Saturday, November 9, 2013


might as well say this here, too.

After Katrina devastated the shallow water wells around the delta, natural gas prices briefly topped $17/mcf and some folks got dollar signs in their eyes.  With the advent of fracking, major new gas fields were opened up.  "Utica", "Marcellus", "Barnett", and even venerable old coal companies got into the act drilling for coal bed methane.  By 2007, Baker Hughes reported that there were almost 1800 rigs in the field in North America drilling for gas.

Well, the price collapsed, of course, all the way back down to around $2.50, well below what it cost to drill a new well and almost lower than what it cost just to keep the existing wells open.  All the new wildcatters were driven out of business, many properties had to be resold, and the only people making money were the outfitters.

Enter Wall Street.  Always eager to find new ways to fool the public, they started offering folks like Al Gore big, big money in order to convince the public of two things, one that there is a developing crisis under the label of "global warming" and two that US reduction of carbon-based fuel use would have an impact on it, and Wall Street could invent "carbon swaps" and "carbon credits" as yet another new financial vehicle to trade.  Al Gore became a multimillionaire and just to make a point he put fancy lights all over his house inside and out in Oak Ridge so it looks like a christmas tree at night.

Infrastructure takes a long, long time to change.  Adaptations to oil price changes and NG price changes take many years to work their way through the economy.... building NG pipelines to small cities takes time .... changing over millions of fuel oil furnaces to NG takes time ....building NG fueling centers and changing bus systems over to burn NG takes time ...convincing small town councils to change their habits takes times ....

Then, as prices for gas bumped along the bottom, Mother Nature decided to get involved.  She threw us a series of extra-mild winters and extra-mild summers.  Wall Street loved it as "proof" of their global warming thesis.  The drillers hated it as more and more of them went bust.  By the summer of 2012, there were less than 400 rigs still in operation.  The media and the politicians are all shouting from the rooftops about the modern day miracle of new gas and oil production in the USA.  They are practically guaranteeing full energy independence by 2020.

fat chance.

There's a funny thing about a fracked well.

The old, conventional wells, the oil wells, the mixed ones, and even the dry gas ones ... used to be, you just stuck a straw into the ground and the stuff blew out everywhere, the biggest problem was containing it.  Remember "blowout preventers" from DeepWater Horizon????  And the stuff just keeps coming and coming like the eveready bunny, for decades.

Not so with fracked wells.  Yes, there is shale almost the girl next door.  But there's another thing you remember about the girl next door?  Its very, very hard to get her to put out, maybe once or twice.  After that she marries you and she never puts out again.  Well its the same with fracked wells.  Their initial output is pretty modest in comparison with a conventional well.  But then, the output starts to decline almost immediately.  After a mere five years or so, its hardly worth the bother to even collect it.  You can try fracking it again, but that works about as well as divorcing your wife and then marrying her back again;  she is still not going to put out for you.

Enter the winter of 2013-2014.  Wall Street is trying to hide some "inconvenient truths".  The ice cover in the Antarctic las summer (winter there) was the largest on record.  ON RECORD!.  Since the beginning of satellite surveillance over 40 years ago.  Meanwhile the minimum reached in the Arctic was 1.7 million square miles greater than the year before.  It was the first year that the fabled "Northwest Passage" through Canadian waaters, did not open up for shippers and tankers, in six years.

Even the wooly bears in my area had mostly or all brown coats, a tell-tale sign that something "different" is up.....

I don't know about you.  You can do what you want.  I have more firewood in stock at this time than I have ever had before.  I did start the first fire late in September, a month ahead of schedule.  the temperature right now is hard frost, not unheard of, no, its about "normal" for this time of year, but we have not had a "normal" winter for a decade.  I also have over half my portfolio invested in natural gas companies.....with demand at an all-time high but the number of drillers approaching a twenty year low ... you figure it out .....

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