Fracking Isn't Going To Save The World

-by Jack Hannold

The price of gasoline has been falling lately because U. S. oil production has soared to its highest level in decades, producing a worldwide surplus. OPEC’s Thanksgiving Day announcement that its members won’t soon cut oil production means prices will remain low for now.

One Russian oil executive thinks OPEC wants to crash the U.S. shale oil boom, which he compares to the dot-com boom of the 1990’s. He predicts prices will rise again in 2016, after OPEC finishes “cleaning up the American marginal market.”

Fracking for shale oil costs more than conventional drilling. The consulting firm Wood Mackenzie estimates that the break-even prices for oil producers range from around $50 a barrel in the most promising areas to over $100 in the worst spots, with the average being around $76 a barrel. And the global glut from fracking has already reduced the price of conventional oil futures to about $70 a barrel.

If OPEC can bust the shale oil boom, that’s good news for the environment. And the likely effect on Canadian tar sands production is even better news.

Bitumin from tar sands costs more to extract than shale oil. The process looks more like strip mining coal than drilling for oil. Bitumin is costlier to refine, too. That’s why it sells for $20 to $30 a barrel less than conventional oil-- and why it can’t be profitable unless it’s exported to countries where fuel prices are higher.

It costs $25 a barrel to ship bitumen by rail from Alberta to the Gulf Coast, but only $9 a barrel to send it through a pipeline. Four firms-- Shell, Total SA, Statoil and Canada’s own Suncor-- have halted new tar sands development because it’s not profitable without the Keystone XL pipeline. And at $50 a barrel, it wouldn’t be profitable with KXL either.

Bitumin has the consistency of peanut butter. To make it flow, it’s diluted-- usually with naphtha, a known carcinogen. Diluted bitumen, or “dilbit,” is far more corrosive than conventional crude. It shortens the useful life of tank cars and pipelines. Leaks are inevitable, and a pipeline can spill far more oil than a single ruptured tank car. Nevertheless, the new Republican Congress will try to force completion of KXL.

Fortunately, President Obama, mindful of his legacy, will probably veto their efforts. Let’s hope at least 34 Senators will be sane enough to sustain his veto.


UPDATE: Hillary Clinton-- Warrior On Behalf Of Frackers?

This morning David Freedlander reported that at a speech to the League of Conservation Voters in midtown Manhattan last night, before hundreds of deep-pocketed donors, Hillary Clinton came out in favor of fracking-- and ignored the controversial Keystone XL Pipeline project. And she had no answers at all on Climate Change, the biggest dilemma facing the country (the species).