Source: Business Insider.
Business booms are followed by busts—the interaction of overconfidence, oversupply and diminishing returns.
That’s not just a law of the free-market system, it’s a law of human nature.
As the chart above indicates, hydraulic fracturing for natural gas is an industry entering the bust part of its cycle.
The glut of natural gas probably will continue for some time. Gas companies would continue to pump gas even if they’re losing money.
They’ve already paid for the drilling equipment, and they’d lose less money by continuing to pump than by walking away from their sunk costs.
It’s good that New York state didn’t jump into fracking just now. We’d have had all the problems associated with fracking and none of the benefits the come with getting in on the ground floor.
The wise thing to do just from a business point of view, aside from all environmental and climate considerations, is to keep natural gas in the ground as long as we can. If there comes a time when we desperately need it, it will be there.
LINKS
Fracking has collapsed by Wolf Richter of Wolf Street for Business Insider.
Keystone XL, Cold War 2.0 and the GOP Vision for 2016 by Michael T. Klare for TomDispatch. Fracking is a factor in geopolitics.
Update 2/28/15
As Bill Harvey pointed out in his comment, a decline in the number of rigs doesn’t mean a decline in production—that is, not right away.
Oil rigs and oil production in the United States
Phil Ebersole's Blog 