Keystone, Fracking, and the New Cost of Oil

fracking

Keystone, Fracking, and the New Cost of Oil

Ryan Pollin for Zondits, February 18, 2015

When the Keystone XL pipeline extension project was first proposed in 2008, there was almost no one in the business who doubted it would be approved and completed within a few years. Seven years later, as the first agenda item for a Republican-controlled US Congress, it seems as though the pipeline’s legal future might finally be determined. A few things have changed in those seven year. One very important one is that the going rate of crude oil has sunk from $100 per barrel to its current price of around $50 per barrel.

The only way extreme fossil fuel projects like fracking and tar sands can make financial sense is when the conventional methods are very costly. Since the mysterious Saudi Arabian oil floodgates have opened, these extreme infrastructure projects with high cost and diminishing returns look worse and worse. We have already seen the effect on the fracking industry; very few wells across the country have continued operation since cheap eastern oil has pulled down prices of conventional crude.

While we might celebrate the victory of the reduction in tar sands and fracking development that have significantly higher environmental effects than conventional oil and gas, the “new price” of oil does mean we’re seeing increases in fossil fuel energy use in general, and it typically means a more difficult sell for energy efficiency projects in any industry.

Read more on Keystone’s fragile future from Amory Lovins here:
What If Congress Threw a Keystone XL Party and Nobody Came?
Read more on Saudi Arabia’s motivations and its potential effect on the future of energy here:
Historic moment: Saudi Arabia sees End of Oil Age coming and opens valves on the carbon bubble

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America’s fracking ‘boom’ is having its worst months ever

The Washington Post, January 26, 2015

They threw a fracking party in Illinois, and hardly anyone showed up.

More precisely, two months after the state completed a long regulatory process and opened the door to hydraulic fracturing, only one company applied. The state hired 36 employees and five lawyers to handle the expected rush of applicants, reported the Chicago Tribune, “for work that doesn’t exist.”

This after a land rush by energy companies in Southern Illinois that saw them buy tens of thousands of acres anticipating a North Dakota-style energy boom that would create 10,000 jobs.

The disinterest is attributed to the sharp decline in oil and gas prices globally, which makes fracking unprofitable — at best a break-even proposition, at worst a big money-loser.

“Smart people don’t invest in things that break-even,” said energy expert Arthur Berman in Oilprice.com.

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