The drilling of shale oil has been hailed as revolution that has brought cheap gas and oil to American and made America a net exporter of oil and natural gas. However, there is serious debate as to whether shale is a sustainable business model given the high number of bankruptcies in the sector. What are the positions on the shale operating model?
Shale oil is not economical except at extremely high prices
Shale oil and natural gas are extremely capital intensive, and buying land, drilling and extracting the oil is far more expensive than drillers will admit to. Proof of this is that we have seen hundreds of shale oil companies go bust and almost no shale oil companies produce any free cash flow.
Shale oil companies have gone bust, many repeatedly
Hundreds of defaults and billions of dollars of defaulted bonds show that the shale oil business model was not sustainable.
Shale drilling is bad for the environment, independent of any poor financial outcomes
Shale oil destroys the landscape and leaves a large pockmarked surface polluted by chemicals. The long run environmental problems of shale make it a poor business model, as communities are left to pick up the pieces.
Shale drilling leaks toxic chemicals into drinking water
The hydraulic fracturing (fracking) process of shale poses significant threats to water supplies.
Fracking releases cancer-causing chemicals into the air. Such a reality forces residents to move far away from their homes in hopes of protecting their families. Those who cannot move away are punished by the conditions that were not their doing. Fracking companies deny the existence of fracking induced air-pollution.