In last week’s energy news, the drastic cut in the estimate of recoverable shale oil in Monterey, California, by the Energy Information Administration drew a lot of attention. In 2011, a consulting company had estimated that there would be as many as 13.7 billion barrels that could be extracted with today’s production technology. The latest update is 600 million barrels – a 96% decrease. It turned out that Monterey’s geology is not very conductive to fracking.

Reactions to the news have been predictable. For example, The Guardian, which has expressed reservations about fracking in the past, declared that “Industry’s over-inflated reserve estimates are unravelling, and with it the ‘American dream’ of oil independence.”

Responding to Los Angeles Times queries, Tupper Hull, spokesman for the Western States Petroleum Association, said that “”We have a lot of confidence in the intelligence and skill of our engineers and geologists to find ways to adapt … As the technologies change, the production rates could also change dramatically.”

For California’s Governor, Jerry Brown, the news brings trouble. Although Brown has a reputation for being sympathetic to environmental concerns, he had earlier endorsed fracking in Monterey, hoping California to benefit from an economic boom that the largest shale oil reservation in the United States would bring.

What to make of all this? For Governor Brown, it’s quite simple — there is no fracking boom in sight. The industry may or may not develop the requisite technologies, depending on oil prices and the difficulty of the engineering problem. At this stage, it’s all speculation.

Many of my fellow environmentalists have welcomed the news. This makes sense in that it casts doubt on the future of shale oil in America — Monterey was supposed to be the mother lode — and, assuming current industry estimates are based on speculative consultant work, elsewhere as well. At the same time, we should not forget that the oil is still there. The industry will surely invest heavily in new, more aggressive technologies to recover the resource.

In the light of the news, it is now important that industry claims about oil and gas be thoroughly scrutinized. The industry’s valuation depends not only on output today, but the expectation of output in the future. This is also true of energy policy. If the industry is operating under wildly optimistic output expectations, then the case for energy conservation and renewable energy deployment is even stronger — not that it has ever been weak, except in the minds of fossil fuel executives — than before.