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The Inside Scoop on Fracking in the United States

Updated on October 28, 2014

US oil prices are falling, and fracking companies are leading the charge!

Fracking is a contentious practice – there are no two ways about it. However, it is rapidly gaining favour in the US where fracking oil wells stretch all the way from North Dakota down to Texas, with more drilling taking place in key states like Pennsylvania, and beyond. As these fracking initiatives continue to gain momentum, they are being fuelled by rapidly falling oil prices. With third-quarter earnings from oil companies projecting strong gains and robust growth, the US refining industry is going to enjoy windfall profits. It is notable to point out that the price of US oil is far less than the price of Middle East oil. American energy independence is often at the forefront of US economic debates, with many people favouring a reduction in US dependence on Middle East oil.

US Oil Production

Fracking benefits refining companies that can buy cheap US oil and sell the refined products like diesel and gasoline on the international markets at a much higher price. These companies include the likes of Alon USA Energy Inc, Phillips 66, and PBF Energy Inc among others. Their third-quarter earnings in 2014 are testament to strong growth, and rising demand. One of the most impressive performers is Valero Energy Corporation. In recent months, the market has been hit by an oversupply, and oil traders are concerned that this has resulted in the unusually low prices. This is surprising, given that OPEC countries (Saudi Arabia, Iraq and Kuwait, Iran and Venezuela) generally try to influence higher prices by reducing supply. Saudi Arabia announced that it would continue to supply high volumes of oil to the market, despite low demand.

Oil barrels' prices

The price of a barrel of oil in the United States is trading for $81.01 (WTI Crude Oil), and the price of foreign oil is $86.13 (Brent Crude Oil). While there appears to be daylight between WTI crude oil and Brent crude oil, that gap is closing fast. Consider for a moment the futures contracts for the international benchmark – Brent Crude Oil – was listed $19 more than WTI Crude Oil. As can be seen from the above comparison, there is barely $5 between them now. This means that there has been a significant erosion of profits for refineries using WTI Crude Oil to offer gasoline and diesel on international markets.

Middle East uncertainty (as a result of ISIS and Iranians nuclear talks), combined with recessionary fears across Europe and Japan, and heightening tensions between Russia and the West are coming into play. There will undoubtedly be a lag effect as a result of the changing differentials. For the third quarter, US refineries will still show strong profitability, but moving forward the outlook is less optimistic. The US typically prohibits the export of crude oil, but recently Alaskan crude oil was sold to Asian refineries, owing to a loophole in the export restrictions. The Department of Commerce made a ruling, allowing for the sale of light oil under certain provisos.

Animation of Hydraulic Fracturing (fracking)

The Very Real Dangers of Fracking

The EPA (Environmental Protection Agency) recently concluded that an estimated 3 billion gallons of toxic waste was pumped into farm irrigation aquifers in California’s drinking water by fracking companies. Widespread contamination is suspected, as reports have concluded that 9 of 11 hydraulic fracturing companies had to be shut down for contaminating the environment. The reports found that toxic fluids are being pumped deep underground, and that they have found their way into California’s water supply. According to California state law, and the Federal Safe Water Drinking Act, all aquifers must be protected.

Some of the most toxic chemicals found in the water supply include nitrates, arsenic and thallium. These chemicals are exceptionally dangerous, especially in high concentrations. The dispersion of these toxic chemicals is limited to areas in relatively close proximity to the injection sites. The exact concentration of toxic chemicals is unknown, and many aquifers further from the sites were also found to have been contaminated. For example, the CVWB (Central Valley Water Board) tested 8 water wells and found 50% of them to be contaminated. There are an estimated 100 water wells in the area.

Fracking requires high pressure blasting of chemicals, water and sand into dense layers of rock. The precise mix of components that are used to break through the rock are not known to the public. The oil industry and government officials insist that the chemicals will not endanger the environment, but this has been strongly refuted by biologists, scientists and environmentalists. To add to these woes, the fracking chemicals are used over and over again. Some of them are stored in underground wells, while others are dispersed into waste fields, or left to evaporate. There are many more dangers associated with this oil exploration technology, including health concerns, worsening of drought conditions and earthquake activity.

Frack them all! 'Safe' drilling in US (RT Documentary)

The human cost of fracking wells is mounting as more and more people living within close proximity to these hydraulic fracturing sites are complaining of all sorts of maladies. These include skin irritations, and upper respiratory problems. One such study in SW Pennsylvania concluded that 39% of people living within 1 km of a well had upper respiratory problems, while that figure dropped to 18% for people living within a 2 km radius. The study was conducted by health Professor Peter Rabinowitz fromYale University. The study involved a sample size of 492 people in 180 households. Even though the evidence appears overwhelming, it does not prove correlation between sickness and fracking. There have been multiple reports of fracking being responsible for all sorts of diseases, sicknesses and infections. However, the professors in charge of the study believe that more in-depth analysis is required before any assumptions can be made.

Seismic Activity with Subsurface Manipulations

Earthquakes are another major source of concern with fracking. Since hydraulic fracturing of subterranean rock requires the use of massive volumes of water, chemicals and sand, there is widespread devastation of the subterranean environment. This shattering is necessary for gas and oil to be extracted, and drawn to the surface. This has now been proven to be the cause of hundreds of minor earthquakes in fracking zones. The general opinion on the issue prior to a new body of evidence which has emerged, was that hydraulic fracturing of rock did not cause earthquakes or geological disturbances. A leading Cornell University geophysics professor – Rowena Lohman - attested that the oil and gas community have known full well that any subsurface manipulation results in minor earthquakes. The big concern is now whether these subsurface manipulations can cause large-scale earthquakes. The prevalence of earthquakes related to hydraulic fracturing of rock has been reported in Texas, Idaho, Oklahoma, Colorado and other states.

Massive Water Wastage in Drought-Ridden California

In California, the ongoing drought is a major concern for everyone. Fracking requires the use of approximately 150,000 gallons of water every day, and that water cannot ever be used for human consumption, or for farming purposes. But the bigger concern is the flowback of this toxic water into aquifers and the water supply. This toxic water is released into waste water wells, where high concentrations of benzene and toluene are now being found. EPA advocates are calling for a moratorium on this activity until such time as extensive studies have been conducted to verify the safeguards in place to prevent environmental catastrophes.

Hydraulic fracturing of rock for gas and oil

There is also a growing concern that hydraulic fracturing of rock for gas and oil has a detrimental effect on wildlife. In the state of Nevada, critics of this practice are concerned that sage grouse birds and widespread environmental damage are taking place as a result of fracking. The reason being, some key drilling sites are located in the natural habitats of the sage grouse, a species that the US Fish and Wildlife Service is considering placing under protection as an endangered species. Various ranchers throughout the state of Nevada have filed complaints against The Bureau of Land Management (BLM) for failing to take their concerns into consideration. Farmers and ranchers feel like they've been side-lined in favour of big business on the matter. For its part, the Bureau of Land Management acknowledges that it has sold leases to fracking companies, but that it can exercise its discretion about whether it will issue any of them. In the meantime, the BLM will continue to sell leases to fracking companies. Hydraulic fracturing is an issue that will not go away, and there remains heated debate in the US about the implications of this activity.


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    • Iris Draak profile image

      Cristen Iris 

      4 years ago from Boise, Idaho

      You're right. This is a contentious issue, but it still needs to be discussed. We can't just pretend it doesn't exist. I'm so glad you chose to take a chance and write about this.


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