Absolutely fracking unbelievable…
Posted November 15, 2013on:
Good afternoon Widdershin friends. A word of caution, I’m free-stylin’ today so logical congruity will be tenuous at best. Keep your hands and feet inside the car at all times.
Who knew? While trying to educate myself about the economic alchemy known as fracking, I came upon a surprising bit of trivia. Who knew the burly, macho roughneck oil riggers were Alice in Wonderland aficionados? But I digress.
Currently, the U.S. is producing 7.8 million barrels of oil a day, more than it has produced in a quarter-century. There are accounts in the media that the U.S. will overtake Saudi Arabia by 2020 as the world’s largest oil producer.
That’s all well and good if you overlook the needed 50,000 gallons of hydrochloric acid to dissolve the limestone, the 1,000 gallons of antibacterial solution to kill microorganisms that chew up the pipes, the soapy surfactants to reduce friction, the scale inhibitor to prevent lime buildup, and the 2 million pounds of sand to prop open the fractures so the oil and gas can flow freely. For the average well, these ingredients plus the regular costs bring the cost per well to about $3.7 million.
This means to be economically viable, the cost of oil must remain high — above $70 a barrel.
Still all well and good if you don’t mind sacrificing at the pump so big oil can wring the last drop of oil from what was once the shallow seas covering a large part of the Midwest. But herein lies the rub and where our literary friend Alice comes into play.
You see these fracking wells don’t produce in perpetuity. In fact, their production numbers are quite anemic. For instance, a well near Oklahoma City came in as a gusher in 2009, pumping more than 1,200 barrels of oil a day. Now that same well produces less than 100 barrels a day. The dirty little fracking secret: Shale wells start strong and fade fast. Therefore, the fracking producers are drilling at a breakneck pace to just hold output steady.
David Hughes, a geoscientist and president of Global Sustainability Research, has examined the life span of shale wells. He says, “The Red Queen syndrome just gets worse and worse and worse. The higher production goes, the more wells you need to offset the decline.” What’s more, Hughes estimates the U.S. needs to drill 6,000 new wells per year at a cost of $35 billion to maintain current production. His research also shows that the newest wells aren’t as productive as those drilled in the first years of the boom, a sign that oil companies have already tapped the sweetest spots.
The most sobering forecast prediction: All this environmental carnage for oil recovery will peak in 2018. What’s more, it will fall back to 2012 production levels by 2020. So through our tithing at the altar of the pump, we are potentially harming the environment so that we may continue paying high prices in order to continue enriching the wealthiest corporations in the history of mankind for another five years. Fracking unbelievable!
Now for the free-stylin’ — this realization jarred some synapses into thinking about a banking factoid. Just five years after the beginning of the Great Recession spawned by the financial meltdown, the largest 5 banks hold about half (48% to be exact) of the total assets of our entire banking system. Let me restate for clarity, five years after “too big to fail” five banks, just 5 banks, hold one-half of all the assets of the entire U.S. banking system.
This further jarred some thoughts about the thirty years of feasting on the manna of merger and acquisitions empowered through “trickle down economics.” After thirty years of swimming in an economic aquarium where the exalted practice is the bigger eating the smaller, there are studies indicating no economic gain at all from this corporate feeding frenzy. Again let me restate for clarity, outside of substantial gains for the owners of acquisition targets and the corporate executives who reap huge bonuses for completing acquisitions, the evidence of economic gain for anyone else, including shareholders, is relatively thin or nonexistent.
There are other staggering anecdotal examples like the housing bubble, the tech bubble, the ongoing precious metals bubble, but you get my point. Just envision Gordon Gekko saying, “Greed is good.”
In leadership training when we do a psychological assessment, I’m always on the lookout for those who have an over-developed sense of competition. It is not uncommon for individuals with competition to answer the question of, “What is second place,” as the first loser. That is pretty pedestrian standard stuff for someone with competition.
What we watch, listen for and pay particular attention to is the competitive person who says, “It’s not about me winning, it is about everyone else losing.“ That is extreme competition — extreme to the point of overshadowing any other considerations of leadership.
In many ways, the greed we have condoned under the guise of unbridled success is much like competition. Through thirty years of a political slogan masquerading as economic theory, the greed we have sanctioned is not so much about opportunistic wealth accumulation, it’s about corralling opportunity into the soul-searing placebo of “me first“. That is neither capitalism nor free enterprise nor American exceptionalism. It is nothing more than inculcating fear of another’s success into policy.
Unlike the rapidly declining fracked wells, after a thirty-year economic incubation there’s what seems to be an inexhaustible supply of greed and fear. As Mark Twain wrote, “Sometimes too much to drink is barely enough.”
Ain’t that the fracking truth.
This is an open thread.
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