Tuesday, September 8, 2015

Who Could Ask For More? Frackers Are Shutting Themselves Down!

Thirty billion dollars in losses so far this year and still counting...... Many frack wells now have to have their pumps pulled (as loans come due) and workers sent home. For the environmentally conscious and aware citizen, especially those who've been battling the oil frackers for the past five years or so, it's about like a dream come true. Despite all the efforts to shut the frackers down or limit them, it now appears the frackers are shutting themselves down - without the rest of us lifting a pinky finger.

How did this happen? You could say it occurred out of pure greed, a lack of foresight, or both. Though oil experts kept warning about an oil glut and price collapse, none of the American frack- happy companies were taking it seriously.  As the Wall Street Journal put it (' As Rout Deepens, Oil Producers Keep on Pumping', Aug. 21, p. A1):

"When oil prices started to edge down a year ago, most energy mavens thought the drop would be small and short lived. Instead the price of crude has plunged by almost 60 % from its 2014 peak  - and suddenly looks likely to stay low for years and months to come."

The effect has been to drive prices for oil in the U.S. down to near the EROEI threshold, from $70 a barrel late last year to just above $40 a barrel now. As I've written about before, this latter price is ten to twelve dollars below the price level at which it is worthwhile to take the stuff out of the ground. Given all the extra ancillary equipment needed to extract kerogen, plus the fact it is the most unfinished form of oil, the costs are too great and hence the operations too costly for the product.

No surprise then that frack operations are being shut down across the country including 50 percent of them in the Marcellus Shale in Pennsylvania, and others from North Dakota to Texas. More than 170,000 workers have already been laid off and likely more to come according to WSJ reports.

The problem? Everyone appears to be "locked into pumping as much oil as possible" (ibid.) to the detriment of all.  As the Journal notes (ibid.) even the Saudis have increased their production in the face of falling prices. Analysts say this is "a preemptive effort to keep competitors like Iraq from stealing consumers in Asia."

The result has been "an energy version of trench warfare, with producers all trying to gain an inch of market share no matter the cost."

The Journal acknowledges the obvious, that "while it might make sense for producing countries to cut back and ease the glut there is no political will or business rationale to do so."

But let's make it clear there is certainly a sound environmental reason to do so, namely that of leaving the stuff in the ground so as not to exceed the two most critical limits of carbon burning: 565 gT and 2795 gT. We're already zooming past the first and will likely exceed it by 2050 - assuring at least a 4C hotter world (The 2C has already been acknowledged as being lowballed).

The other calamity would transpire if we burned up the planet's current existing reservoir of fossil fuels, including regular crude oil, kerogen and coal. If that happens, we will enter the maw of the runaway greenhouse effect, and what people see playing out now with monster fires in the West will be commonplace across the country - with temperatures to go with it, and lasting for months and possibly years - not just weeks.

Let's hope that this financial crisis in the frack industry - because of their own refusal to logically respond to a market glut - causes them to reconsider their toxic trade and also realize (as Richard Heinberg has portrayed it), fracking really is "snake oil" that has nothing to offer us in terms of energy advantage for the future - or now.

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