For the last several decades, oil companies have been turning the American countryside into Swiss cheese as they scour the Earth for oil and gas deposits that can only be unlocked by fracking. The prospect of making America into the largest oil exporter in the world had caused many to salivate at the thought of the enormous profits to be made selling American oil to the world.
The justification is that it gives America energy security, but we all know that is a bogus claim. America can have energy security in perpetuity if it simply takes advantage of all the free sunshine and wind resources it squanders every day. The only way someone can support fracking is to totally ignore the harm that all oil and gas does to the environment when it gets burned to make electricity or power cars, trucks, planes, and ships.
But a cloud has appeared on the fracking horizon. The price of oil on the world market is trending downward. Fracking is often more expensive than drilling conventional wells and the fracked wells tend to have a very short life span. The big oil companies like ExxonMobil and Shell are happy to take the oil produced but most of the drilling is done by small independents who rely on regular cash infusions from the investment community to drill more wells and pay their bills.
Shale oil production exploded several years ago when the price of oil hit $100 a barrel, but in today’s business environment, the wells can cost more to drill than the oil is worth. David Deckelbaum, an analyst at investment bank Cowen, tells NPR, “This is an industry that for every dollar that they brought in, they would spend two.” He says those in the industry have a prospector mentality. “There’s always this idea of this brand new play that’s going to have billions of barrels of upside and if you can just get in early, then it’ll pay off in the long run,” he says.
The industry grew by 20% in 2018 and employment was up 11%. This year has seen no growth in the industry. Halliburton, one of the largest companies in the shale gas business, has laid off 3,000 workers. More than 3 dozen shale oil drilling companies have filed for bankruptcy.
All this gloomy news has investors who used to fund the industry holding onto their wallets instead. “I think now you’ve seen a lot of pressure of, ‘We want you to be a real business. Your cost structure’s too high, you have too much debt, I’m not funding your drilling anymore with external capital. You have to live within your own means,’ ” Deckelbaum says.
Without access to new cash, NPR says, many producers are cutting back on exploration. The number of rigs drilling for new oil is at its lowest point in two years. Ron Fountain works on a drilling rig in the Bakken shale area of North Dakota. He says when oil was selling for $100 a barrel, companies were drilling everywhere and as quickly as possible. He thinks back to a few years ago, when the price of oil was more than $100 a barrel and companies were drilling with abandon. “That’s when we were still booming,” he says. “There was rigs coming out every month. We couldn’t keep up, there was so much work going on.”
Today, things are a lot less rosy. More and more drilling rigs are sitting idle and life has become much less certain for Fountain and others in the industry. “We went from having three-year contracts to well-to-well contracts, which means you drill one hole and if you did a good job, then they’ll give you another. Or they drop you and you gotta figure it out from there,” Fountain says.
In theory, as production slows and supply shrinks, the price of oil should go back up, which would give a much needed boost to the industry The question, Fountain says, is how many companies will be able to survive until then. “I think as an industry we’re going to be OK,” he says. “But I think there’s a lot of people that are kinda holding their breath.”
What people like Ron Fountain fail to realize is that fracking is one of the dumbest endeavors humans have ever thought of. Shale oil producers routinely release the methane that is released with the oil directly into the atmosphere or burn it at the wellhead. So shale production has a double whammy on the environment. It front-loads the atmosphere with methane or carbon dioxide emissions in the production phase then adds even more carbon dioxide when it is burned later. The effect is like injecting a huge spike of heroin directly into the veins of an addict. The last thing the Earth needs now is more methane and carbon dioxide emissions.
And what does America get out of this? Tens of thousands of old wells that no one will pay to clean up because the industry has never been required to pay for the harm it does. Only someone with the limited brain power of President Quid Pro Quo would think that makes America anything but a third world country run by people who get offended when they are asked to clean up their mess. The only sensible course of action for the US is to eliminate oil, gas, and coal extraction altogether so the Earth can begin to heal itself from the wounds inflicted by the fossil fuel industry.
A CleanTechnica tip of the hat to Dan Allard.