[Peakoil] Kunstler this week on the economics of fracking

[Keith Thomas]

Kunstler this week:
http://kunstler.com/clusterfuck-nation/true-believers/

the vaunted efficiencies in shale drilling and fracking he’s hyping will 
only accelerate the depletion of wells which, at best, produce a few 
hundred barrels of oil a day, and only for the first year, after which 
they deplete by at least half that rate, and after four years are little 
better than “stripper” wells....

“Right now, some US shale operators can break even at $10/barrel.”

The truth is the shale oil industry couldn’t make a profit at 
$100/barrel. The drilling and fracking boom that began around 2005 was 
paid for with high-risk, high-yield junk bond financing and other 
sketchy, poorly collateralized financing. Most of the earnings in the 
early years of shale oil came from flipping land leases to greater 
fools. Now that the price of oil has fallen by more than 50 percent in 
the past year, the prospect dims for that junk financing to be repaid. 
Since that was “bottom-of-the-barrel” financing, the odds are that the 
shale producers will have a very hard time finding more borrowed money 
to keep up the relentless pace of drilling needed to stay ahead of the 
short depletion rates. They are also running out “sweet spots” that are 
worth drilling.

This topic is covered in more detain in Kunstler's latest podcast:
http://kunstler.com/podcast/kunstlercast-269-steve-ludlum-of-the-economic-undertow-blog/
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Keith Thomas
keith at evfit.com
Within UK: 074 2929 4146
(From outside UK: +44 74 2929 4146)
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