The economic absurdity of fracking

James Kunstler over at Clusterfuck nation may be excessively cranky about the current social-political order and sometimes given to speculations on motives that might seem a little wild, but when it comes to his main subject—the end of the age of petroleum and the need to ponder what this will mean—the man is brilliant.  This week he provided an excellent example.

The New Abnormal

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The New York Times, National Public Radio, Bloomberg News, Forbes, and The Atlantic Magazine are media giants that have lately spread the "good news" that America will soon be 1) "energy independent," 2) the world's leading oil exporter (greater than Saudi Arabia is now!), and the "go-to nation" for cheap manufacturing.

All of these claims are false, by the way. The American way-of-life was designed to run on $20-a-barrel oil, not $90-a-barrel oil, and "new technology" has not changed that. The unfortunate and, to some extent, mendacious memes about the wonders of "new technology" have only snookered the public into a false sense of security about a future that will disappoint them badly and probably provoke an extreme political reaction as the reality of our predicament sweeps through daily life.

Most of the current "endless oil" fantasy revolves around shale oil. Just to get a visual idea of what this amounts to, consider this map. It depicts the two major shale oil production regions of the USA: the Bakken in North Dakota and the Eagle Ford "play" in Texas. Bakken production is confined almost entirely to four counties in North Dakota (Williams, Mountrail, McKenzie, Dunn). The Eagle Ford region touches perhaps ten Texas counties. Now, realize that the oil fields all over the rest of the USA (including Alaska) are in decline. Here's where the "bonanza" of new oil all comes from:



The oil coming out of these places is high cost and low flow-rate oil. This is exactly the opposite of what US oil production used to be (low cost and high flow-rate) when we were busy building all the freeways, strip malls, housing subdivisions, suburban office parks and all of the other stranded assets that now make up the infrastructure of daily life in this country. Those were the days when you could pound a single pipe vertically 1000 feet down (not much deeper than many home water wells) into the temperate wheatfields of Oklahoma (drive to work in shirtsleeve weather!) and after that modest investment in drilling you could kick back and depend on a great flow rate (5,000 barrels-a-day, not unusual) of sweet light petroleum for years.

Horizontal drilling (often more than 10,000 feet down + many "laterals" an additional 10,000 feet horizontally) and then fracturing "tight" rock for shale oil is not only a way larger capital expense (lots of steel!) but the flow rates per well (82 barrels-a-day average) are laughable compared to the halcyon days of conventional oil -- little better than "stripper" wells. Consider also that shale oil well flow-rates decline greater than 60 percent in the first year (rapidly thereafter, too) and you can see easily that there will be no "kicking back" to run the pump-jacks like cash registers, as in the old days. In fact, the rapid depletion only prompts more frantic drilling and re-drilling to keep the production at its current rate - the "Red Queen Syndrome" ("I'm running as fast as I can to stay where I am"), which means fantastic capital expenditure to keep drilling and fracking more wells (even more steel!). Consider also, that the small "sweet spots" in the shale oil regions were the ones drilled first (in earnest after 2003), for the simple reason that they were the most promising. This was the "low hanging fruit" -- easy to pick. Outside these sweet spots the oil may be too meager or difficult or costly to bother drilling for.  more