Fracking Firms Get Tested by Oil’s Price Drop
Further Declines Risk Making Expensive Shale Drilling Unprofitable
Tumbling oil prices are starting to frighten energy companies around the globe, especially drillers in North America, where crude is expensive to pump....
Weakening oil prices could put a crimp in the U.S. energy boom. At $90 a barrel and below, many hydraulic-fracturing projects start to become uneconomic, according to a recent report by Goldman Sachs Group Inc. While fracking costs run the gamut, producers often break even around $80 to $85.
1. Will a like percentage drop in price be reflected in the pump price of gasoline? To ask the question is to look stupid.
2. Inside every dark cloud (for oil companies), is a silver lining. As the Wall Street Journal also reports: "Oil’s Price Drop Stands to Help Refiners. Field-to-Pump Operations at BP, Shell Provide Insulation from Market Pressures."
3. Don't worry, as surely as rain comes down, oil prices will go back up.
4. The drop in prices ultimately has something to do with weak demand. Could it be that we're using less? Or becoming more efficient in our use of petroleum and petrochemicals? Are renewable resources significantly cutting into demand for crude? Maybe the "all of the above" energy strategy is working. Do we still need the Keystone Pipeline? (Yes. Yes. Maybe. Yes. Yes.)
5. The good news: It's hurting our dear friends, Russian and Iran.
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