder if industry’s rush to shale-oil plays and skill in transferring technology to them will result in a similar comedown for oil prices.

Taking a stand on this debate in a recent report are Bernstein Research analysts, led by senior analyst Bob Brackett, who say the shale-oil flood “may not break the levee.” The analysts note that the bear argument for oil prices is based on the experience of a rising U.S. gas rig count and resulting production from the shales flooding U.S. gas supply, depressing gas prices and the value of gassy equities. In recent years, producers have responded to those cratering gas prices by rushing to oil plays, with an attendant significant rise in the U.S. oil rig count. Thus, the argument goes, won’t oil prices in turn be brought down by burgeoning shale-oil supplies?

The Bernstein analysts give 12 reasons why they think oil prices will hold up, based on market dynamics, subsurface issues and investment dynamics.

In terms of market dynamics, producers have favored oil over gas for some time now, and oil prices have held. Further, the end market is bigger for shale oil than shale gas; price elasticity with changes in supply is less for shale oil; and industry structure for oil is better than for gas, the analysts say.

As for subsurface issues supporting oil-price strength, “the resource opportunity of shale oil is lower than shale gas; the cost structure for shale oil is not the low end of the cost curve; and quality drilling locations are finite,” the report notes.

Investment dynamics also support oil’s price strength. Compared with shale gas, the learning curves for shale oil are capital intensive; the footage-per-well revolution that drove gas production has passed by shale oil; per-well volumes for shale oil are lower; and “industry available capex is dominated by oil revenues and cannot sustain in a low-price environment,” the analysts say.

The end result if Bernstein’s thesis holds up: Oil-levered companies will prosper, with those having the lowest cost structures creating the most value. Top picks in that scenario are EOG, Apache, Anadarko, Noble and Talisman. If shale-oil production does depress oil prices, the future will “still be brighter than what we believe the oil equities are currently reflecting,” the analysts note.

Should prices collapse, if shale oil works “too well,” being underweight energy or defensively positioned in the large integrateds would offer protection. If shale oil doesn’t work well enough, and prices rise due to insufficient production, even the lower-quality resource plays would be economic and, obviously, oily companies would outperform.

“Also, in such a world, pressures on growth could well drive industry consolidation, creating investment opportunities for smaller-cap and mid-cap names with oily assets,” according to Bernstein.

Contact the author, Susan Klann, at sklann@hartenergy.com.