Steve, I've been trying to stay out of it, but since you asked so nicely. I worked for over three decades in the oil patch, along the US gulf coast and overseas in Europe, Africa, and western Asia. I think that's why Steve tagged me.
Fracking is not new but came into such great importance when horizontal drilling was developed. Instead of just drilling down drillers developed a way to drill a well horizontal and control where it went. You drill a horizontal well in a rock or soil that does not easily give up its oil or natural gas because of a lack of porosity then pressure that up enough to fracture cracks into the soil or rock, usually shale. After you crack it you pump sand particles into those cracks which keeps the crack open and allows the oil or gas to flow to the well bore. If it is done right in the right circumstances it will not pollute ground water or cause any problems. If it is not done right or is done in the wrong circumstances yes it can cause problems just like anything else. Most people I met in the oil patch would do it right, but there are some that we called cowboys because they shot from the hip without worrying about what was downrange or what damage they caused. That's why I favor a highly regulated oil and gas industry, to rein in the cowboys. Not just regulate fracking but most activities.
@Smart Red it's not about how much oil and gas is in the ground, it's about how much can be recovered and at what cost. It's not unusual to leave 90% of the oil and gas in some reservoirs just because you cannot get it out economically. There is plenty of oil down there but can you afford to get it out? For example, some oil is so thick it won't flow, so you have to heat water to make steam and pump that steam into the formation to heat the oil up enough to liquefy it so it will flow. Imagine how inefficient that is, plus if you transport that oil to the refinery by pipeline you have to heat the pipeline to keep the oil liquid enough to not block the pipeline but keep flowing. And you have to have a lot of pumps to keep it moving.
The price of oil is cyclic. It goes up and then goes down. But the trend is for the cycles to get more expensive. Most of the cheap easy oil has been found and produced. The stuff that is left costs more to produce. That's Saudi Arabia's huge advantage, they have huge reservoirs that are real cheap to produce. Our shale oil is really expensive to produce. You have to keep drilling new wells and fracking because the old wells go dry. I don't know what it costs to find and produce our shale oil. I don't believe the numbers that are made public. I worked with numbers for most of my working life and know you can make numbers say what you want them to if you have an agenda. I think we are at a point the oil companies cannot make a profit on that oil so they will stop investing in it and look for cheaper oil to produce. They will keep producing the wells that have been drilled but won't be drilling new wells. Look for a sharp decline in production.
The oil companies will not shut in production to get the prices back up. That's a huge fallacy in "general knowledge". I worked in that industry. When the prices dropped the pressure was intense to produce more to keep profit margins up. If the oil companies can find projects to develop that make money, they will be all over them. But with prices down, they will not be able to find many projects worth developing. It's a business and the purpose of that business is to make money. Expect a lot of people in the oil patch to lose their jobs, not just the oil companies but especially the service companies.
It is supply and demand, pure ands simple. With many countries economies down and production still high, there is a surplus of oil on the market. We are not the only ones producing expensive oil. Russia is producing a lot of very expensive oil from their Arctic regions. All those deep water projects around the world are extremely expensive. The Saudis and other producers of cheap oil are not cutting back production to keep prices high. For their own reasons they want to get the prices lower to stop the production of that expensive oil ,then the prices will go back up and the profit margins on their cheaper oil will go through the roof. It's a balancing act. Keep the prices as high as you can but stop the production of the more expensive oil.
For the record I'd prefer to use their cheap oil and leave our oil in the ground for my granddaughter to use when it is more valuable.
In my opinion the Keystone Pipeline is pretty insignificant overall. It has become this huge political thing blown way out of proportion in regards to our economy or energy independence. The only major effect is political. If it is approved the Republicans will have won a huge political victory over the Democrats. I'm not sure the Democrats can win whether it is approved or not. If it is approved, it will not look anything like it would have a couple of years ago. Behind the scenes regulators have been working with the pipeline company’s engineers to look at every water crossing, road crossing, and ridgeline crossing. You have to look at the soils and the individual streambeds or ridgelines so you can install it in a way that you don’t cause huge pollution or erosion issues. You don’t want a boat’s anchor to puncture the pipeline. The route has changed some to avoid less stable areas or avoid graveyards or archeological sites. Some of the safety devices on that pipeline will have changed to reduce the chance of an accident or to reduce the consequences of a spill if one does occur. A pipeline done right is the safest way to transport oil but it has to be done right. That requires a lot of engineering and a good regulatory review. You don’t just draw a line on a map and install a pipeline. Should the review been finished before this? Yes, but somebody turned it political. Yippee Yi Oh, Ride ‘em Cowboy!!!
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