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| Fig. 1: Shale plays in the lower 48 states. (Courtesy of the U.S. Department of Energy). |
In recent years, much attention has focused on alternative methods of producing energy. Most of these endeavors have concentrated on renewable and sustainable techniques for meeting the world's energy needs. However, one of the most earth shattering developments in the energy industry over the last decade has been the emergence of hydraulic fracking. While not as glamorous as environmentally friendly methods of producing energy, the proliferation of fracking is equally intriguing. In fact, more so than any other technology, hydraulic fracking has the potential to fortify the United States' position in the global energy market. The procedure is driving a shale gas revolution which has cemented the United States' standing as the world's largest producer of oil and natural gas. [1]
As can be seen in Fig. 1, there are numerous shale plays in the United States. In order to extract gas from shale, an extensive and complicated process must be undertaken. Initially, a long vertical shaft is drilled which is then followed by a horizontal shaft of almost similar length. Through the use of explosives, the horizontal shaft can be perforated to allow a mixture of water, chemicals and sand to be injected into the well. This solution fractures the rock, and upon its return to the surface, the well begins producing natural gas. [2] The unquestionable benefit of this method is its ability to access more natural gas than was previously possible. However, this comes at the expense of dramatically altering underground rock formations. The danger is amplified when the same well undergoes hydraulic fracking multiple times. [3] Additionally, the mixture used to enhance the recovery of shale gas poses risks to the water supply after it has been discarded. Yet, greater adoption of natural gas to fuel automobiles and power plants would significantly reduce the country's greenhouse gas emissions. [4]
Through 1986, the United States was able to approximately meet its need for natural gas via domestic production. In the subsequent 20 years, imports of natural gas were required to fill the gap between supply and demand. Conversely, in the mid-2000's producers' adoption of hydraulic fracking and the improved access it provided to shale formations drove U.S. production to new heights. [2] Due to this development, President Obama claimed in his 2012 State of the Union address that the United States possesses, "a supply of natural gas that can last America nearly 100 years." [5] The increase in production throughout the last decade is projected to continue in subsequent ones. Shale gas has undeniably established itself as the main driver of this growth in the United States.
One of the consequences of increased oil production due to shale gas extraction has been a plunge in oil and natural gas prices. For the month of October, the spot price for natural gas on the New York Mercantile Exchange averaged $2.34 per million BTU. [6] With its many inputs to draw more oil out of each well, hydraulic fracking increases the cost of extracting oil. The break even point for profitable extraction of natural gas from a shale well is approximately $5 per million BTU. [2] As a result, the drop in oil prices has squeezed the profit out of the shale gas industry. However, when natural gas prices fall below $5 per million BTU, power generation from natural gas is less expensive than from a coal-fired power plant. [2] To bring the current market to equilibrium, an increase in demand for natural gas or a contraction of supply is needed to raise the price of natural gas. This will bring natural gas prices within the narrow margin where it is economical for both consumers and suppliers. In fact, the current reduction in oil rig counts is an attempt to tighten supply and improve the profitability of operations for producers.
Shale gas extraction has revolutionized the natural gas industry. It has driven U.S. oil production and proven reserves to levels unimaginable just years ago. Yet, with this glut of supply has come much controversy. Environmental concerns over the contamination of water sources and the effects of tampering with rock formations deep underground remain due to the relative infancy of hydraulic fracking. Nonetheless, the shale gas boom has been a bright spot in the United States' recovery from the Great Recession of 2008. While low oil prices threaten the viability of the extraction of shale gas in the short term, further technological advancements and the eventual depletion of oil reserves will make it profitable in the long run. Despite not being as environmentally friendly as some renewable energy sources, natural gas is clearly an improvement from the use of coal and oil as a source of energy. As such, the United States should put its weight behind shale gas as a path to oil independence.
© Trey Strobel. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "BP Statistical Review of World Energy 2015," British Petroleum, June 2015.
[2] M. B. McElroy, "Fracking's Future," Harvard Magazine, January-February 2013.
[3] C. Mooney, The Truth About Fracking," Scientific American 305, 80 (November, 2011).
[4] R. J. Pierce Jr., "Natural Gas Fracking Addresses All of Our Major Problems," George Washington University, May 2013.
[5] M. Inman, "The Fracking Fallacy," Nature 516, 28 (2014).
[6] "Short-Term Energy Outlook," U.S. Energy Information Administration, November 2015.