The end of fracking leaves N. Dakota in the lurch

[planosteve]

I remember when I posted an article on DD that fracking was basicly a Ponzi scheme. KM said it was the dumbest thing he had ever read.

The fallout of the collapse in oil prices has a lot of side effects apart from the decline of rig counts and oil flows.

Oil production in North Dakota has exploded over the last five years, from negligible levels before 2010 to well over a million barrels per day, making North Dakota the second largest oil producing state in the country.

But the bust is leaving towns like Williston, North Dakota stretched extremely thin as it tries to deal with the aftermath. Williston is coping with $300 million in debt after having leveraged itself to buildup infrastructure to deal with the swelling of people and equipment heading for the oil patch. Roads, schools, housing, water-treatment plants and more all cost the city a lot of money, expected to be paid off with revenues from oil production that are suddenly not flowing into local and state coffers the way they once were.

http://txdigest.com/txdigest/posting.php?mode=post&f=2

[ralph]

suppose that N. Dakota population will head back to where it came from .

[planosteve]

Fracking was made possible by the FED's cheap money policy to "stimulate the economy". It works for awhile, but when the cheap money stops, which it always does, the economy goes back into the tank and is in even worse shape than before. It's called a depression.

[ralph]

don't know Steve but Fed musta thought that it was profitable to frack so that may be the reason for the Fed to fund it . Then again , I have heard that the fracking has mostly been done on private property using private money which has led to the oil boom . I don't follow this stuff very well but that's what I have heard !!

[Red Oak]

An Oil Boom followed by an Oil Bust, is not new or unexpected.

[planosteve]

An Oil Boom followed by an Oil Bust, is not new or unexpected.

No, fracking is a different deal. Regular wells pump oil for many years, decades. Fracking wells star to play out within two years and have to be replaced with new ones. That is only economic when you have free or very cheap money available.

[Red Oak]

I have interest in a fracked well that has paid me a royalty ever month for 8 years.

[planosteve]

I have interest in a fracked well that has paid me a royalty ever month for 8 years.

I have interest in regular wells in Kansas on land that my Gt. Grandfather drilled in the 1930's. Those wells are still pumping.

[Red Oak]

Fracking may not be economic at under 75 dollar a barrel oil, it is not the end of fracking however.

[planosteve]

Fracking may not be economic at under 75 dollar a barrel oil, it is not the end of fracking however.

It all depends on the price of oil and the price of fracking a particular area.

[Red Oak]

That is a sensible statement.

[GFB]

Fracking may not be economic at under 75 dollar a barrel oil, it is not the end of fracking however.

Bingo!

[jellowrestling]

An Oil Boom followed by an Oil Bust, is not new or unexpected.

No, fracking is a different deal. Regular wells pump oil for many years, decades. Fracking wells star to play out within two years and have to be replaced with new ones. That is only economic when you have free or very cheap money available.

Your posted quote talks about collapsing oil prices, not played out wells. That's just standard boom/bust stuff. When oil profits decline, so does the local economy when oil is the primary industry. As was previously posted: not new or unexpected.

[planosteve]

I think the main point here is to realize that a principle of Kenysnian economics is that when the economy slumps it can be revived by govt. spending more money and lowering interest rates below the market level. That is supposed to goose the economy to reach an "escape velocity" where it will take off again on it's own again. Problem is it doesn't work, though it seems to for awhile, as economic activity does increase. What it does is create a lot of spending on uneconomic things that will collapse once the stimulous is removed. Fracking is just on of those phony booms that occur. Another major one is real estate.

[Mark]

The price of oil will eventually go back up. With all of the chaos created in the Middle East by Obama, I am surprised it is still as low as it is.

[planosteve]

The price of oil will eventually go back up. With all of the chaos created in the Middle East by Obama, I am surprised it is still as low as it is.

We're in a bubble economy. When the bubble bursts oil is going to fall through the floor. If "eventually" means 20 or 30 years, you might be right.