Fracking, or hydraulic fracturing, is a method of extracting oil and natural gas from dense rock or sand where traditional drilling is not an option. Due to the nature of fracking, costs are 澳洲幸运5开奖号码历史查询:higher than regular oil extraction. With falling oil prices dipping ඣbe🌃low the highs, can fracking survive?

What Is Fracking?

Traditionally, oil is extracted from natural underground oil reservoirs. These reservoirs are reached by drilling a deep hꦡole into the earth, and the oil is extracted through oil wells and platforms. When oil is in the ground but not in a liquid reservo🌌ir, it has to be extracted through other means.

Oil can exist in many underground conditions. Some formations contain shale, a rocky and dense substance, or 澳洲幸运5开奖号码历史查询:oil sands. This type of oil ജis referred to as shale oil or tight oil🌸.

Extracting shale oil and tight oil requires hydraulic fracturing. The fracking process is complex. A drilling team drills into the ground until they reach the shale, which is filled with small fissures. The team then injects a chemical fluid into the fissures at very high pressures, causing the shale below to fracture. The fracturing releases the oil from the sand and rock allowing the team to extract the oil and natural gas from the ground.

As one would expect, the cost of the equipment, process, and cleanup from fracking is higher than drilling into liquid 澳洲幸运5开奖号码历史查询:crude oil for extraction.

Oil Price Trends

澳洲幸运5开奖号码历史查询:Oil and natural gas priceꦺs fluctuate on a daily basis. These 澳洲幸运5开奖号码历史查询:commodities are traded on public markets, such as the NYMEX, and the price rises and falls with 澳洲幸运5开奖号码历史查询:supply and demand. As more people in the world own cars 🎀and developing countries like China demand more energy, prices are expected to increase. Oil prices can also respond to geopolitical events and incidents such as natural disasters or armed conflicts involving oil-producing regions.

On the other side of the equation, an increase in supply can push oil prices down. As new sources of 澳洲幸运5开奖号码历史查询:oil and gas are discovered and accessed around the world, the total supply increases. Since 2022, oil prices have dramatically decreased because of supply and demand.

Breaking Even on Oil Production

In 2011, crude oil was priced at over $110 per barrel, the first time the "global benchmark averaged more than $100 per barrel for a year." High oil prices were sustained until mid-2014, when prices crashed from $108 per barrel to less than $60. While consumers rejoi🎐ced at lower gas prices, oil and gas producers scrambled to stay profitable.

When oil costs $110 per barrel, fracking🐎 is a very prof🔴itable business. At lower prices, companies are forced to weigh the cost of expensive fracking compared to less expensive extraction methods.

The most expensive oil produced in the United States today comes from older wells known as “stripper wells.” These are aging oil and gas wells that only produce a few 澳洲幸运5开奖号码历史查询:barrels per day. The maintenance cost on the wells does not decline with oil prices, and these wells become unprofitable at around $40 per barrel. Other high-cost oil comes from Canada’s tar sands and the United Kingdom’s North Sea 澳洲幸运5开奖号码历史查询:oil fields; these become unprofitable around $30 per barrel and $50 per barrel, respectively.

Fracking is expensive, but still less costly than the methods used to obtain oil from the wells mentioned above. According to Reuters, estimates put the 澳洲幸运5开奖号码历史查询:break-even point for fracking at around $50 per barrel, but other estimates put it as low as $30 per barrel. This $30 ꦗ;per barrel figure is much lower than the total cost per barrel more widely published, but there is an important distinction between the estimates that put frac♍king costs at the $50 per barrel range.

For $50 per barrel, oil and gas companies are less likely to explore and drill for new oil accessible through fracking, but existing operations may still be cash-flow positive. Once the expensive exploration and initial drilling are complete, existing wells can continue to operate and stay cash-flow poജsiꦕtive even as prices fall below $50 per barrel.

Environmental Concerns and Opposition

Oil and gas companies have other costs to consider when it comes to fracking outside of the 澳洲幸运5开奖号码历史查询:direct costs to find, drill and extract. Fracking comes with a negative stigma, and environmental advocates around the world are pressuring government officials and oil companies to end 澳洲幸运5开奖号码历史查询:fracking operations completely.

Both sides have strong arguments and quote scientific reasons for and against fracking. Opponents argue that the chemicals used in fracking cause serious health risks to nearby residents as the chemicals can leak into 澳洲幸运5开奖号码历史查询:groundwater used as drinking water. Fracking has also been linked to small earthquakes.

Proponents argue that health and environmental concerns are unproven and that fracking is completely safe. The truth likely lies somewhere in between, but the pressure from communities and government officials leave oil and gas companies with expensive costs for lobbying that other types of oil and gas extraction do💞 not require♉.

The Bottom Line

While falling oil and gas prices leave producers scrambling to cut costs, fracking can survive below $50 per barrel. New exploration and production may decrease, and some higher-cost wells have already been shut down. However, fracking as a whole continues to survive, and will do so for the f🔯oreseeable future.