BOOM OR BUST
The economics of oil or natural gas hydrofracking are seldom analyzed from the
perspective of the American consumer. Most discussions focus upon the investment
opportunities of specific companies, royalties to leaseholders, windfall tax revenues that
state governments will benefit from and the bonanza that local communities will enjoy from
the added business activity. Missing is a clear understanding of the pricing points and
factors that will determine the actual selling charge and total all inclusive retrieval
costs in the domestic market. Will the price of energy drop precipitously or will the net
effect be that the native end user sees no direct benefit from the rush to drill?
risks of the fracking process are real. Policymic presents an assessment of the merits of Hydrofracking
Fact and Fiction: What You Need to Know About the Controversial Practice .
"Hydrofracking uses a lot of water: it may take several million gallons of water
to properly frack a single well. Water is the main ingredient in hydrofracking; the sand
is used to help keep the fractures open once they are created, while the mix of chemicals
helps the process along and eases the flow of gas/oil. It is hard to say what chemicals
are used since most firms treat their frack mixtures as proprietary secrets, and thanks to
industry lobbying efforts, the Environmental Protection Agency ruled in 2005 that
companies do not have to disclose their frack mixtures. Much of the water used in
hydrofracking eventually comes back up to the surface contaminated with hydrocarbons, sand
and other chemicals. Treatment and disposal of this used water is a major challenge to any
hydrofracking operation. Environmentalists are sounding the alarm over
hydrofracking-related groundwater contamination, contending that methane gas and fracking
chemicals are migrating up from the frack locations and into local water tables."
The next point starts with a specious assumption:
"The economic benefits of hydrofracking are obvious, but is the
process too inherently dangerous to use, or can its environmental risks be mitigated? That
is the question to ponder. Unfortunately both the oil and gas industry, and
environmentalists are doing their best to make an informed debate on the issue
Who really reaps economic gains from this process? Clearly, the corporatists have a
strategy that benefits from international sales, while burdening local jurisdictions with
the reclamation expenses from the negative eco aftermaths. Also, the effect from actual
greater production extraction costs results in selling in to markets willing to pay top
prices for the oil or gas.
Opponents of hydrofracking warn of the Fracking
Economics Revealed as Shale Gas Bubble, Not Silver Bullet.
The reports, Drill
Baby Drill by veteran coal and gas geologist David Hughes and Shale and Wall Street by financial analyst Deborah Rogers, assess the economic
sustainability of the tight oil and shale gas booms that are sweeping America.
authors conclude that rather than offering the nation a century of cheap energy and
economic prosperity, fracking will provide only a decade of gas and oil abundance, at
most, and is creating a fragile
new financial bubble that is already starting to deflate. Additional research
conclusions discussed at the briefing included:
1.The shale gas and tight oil booms have been oversold. According to actual well
production data filed in many states, shale gas and shale oil reserves have been
overestimated by operators by as much as 400-500 percent.
2.Wall Street has played a key behind-the-scenes role in hyping the fracking boom
through mergers and acquisitions and transactional fees, similar to the pattern seen in
the housing boom that led to the financial crisis.
3.High productivity shale plays are not common. Just five gas plays and two oil plays
account for 80 percent of production of those energy sources, while the most productive
areas constitute relatively small "sweet spots" within those plays.
4.Production rates are already in decline in many shale plays. The high rates of
per-well investment required to maintain production mean U.S. shale gas production may
have already peaked and maintaining production will require high rates of potentially
unsustainable, high-cost drilling.
points out the most significant economic consequence from hydrofracking.
"Exporting is a last ditch effort to shore up a failing balance sheet.
Exportation will drive the price higher in the U.S.
Theres no doubt about it. The question is how high will it go. When you are
producing a commodity and have produced it to such a high extent, you want to find someone
who will buy it, and in this case, it will be the Asians."
Here is the key issue. If the energy resources from fracking are destined for an export
market, sold at a dramatically higher price overseas, the pressure will increase to raise
domestic prices when the oversupply vanishes.
The greed from the Fracking
Boom Prompts Foreign Export Of U.S. Gas, Could Drive Up Prices At Home, inevitably
demonstrates that the public will never experience the benefits of low cost energy
produced from our own soil.
"In recent months, however, production has begun to level off as the glut of
natural gas keeps U.S. prices down. In response, producers have begun pushing to export
the fuel to Europe and Asia, where prices are far higher.
Approval of all the projects currently under review by the Energy Department could
result in the export of more than 40 percent of current U.S. production of liquefied
natural gas, or LNG, which is gas thats been converted to liquid form to make it
easier to store or transport."
Energy internationalists, opportunistic politicians, Wall Street banksters and
irresponsible developers would stash ill-gotten gain from the pillaging of our domestic
resources, as our energy rich residents get to pay a higher price for their energy needs.
Add into the equation the enormous environmental chemical pollution of our finite ground
water and you have a monumental disaster in the making.
Since safeguards and less caustic additives can be substituted within the fracking
technology, the bare minimum course is to protect the water supply. In addition,
production from such development needs to have a direct benefit to the American consumer.
No fracking for export sales is the national interest.
is the pen name of a reformed, former political operative. This pundit's formal
instruction in History, Philosophy and Political Science served as training for activism,
on the staff of several politicians and in many campaigns. He is a past columnist for
"Published originally at
EtherZone.com : republication allowed with this notice and hyperlink intact."
SARTRE can be
reached at: BATR@batr.org
We invite you to visit
his website at:BREAKING ALL
the June 14, 2013 issue of Ether
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