As Oil Prices Slide, Speculation Rises On Shale Boom's Sustainability
STEVE INSKEEP, HOST:
This is good news if you're buying gas today, not such good news if you're in the oil industry. World oil prices have fallen to a four-year low. This confirms some industry suspicions that the global market is producing considerably more crude oil than it is consuming. It tells us a lot about the way the world economy is changing. NPR's John Burnett reports.
JOHN BURNETT, BYLINE: The answer is now in, to the question, has America's fracking boom shaken up the world's energy order? Michael Webber's deputy director the Energy Institute at the University of Texas at Austin.
MICHAEL WEBBER: Yes, the American shale revolution is a victim of its own success. They've been so good at getting oil and gas out of the ground, now there's a supply glut or extra oil and gas, and that's driving prices lower.
BURNETT: In fact, the International Energy Agency has predicted that U.S. oil output will overtake Saudi Arabia's by 2020. The effect of this boom in hydraulic fracturing, which breaks up shale rock and releases the petrochemicals, has been dramatic. Brent oil prices, the European benchmark for light sweet crude, have slid nearly 25 percent just since June. At home, West Texas Intermediate crude has fallen to about $86 a barrel. The reasons for softening prices are not only abundant supply. On the demand side, U.S. policies are encouraging vehicle fuel efficiency that reduces our thirst for gasoline and diesel. And economists say energy demand from China and Europe has weakened. If all these trends keep up, it's going to have a heavy impact in the oilfields in states like Texas and North Dakota, says Chris Tomlinson. He's an energy columnist at the Houston Chronicle.
CHRIS TOMLINSON: Well, if you're considering fracking a new well in south Texas, you're going to be thinking twice about that at $85-a-barrel oil. And you're definitely not going to do it at $80-a-barrel oil. The question is, how long are the prices kept this low?
BURNETT: Fracking's an expensive technology. It's estimated to account for a third of the cost of a modern well. There are tanker trucks filled with water and chemicals, high-pressure diesel pumps and wastewater disposal.
TOMLINSON: People like to talk about energy independence and energy security. But the truth is, if you can't get a good price for your oil, you're not going to pump it out of the ground.
BURNETT: The question for consumers is how long they can keep oil prices this low. Because of the diving crude markets, the average price of gasoline dropped 12 cents in the past three weeks to its lowest level in nearly a year. John Burnett, NPR News, Austin. Transcript provided by NPR, Copyright NPR.