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Low Gas Prices Could Cost Fracking Companies Big

By Mark Martin, Dale Hurd

CBN News — Fracking is a modern American success story. The technique for extracting oil from shale has made America the world’s leading oil producer.

However, could fracking become a victim of its own success?

Lower energy prices have been an early Christmas present for consumers, but they also hurt companies that drill for oil. And with oil prices now below $60 a barrel and likely to go lower, fracking is facing a challenge.

Fracking, which extracts oil and gas from deep in the earth using chemicals and water, is an expensive process. The technique is part of what has helped bring down oil prices by increasing supply.

But some fracking companies may not survive their own success. Lower prices have sent oil company shares plummeting and forced companies to cut spending.

British Petroleum said it will aim to cut costs by $1 billion next year.

Policy analyst Phil Kerpen said Saudi Arabia and OPEC are also trying to use the low world oil prices as a weapon to kill off fracking as an industry by making the process too expensive compared to the price of oil. OPEC has decided to not curb production in an effort to raise oil prices.

“They don’t like the competition from the U.S. They think if they drop the price, they’ll be able to cause enough pain and push some of them out of business, and they’ll be able to raise the price back up,” Kerpen told CBN News.

President of American Commitment Phil Kerpen spoke more with CBN News about the impact of falling oil prices on the industry and what this could mean in the long-term.

However, Kerpen said it’s a risky maneuver for the Saudis.

“Their national budget in their country cannot balance if the price of oil is under about $90 a barrel, and of course it’s well below that now,” Kerpen said. “So there’s a real question, how long they can live themselves with prices where they are right now before they kind of give up and let things go back to normal?”

Industry analysts say some fracking operations will survive the low oil prices, while others may fold.

Report via CBN News



 

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