Why Fracking Won’t Solve the Global Oil and Gas Squeeze

A tsunami of oil and gas from the technique called fracking has made the US the world’s biggest producer of both, giving the country the energy independence its leaders have sought for decades and upending the geopolitics of the world energy trade. Now, with the world crying out for more oil and gas, American frackers are theoretically in a position to provide it. Instead, they are riding the brakes, having changed their business models to focus on generating profits for investors rather than increasing production. 

Fracking, or hydraulic fracturing, was first used commercially in 1949 in the oil- and gas-rich US state of Oklahoma. The technique involves forcing water mixed with sand and chemicals into a well to create fissures in underground rocks known as shale so that oil or gas trapped inside can be captured. Advances in another technique, horizontal drilling, came in the early 1980s and opened up access to thin layers of shale deep underground. The subsequent exploitation of the Barnett Shale formation in Texas proved large-scale fracking was economically viable.  

2. How has fracking changed the energy trade? 

US oil and gas output has more than doubled in two decades, largely thanks to shale-rich areas such as the Permian Basin, which stretches from Texas to New Mexico and alone pumps more oil than most OPEC nations. That’s enabled the world’s largest economy to export fossil fuels at a pace unthinkable only a few years ago. America’s new dominance undercuts OPEC’s ability to control the oil market. OPEC tried to drive North American frackers out of business starting in 2014 by flooding the market with crude, provoking a price crash. Although some frackers went bust, overall they proved nimble, innovating to reduce production costs and stay alive. The abundance of shale gas has helped the US cut its use of coal, the most polluting fossil fuel, nearly in half since 2008. What’s more, American gas is now available on world markets, thanks to a process that enables it to be super-cooled into liquefied natural gas and transported via ship. 

3. Why are US frackers holding back now? 

Recent oil busts, exacerbated by the pandemic, drove many producers to bankruptcy. Coming out of the wreckage, investors demanded that publicly traded producers show more austerity and return profits to shareholders rather than plow it all back into drilling. Some of the biggest producers in the US are generally keeping annual production growth to 5% or less. The service providers who are hired to do the actual fracking are also embracing the chance to reward their shareholders with greater returns. They are holding off on ordering more gear to avoid being stuck with excess equipment as they were when previous booms ended.

4. Where else is fracking done?

Canada was the first country to thoroughly embrace shale extraction outside the US. It’s also spreading to Argentina, Australia, China and Saudi Arabia. In other places, the practice is controversial, and some countries have banned it outright. In the UK, the government overturned a moratorium on new fracking permits in September amid an energy crisis caused by Russia throttling its gas exports.  

5. What are the objections? 

Opposition to fracking within communities often focuses on water concerns. The copious amount of water needed for fracking — as much as 16 million gallons per well in the US — can threaten local supplies, and concerns have been raised that shale operations may contaminate water sources. Fracking and, more commonly, the pumping of wastewater into wells, have been connected to earthquakes. They’ve been mostly small, but temblors in China’s shale hub in Sichuan province killed two people and damaged 11,000 homes in early 2019. More broadly, critics of fracking say that by making oil and gas more plentiful, it has reduced incentives to invest in a switch to renewable energy, even as climate scientists call for speeding the change.

6. What do defenders say?

They note that a growing number of companies are reusing the water employed to frack a well multiple times and are reducing emissions from their operations by utilizing electric-powered vehicles instead of the diesel-powered fleets typical in the oil and gas industry. They point to the jobs created by fracking and the cleaner air natural gas produces where it replaces coal. Their larger argument is that, compared with coal, gas emits half as much carbon dioxide, the most important greenhouse gas. There’s a robust debate as to how much the carbon savings are offset by leaks throughout the natural gas supply chain of methane, a more potent greenhouse gas than carbon dioxide. Supporters tout natural gas as a “bridge fuel” that will ease the transition to renewables, supplying power when wind and solar sources don’t, until sufficient storage capacity is built. 

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