THE CARBON WAR

Chapter 2
The men behind the wire
Balcombe, 18 th August 2013
In America, the shale boom is in full swing. Gas and oil are being sucked from
rocks that were once thought unproductive, by the drilling technique known
as fracking. Drillers have found a way to drive horizontal wells through shale
horizons, force open the natural fissures in the rock and free hydrocarbons long
thought irrecoverably trapped. As well as a high degree of drilling wizardry,
large amounts of water and toxic chemicals are involved. For the oil and gas
industry, and many people besides, this is an example of how innovative people
find new ways to create wealth. Cheerleaders talk of an America en route to
oil-and-gas self sufficiency because of the boom. “Saudi America” here we
come, they are saying.
For a wearying minority, this is another example of one of those bubbles
humans seem so good at creating: a sudden eruption of apparent asset value that
spreads fortunes around for a short while and then deflates, once it becomes
clear that the value is delusional. The doubters believe the delusion begins with
the simple economics. The industry is losing money, we point out, even with
the oil price as high as it is today. The shale boom might have created benefits
for American industry, with the cheap gas and reduced oil imports that it has
provided, but how can it be sustainable, when so many drillers are producing
oil and gas at a total cost – including the cost of money borrowed to finance
drilling – in excess of the price they can sell it for?
The oil and gas industry insists there is a way around this: some combination
of the gas price going up and the cost of drilling going down. In any
event, new prosperity can be created in multiple countries if they would but
import the shale narrative.
In the UK, the British Geological Survey has announced that the country
is sitting on shale gas deposits that could supply the nation for a quarter of a