Fracking: another bubble ready to burst

Submitted by gjohnsit on Sat, 09/08/2018 - 5:19pm

A couple years ago I posted this article.

Interest rates today are the lowest they’ve been at least since Stonehenge was under construction and the pharaohs of the First Dynasty ruled Egypt, Bank of America Merrill Lynch (BAML) said in a report this week.

Around the same time this article was posted on the ultra-bullish Yahoo financial site.

"We're in an epic bubble of colossal proportions," Peter Boockvar, managing director and chief market analyst at The Lindsey Group, said Tuesday on CNBC 's " Futures Now " in reference to the fixed income market....
Ultimately, Boockvar warned of the fallout that could occur if multiple nations opt to end what he referred to as a "negative deposit rate regime."
"Even if they put it back to zero, imagine the carnage, at least in the short-term bond markets," concluded Boockvar.

Artificially low interest rates encourages risky borrowing and risky speculation.
That's what it's supposed to do.

One of those places of risky speculation was fracking.
Here's one example of an essay I've written about fracking back in 2015.
The flood of cheap money has allowed the fracking bubble to keep growing, but now even the NY Times has noticed.

Some of fracking’s biggest skeptics are on Wall Street. They argue that the industry’s financial foundation is unstable: Frackers haven’t proven that they can make money. “The industry has a very bad history of money going into it and never coming out,” says the hedge fund manager Jim Chanos, who founded one of the world’s largest short-selling hedge funds. The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses. In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.
These companies have survived because, despite the skeptics, plenty of people on Wall Street are willing to keep feeding them capital and taking their fees.
...
Amir Azar, a fellow at the Columbia University Center on Global Energy Policy, calculated that the industry’s net debt in 2015 was $200 billion, a 300 percent increase from 2005.

The frackers have made some spectacular advances in efficiency, but they are still up against geology.

A key reason for the terrible financial results is that fracked oil wells show a steep decline rate: The amount of oil they produce in the second year is drastically smaller than the amount produced in the first year. According to an economist at the Kansas City Federal Reserve, production in the average well in the Bakken — a key area for fracking shale in North Dakota — declines 69 percent in its first year and more than 85 percent in its first three years. A conventional well might decline by 10 percent a year. For fracking operations to keep growing, they need huge investments each year to offset the decline from the previous years’ wells.

In other words, the only thing keeping the frackers going is low interest rates.
Rising interest rates will drive them out of business.

One side note is that fracking ranks among the least sustainable sources of electricity.

Tags:

debt

Fracking

Vote

Comments

Submitted by k9disc on Sat, 09/08/2018 - 6:12pm

Irony Is Destroying the Planet and Water Supplies to LOSE Money.

Or is it ironic? Do markets and politics do irony? I don't think so. Irony in markets and politics is really just a different strategic goal than the one stated.

Irony in markets and politics is a con.

—

“Tactics without strategy is the noise before defeat.” ~ Sun Tzu

Submitted by peachcreek on Sun, 09/09/2018 - 1:55am

It seems that it's all about short term profits these days...

@k9disc Hey! Good news! You're a multimillionaire.
Oh. So sorry, there is nothing left to spend your "money" on.

The coming of climate change has made me feel more and more like we are like frogs in a slowly heating pot of water sitting around a table in a casino...Woohoo! my fracking stock won some temporary and worthless $$.
There are so many ways to play roulette. And in all cases, the "house" wins.

Submitted by gulfgal98 on Sun, 09/09/2018 - 11:56am

^^^This!!!^^^

@k9disc

Irony Is Destroying the Planet and Water Supplies to LOSE Money.

—

Do I hear the sound of guillotines being constructed?

“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy

Submitted by Pricknick on Sat, 09/08/2018 - 9:32pm

Welcome to my neighborhood.

We used to hear the crickets and animals of the night. My windows were always open.
Now the noise and smell have caused me to make sure the white noise machine is on and to check which direction the wind blows.
Progress sucks.

—

Regardless of the path in life I chose, I realize it's always forward, never straight.

Submitted by Arrow on Sun, 09/09/2018 - 7:10am

For completness

Max and Stacy talked about this yesterday as well.

—

I want a Pony!

Submitted by DonMidwest on Sun, 09/09/2018 - 7:44am

and they were called out in a congressional hearing

@Arrow how dare those bad folks on RT criticize fracking?

they pointed out the geology of declining production 8 years ago and they were for sure deep agents...

Submitted by DonMidwest on Sun, 09/09/2018 - 8:02am

OT but want to get this posted -- deep state

I follow Thomas Drake on twitter

He just posted the link to a fake organization that is saying that the deep state is after Trump, or something. The web page is listing Drake, William Binney and others as supporters of this effort. They just posted them in this fake effort.

Drake has had NOTHING to do with this

Pure propaganda!!!

Last week Drake, Binney and others were on a panel at CATO which I watched part of.

What was interesting was a staff member of CATO had worked on capital hill for 30 years and was an intelligence staff member to congress. He saw the audit report on the system that was brought in to NSA after their own internally built system, Thin Thread, had been sidelined. Thin Thread could have stopped 9/11. The CATO member said that the audit report of the system to replace Thin Thread was the worst instance of waste, fraud and abuse he had ever seen. There have been two redacted versions of the report (he read the original when he was on the hill), and finally, in the second release, there is an undredacted sentence that says something like, no one can take this report as anything other than corruption. That is an approximate memory of mine.

At the panel at CATO, Drake, Binney and others says that 9/11 was the pretext used by Cheney to spy on Americans. A hard hitting panel. Would like to see a transcript if one is produced. It was live streamed.

But back to this fraud web site -- the HQ are in DC. If someone lives in DC or close, it would be interesting if they could go and knock on the door. If there is a door.

1101 Pennsylvania Ave NW, Washington, DC 20004

From google maps there are various offices and restaurants near this address.

Here is the web page for

JOINT TASK FORCE MAKE AMERICA GREAT AGAIN

JTF MAGA was formed due to the suppression of vital intelligence and weaponizing of U.S. Government Departments for political and financial motives, and to cover their crimes. We are a group of White Hat Deep State Patriots from the Intelligence, Military, Law Enforcement and Judicial Communities, who have formed a supergroup of MAGA Counterstrike Patriots to Expose and bring to Justice, former and present U.S. Government personnel referred to as Black Hat Deep State. This includes politicians; pertaining to their illegal surveillance and tactics, and utilization of various U.S. Departments. We are committed to supporting President Donald Trump Make America Great Again, also to supporting every True Patriot holding an Office in the United States Government, and to every True Patriot Candidate seeking a U.S. Off

***
disclosure. I hate the CATO institute. They are Koch funded libertarians, whatever "libertarians" means. The only other good thing I know about CATO was their funding of Glenn Greenwald to write a report on drug decriminalization in Portugal. But the panel on NSA and 9/11 mentioned above was excellent.

Submitted by DonMidwest on Sun, 09/09/2018 - 8:08am

update by Thomas Drake

@DonMidwest https://twitter.com/Thomas_Drake1/status/1038587419019419648

This is the link to his tweet. Here is the main part of his text

PSA: Heard http://reportforthepresident.org claiming I’m prominently behind it w/ my image on their website. However, I disavow ANY connection of ANY kind, am NOT part of their team, was never contacted & they’re using my name w/out my consent or permission in blatantly false advertising.

I follow Thomas Drake on twitter

He just posted the link to a fake organization that is saying that the deep state is after Trump, or something. The web page is listing Drake, William Binney and others as supporters of this effort. They just posted them in this fake effort.

Drake has had NOTHING to do with this

Pure propaganda!!!

Last week Drake, Binney and others were on a panel at CATO which I watched part of.

What was interesting was a staff member of CATO had worked on capital hill for 30 years and was an intelligence staff member to congress. He saw the audit report on the system that was brought in to NSA after their own internally built system, Thin Thread, had been sidelined. Thin Thread could have stopped 9/11. The CATO member said that the audit report of the system to replace Thin Thread was the worst instance of waste, fraud and abuse he had ever seen. There have been two redacted versions of the report (he read the original when he was on the hill), and finally, in the second release, there is an undredacted sentence that says something like, no one can take this report as anything other than corruption. That is an approximate memory of mine.

At the panel at CATO, Drake, Binney and others says that 9/11 was the pretext used by Cheney to spy on Americans. A hard hitting panel. Would like to see a transcript if one is produced. It was live streamed.

But back to this fraud web site -- the HQ are in DC. If someone lives in DC or close, it would be interesting if they could go and knock on the door. If there is a door.

1101 Pennsylvania Ave NW, Washington, DC 20004

From google maps there are various offices and restaurants near this address.

Here is the web page for

JOINT TASK FORCE MAKE AMERICA GREAT AGAIN

JTF MAGA was formed due to the suppression of vital intelligence and weaponizing of U.S. Government Departments for political and financial motives, and to cover their crimes. We are a group of White Hat Deep State Patriots from the Intelligence, Military, Law Enforcement and Judicial Communities, who have formed a supergroup of MAGA Counterstrike Patriots to Expose and bring to Justice, former and present U.S. Government personnel referred to as Black Hat Deep State. This includes politicians; pertaining to their illegal surveillance and tactics, and utilization of various U.S. Departments. We are committed to supporting President Donald Trump Make America Great Again, also to supporting every True Patriot holding an Office in the United States Government, and to every True Patriot Candidate seeking a U.S. Off

***
disclosure. I hate the CATO institute. They are Koch funded libertarians, whatever "libertarians" means. The only other good thing I know about CATO was their funding of Glenn Greenwald to write a report on drug decriminalization in Portugal. But the panel on NSA and 9/11 mentioned above was excellent.

Submitted by Deja on Sun, 09/09/2018 - 12:27pm

Requires creating an account

@DonMidwest
This is the site that was supposed to go live Friday, but I couldn't find the link to it. Anybody care to sign up, log in, and share?

Not sure if it's "fake" or not, because I haven't read anything but the home page.