A Wall Street analyst regarded as an authority on the petroleum industry has been warning about the collapse of the fracking industry due to its high costs of fuel recovery when compared to other energy sources. According to this analyst, as the price of oil falls, fracking becomes unprofitable. Speaking recently on Al Jazeera, Dr. Stephen Leeb of the Leeb Group likened the fracking industry to a train wreck about to happen. According to Leeb, “The companies that are doing a lot of the fracking, they are cash flow negative…they have to borrow money. As oil prices go down they are going to have to borrow more.” Dr. Leeb also points out that the massive amounts of water needed to raise oil and gas well productivity through fracking is far too expensive, particularly in the USA where some areas are experiencing unprecedented drought. Another development is that Saudi Arabia is raising production and forcing down the price of oil. All these trends could soon lead to the collapse of fracking in the USA.
In a related development, the US Energy Information Administration (http://www.eia.gov/naturalgas/weekly/) report published on Nov 6 indicates that natural gas markets could soon move in the manner that Dr.Leeb warned about. In their weekly report the EIA states that the amount of natural gas entering storage in the USA is increasing rapidly. There are two big reasons for this. First, temperatures in the USA are much higher than normal and demand for heating has been low. To quote the EIA, “Temperatures in the Lower 48 states averaged 57.6 degrees for the week, 5.1 degrees warmer than the 30-year normal temperature and 7.6 degrees warmer than during the same period last year.” Second, natural gas production and storage has increased dramatically. The same report indicates that increased shale fracking production helped add a “record 2,749 Bcf [billion cubic feet] of natural gas to storage.” The spot price of natural gas has risen because of anticipated temperature drops and a projected rise of demand in coming weeks. However, despite current stable forward contracts the report seems to indicate that the long term trend should be toward depressed natural gas prices. Unless temperatures drop considerably and total demand picks up dramatically, the overall trend could soon drive many fracking operations out of business.
Natural Gas is not a “bridge fuel” to a low carbon future, it is only a bridge to the faster extinction of tens of thousands of species from the planet’s oceans and land masses. Part of the attempts to forestall this tragic situation must be to replace home appliances that use natural gas, like furnaces, ranges, and water heaters, with new, high efficiency electric appliances that allow using clean energy from renewable sources. Solar panels on household roofs, plus local renewable energy production, mean that consumers who switch to new high efficiency electric appliances can make a major dent in natural gas consumption. Even marginal drops in such consumption drive down natural gas prices significantly, and can help lead to price levels where fracking will stop because it is unprofitable.
Many people fighting climate change have not made the switch to high efficiency electric appliances because “Our utility bill is too low to make it worthwhile,” or because they simply aren’t aware of the technologies described on this website. Adopting these appliances helps drive a stake through the heart of fossil fuels, and consumers must become familiar with and adopt technologies described here. Solar subsidies will end in 2016, and if your roof can provide solar power there’s no excuse for not installing panels to power your EV, as well as these new high efficiency appliances that can replace natural gas guzzlers.
Efforts to curb personal natural gas consumption will complement hopeful trends in the energy market.