Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

America's Rocky Path towards Energy Independence

Commodities / Energy Resources Nov 14, 2012 - 08:25 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDr. Kent Moors writes: You might have seen yesterday's headline in the Wall Street Journal: "U.S. Redraws World Oil Map."

As the article explains, U.S. oil production is now on pace to surpass Saudi Arabia by 2020. This would make the United States world's largest oil producer. We're already the second-largest natural gas producer, according to 2010 EIA estimates.


It's all thanks to the U.S. shale boom that has unlocked billions of barrels of oil and trillions of feet of natural gas from the Appalachian Mountains to the Pacific Coast, from the Bakken in North Dakota to the shale fields of southern Texas.

But all of this fracking has caused some serious economic and environmental problems.

And while I greatly advocate increased drilling and domestic production, we still must address a wide-range of problems now plaguing the shale oil and gas sectors.

After all - with apologies to Voltaire and Spiderman - with such great fortune comes greater responsibility.

That's why I am in the third day of what has become a very interesting conference here in Pittsburgh. It was convened to set the agenda moving forward to deal with the almost invisible aspects of shale oil and gas drilling.

In fact, for the first time, the conference's primary focus will be on the negatives caused by the drilling.

We also have questions surrounding the amount of water required to frack these formations (the process needs a lot of water to break open rock and release hydrocarbons), as well as the ongoing public health fears from the chemicals used.

Now, we are seeing parallel economic problems as well.

In the Marcellus basin, researchers are now recording some of these shortcomings and placing them in four basic categories.

The real concern is that these four problems - in infrastructure, labor, local inflation, and the environment - will remain well after the drilling (and the revenue) has moved on.

So before you decide to declare "energy independence", take a look at some of the downside that may come along with it.

1. Infrastructure Damage Continues to Accelerate.

The constant movement in water trucks and equipment has caused widespread destruction to roads, bridges, and access routes. In Pennsylvania, localities have responded by introducing "impact fees," which are paid by operating companies to offset the damage.

Yet, the payments have to be divided among locations where drilling takes place, those affected but receiving no direct largess from the gas extraction, townships, counties, with a portion left over for statewide conservation, environmental, and state land maintenance issues.

It is too early to determine the result. The low volume of wells due to poor natural gas market prices (until recently) has depressed the anticipated drilling, making estimates difficult. Nonetheless, we do know from earlier experience in the Barnett basin of Texas that, once the drilling picks up, such fee payments are likely to trail behind the destruction.

The damage, in other words, occurs quicker than the funding to fix it.

2. Labor Dislocation Has Become Visible

As the emphasis is placed upon drilling, employment gravitates to the job openings.This is perfectly natural, in an economy were so many are unemployed or underemployed.

But the short-term emphasis on gas production in each locality throws training and educational programs into imbalance, as well. With the average well producing most of its gas in the first 18 months, and only a finite number of pads (each housing several wells) possible before a company moves on, the emphasis to make new jobs available in these communities only makes the aftermath of drilling that much more difficult to face.

3. Local Inflation Punishes Residents

All eyes have been on the money pouring in and the potential for employment from the drilling.

But as shale gas and oil progressively come to dominate domestic production, a "boom and bust" cycle has developed in the towns surrounded by the shale basins. Simply put, the injections of short-term money are introducing a range of problems for local communities.

Local inflation is rising due to dual pressures.

On the one hand, as so much money pours into confined areas in a short period of time, prices rise quickly for everything from housing and basic services to menu items at the corner diner.

On the other hand, dual usage equipment, materials, and supplies - both needed at the wellheads and having a separate demand in non-gas producing segments of the market - increase in price. Supplies are not sufficient. Competition jacks up the cost.

The worst position to be in when both of these hit is living on a fixed income.

It's no surprise residents of these areas are increasingly relying on public programs. And there are no additional local funds to provide them.

4. Environmental Problems Continue to Mount

Finally, the most disquieting downside is one whose price tag can't be determined yet.

Pennsylvania alone has more than 400,000 plugged wells and many more closed coalmines. Most were discontinued some time ago, but there is a double whammy here. Many were capped or sealed poorly. It is difficult even to determine their locations.

As shale gas extractions become more endemic, environmental cleanup expenses are rising as a result of increasing run off, drainage, and spills from much older locations.

These problems are not coming from the drilling projects themselves. They were caused by earlier problems... and are now being released again by fracking.

What Lies Ahead

The costs from these four problems, and a number of others, are not presently factored into any of the analyses done on shale gas impact. That always becomes a ready recipe for economic disappointment.

We need to develop a balanced view of the economic potential and impact. Otherwise, policy approaches to rectify the situation are hardly possible. That is not possible until we have a clearer view of the downside from drilling.

One other consideration to keep in mind is this. By clarifying the downside, we are able to focus on remedies.

And those usually produce new investment opportunities.

Source :http://moneymorning.com/2012/11/14/the-path-to-energy-...

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History