Fracking story

Investment Analysis Clubs Macro Economic Trends and Risks
#1

I learned several things from this story, most notably that fracking, while it has propelled the US back to the #1 producer of gas and oil, is not, and has not been profitable - almost ever, apparently.

Hardly Anyone Talks About How Fracking Was an Extraordinary Boondoggle

Perhaps the most striking fact about the American hydraulic-fracturing boom, though, is unknown to all but the most discriminating consumers of energy news: Fracking has been, for nearly all of its history, a money-losing boondoggle, profitable only recently, after being propped up by so much investment from venture capital and Wall Street that it resembled less an efficient-markets no-brainer and more a speculative empire of bubbles like Uber and WeWork.
https://www.nytimes.com/2022/07/27/opinion/environment/energ…

“ At the risk of oversimplifying the never-ending complexities of energy, there is a climate lesson here — a clear contrast to draw. Fracking was nothing less than a genuine energy transition, enacted quite rapidly and at enormous upfront expense with only speculative paths to real profit, requiring large-scale infrastructure build-outs against some cultural and political resistance and yet celebrated all the while as a product of irrepressible capitalism, the almost inevitable result of the never-ending appetite Americans have for cheap energy. And yet for a decade, as fracking boomed, Americans were told again and again — and not just by climate deniers — that rushing a green transition would be too expensive, imposing a huge burden on taxpayers, who would be footing the bill to subsidize and support a renewable build-out that couldn’t possibly be justified in terms of market logic or demand.”

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#2

And yet for a decade, as fracking boomed, Americans were told again and again — and not just by climate deniers — that rushing a green transition would be too expensive, imposing a huge burden on taxpayers…

I’m not sure that fracking imposed a huge burden on taxpayers.

DB2

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#3

Reminds me of Buffett’s famous quote about the airline industry:

““If a capitalist had been present at Kitty Hawk back in the early 1900s he should’ve shot Orville Wright; he would have saved his progeny money.””

Not sure that means that it would have been good government policy to intervene to prevent passenger air travel from developing. Sometimes capitalists end up losing a lot of money in an industry that’s useful and valuable to their customers, but is just really hard to turn a profit at.

Albaby

#4

Hardly Anyone Talks About How Fracking Was an Extraordinary Boondoggle

I mentioned often that Fracking relied on other people’s money to keep producing at a loss. Often they had to flare or just release valuable Nat Gas to get at the more valuable (to them as there were no pipelines to move Nat Gas to market) oil.

Tim

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#5

I’m not sure that fracking imposed a huge burden on taxpayers.

When we were looking at buying property in WV, I came across and article detailing all the damage that the fracking equipment did to the roads and infrastructure. Was bad enough that we decided against WV.

IP

#6

Tim

I cared a lot, both with my heart and my pocketbook.

I doubted fracking was viable economically but gave up fighting about it long ago, but I only invested in old fashion stuff (Gulf of Mexico deep wells near existing platform and pipe infrastructure), and I am still making out like a bandit.

I give half of the bandit loot to political and ecological causes fighting GCC. The other half I spend on planting trees and giving smart poor kids from the mexican countryside college educations.

david fb

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#7

I’m not sure that fracking imposed a huge burden on taxpayers.

He goes on to explain he was just comparing relative total costs.

#8

taxpayers paid nothing toward the fracking revolution which kept energy prices low for two decades and oil prices equally low.

All the money for fracking came from ‘investors’ - and the US Gov’t wasn’t one of them.

Now on the Green Energy side.

The Taxpayers paid a billion plus dollars in failed ventures highly backed by government guarantee loans. Solyndra, A123 battery and a two dozen other ‘start ups’ that took taxpayer money right down the drain.

https://www.forbes.com/sites/adamandrzejewski/2021/04/12/rem…

"The president’s new $2.3 trillion infrastructure proposal includes the same kinds of “green energy” provisions that cost taxpayers billions following the 2009 stimulus bill – The American Recovery and Reinvestment Act (ARRA).

Recently, when rolling out his new American Jobs Plan, the president called it “a once-in-a-generation investment in America,” and asked Congress to invest $35 billion in green energy leadership. "

The new bill seems to be repeating a lot of the mistakes of the past.

some history

Solyndra – $570 million taxpayer dollars wasted

Abound Solar – $401 million taxpayer dollars wasted

Calisolar – $280 million taxpayer dollars wasted

Fisker Automotive – $193 million taxpayer dollars wasted

A123 Systems – $132 million taxpayer dollars wasted

ABB, Inc. – $12.6 million taxpayer dollars wasted

Now, the fracking industry provided TREMENDOUS benefit to taxpayers (and even non tax payers) using ‘other people’s money’.

I’m not sure how much of the 2.3 trillion dollar bill will simply go down the drain.

Buffet commented ‘the only reason I build windfarms is to reap the tax benefits’… of course, paid for by taxpayer money (or not getting regular taxes because the tax breaks reduce taxable income way down).

Great reading in detail on these at the link above.

Did I mention that every ethanol company went bankrupt? Guess who paid the majority of funds to get them started! Bought for pennies on the dollar and still not energy ‘producing’. Just very inefficient conversion of crops to fuel that reduces car ‘fuel’ mileage.

t.

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#9

taxpayers paid nothing toward the fracking revolution which kept energy prices low for two decades and oil prices equally low.

This was stated very clearly in the article.