The turn-around of U.S. fossil fuel energy fortunes has been stunning over the past fifteen years. From a general (not universal, but general) understanding that the U.S. had passed peak natural gas and that the globe was facing eminent peak oil, the general (not universal, but general) perspective is that U.S. natural gas supplies are absurdly close to limitless and that oil production can increase significantly over a sustained period of time. Amid this seemingly rosy economic story, there have been analysts and industry specialists warning of risks of a financial bust: that there is a shell game of debt financing moving around with fracked natural gas simply not being a profitable endeavor with sustained low natural gas prices. While there might be great substance to these perspectives, the reality is that such a financial bust simply hasn’t been a real part of the U.S. oil and natural gas primary story line for the past few years.
The seemingly rosy oil and natural gas story might — or might not — be packaged around financial risk and a looming financial bust, but continued aggressive pursuit of it will generate a a far more consequential and far more certain bust.O
Oil Change International‘s just-released report Drilling for Disaster makes this headlong rush toward bust quite clear. With plans for additional oil and natural gas exploitation the equivalent of adding 1,000 new coal-fired power plants, they assess that the O&NG industry’s plans are “incompatible with climate limits.” In other words, as CNN puts it, “America’s oil boom is terrible for the climate.”
All those who believe that the answer is “all of the above” must rethink their beliefs. While it might produce near-term financial rewards and produce some other benefits, the fundamental reality is that full-throated exploitation of America’s oil and natural gas will assure climate catastrophe. No matter the short-term benefit streams, this is an assured path toward a catastrophic bust.