Since June last year, bond yields of companies in the shale business rose from an average of 5.7 percent to 9.7 percent. Currently, about 17 percent of all junk bonds on the market are made up of U.S. oil and gas exploration and production firms, according to Bloomberg News.

Financial analysts are talking about a shale bubble that is soon to burst. Bill Powers, a financial commentator from Forbes Magazine, states, "An enormous shale gas bubble has developed. Like all bubbles, this one will pop sooner than expected and when it does, the aftermath will be very unpleasant."

But what exactly is it about the shale bubble?

To some extent, the panic might be exaggerated as debt financing is just part of the business. As long as the oil price is low, companies in the shale business have to keep extracting and producing oil and gas in order to repay their debt and stay alive. To finance the extraction, they have to issue debt and as long as investors are OK with financing them, this is not against the rules of the market.

This creates, however, a strange contradiction in which companies keep producing oil and gas, and the market stays oversupplied while prices remain low. This will continue until some companies drop out, which might create an upward pressure on the oil price.

An investment researcher on the website Seeking Alpha argues that U.S. oil supply should fall sooner than later and that the restructuring of the industry takes much too long "thanks to investor cash still freely flowing into zombie companies."

Yet this does not tell the whole story either. Part of the reason for the oversupply is the U.S. ban on crude oil exports since the 1970s. A recently released study by Bentek Energy asserts that unless the crude oil export ban is lifted, the U.S. shale energy industry will come to an end.

"We have seen so much growth in the economy due to the oil revolution that we've had in the U.S., and that growth won't be able to continue if another demand force isn't made available," said Jenna Delaney, analyst for Bentek Energy, an energy marketing and analysis company based in Denver.

Lisa Hamilton from the Institute of Energy Economics and Financial Analysis estimates that about $200 billion in oil and gas exploration debt are currently at risk of default. During the first two months of this year, $30 billion in new high-yield energy company bonds emerged on the market, representing both new issuers and downgrades.

WBH Energy, a Texas-based company, filed bankruptcy in January, and Sabin Oil & Gas saw the value of its bonds plunge from above par in September to 49 cents. Companies like Midstates Petroleum Co. currently spend about $1.15 drilling for every dollar earned in selling oil and gas.

Those companies might get into serious problems, especially if the Fed decides to raise interest rates from an all-time low. The downturn of the industry could, however, change abruptly once the oil price starts rising and the export ban is lifted.