REPORT: Oil price drop threatens US fracking boom
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Plummeting oil prices caused by a Saudi-Russian feud and the coronavirus outbreak may lead to a decline in fracking, the controversial practice that has fueled the domestic energy revolution in the U.S. Fracking, which involves blasting water and other chemicals deep within the ground to lift oil out of rock crevices, is more expensive than using a traditional oil derrick, making U.S. producers more sensitive to dropping prices.
Oil sank to $23 from a high of $53 dollars in mid-February, far below the “break even” point that producers need to drill new wells to maintain supply, and with volumes rapidly diminishing at existing wells.
The article goes on to state the following:
“These wells are more expensive, they produce a larger portion of all their oil and gas that first year,” said Lynn Helms, director of North Dakota’s Department of Mineral Resources, which regulates the oil industry. “We’re just starting to see the economic impacts and expect them to grow quite a bit over the next six to nine months.”
It’s not just that fracking is more expensive — it costs anywhere from $6 million to $10 million to drill a horizontal fracked well versus about $2 million for the traditional bobbing oil derricks dominant in the rest of the world — fracked wells can also deliver half of their contents to the surface within the first year, giving a well little time to wait out shocks to the market. Major oil players have already told stockholders they will slash their budgets in response.
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