Fracking's Formidable Foe
Oil prices have taken a nosedive. According to Tuesday's Wall Street Journal, "the global benchmark, Brent oil, dropped to a near-four-year low of $88.89 a barrel on Monday (Oct. 14), and the U.S. benchmark dropped to $85.74, a 22-month low." That's just the beginning, analysts predict.
NPR's Texas-based correspondent, John Burnett, writes (and states in the streaming version) that declining prices result from abundant oil supply and weakening oil demand, particularly from Europe and China as well as the United States.
If all these trends keep up, it's going to have a heavy impact in the oilfields in states like Texas and North Dakota, says Chris Tomlinson.
He's an energy columnist at the Houston Chronicle.
Tomlinson states, "Well, if you're considering fracking a new well in south Texas, you're going to be thinking twice about that at $85-a-barrel oil. And you're definitely not going to do it at $80-a-barrel oil. The question is, how long are the prices kept this low?"
Possibly two years, according to Reuters. Saudi Arabia, "OPEC’s largest producer, will accept oil prices below $90 per barrel, and perhaps down to $80 [in Brent prices], for as long as a year or two, according to people who have been briefed on the recent conversations," write Ron Bousso and Joshua Schneyer in a report that's also summarized in The Hill.
In the introduction to a report on energy prices in American Public Media's "Marketplace," host Kai Ryssdal states that the U.S. is approaching a "'tipping point', where a lot of the oil that we have been pumping is getting less and less profitable." David Weinberg explains.
Some regions in North Dakota and Texas — the “sweet spots” as Chad Mabry, an energy analyst, calls them — would likely remain profitable even if prices continue to drop. “I think one of the first places that you are going to see budget cuts are more on the exploration side of things.”
Bousso and Joshua Schneyer agree, writing that the Saudi policy of not reducing oil output to curtail falling oil prices "may be aimed at slowing the expansion of rival producers including those in the U.S. shale patch."
Perhaps its ironic that the marketplace, which has given rise to America's burgeoning energy industry, aided by Saudi Arabia, which has chosen not to reduce its oil production according to Reuters, may do what fracking opponents have been unable to do with regulations and moratoriums—put an end to additional fracking in the United States.