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Monday, March 16, 2020

frack you


FRACK YOU-post 2 today
I've always been amazed at our fracking industry. Never before has so much wealth been diverted into so little of a return. How do people invest in such a colossal failure? I mean, I get it to some degrees. People that only know about money listen to folks lying about thermodynamics and are easily swayed. It would be like investing in a gold mine without any idea how much the equipment costs ( hint, it takes about 200 ounces of gold profit to replace one tire on one of those jumbo dump trucks ). I can see how the charlatans first found the marks.
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I guess stock buyers never play poker either ( if you can't spot the sucker at the table... ), although they listen to Glen Beck ( who lost every iota of respectability by playing the fracking whore and pimping it as 100 year minimum energy independence-he should stick to his strengths which apparently are drinking and wearing the Jesus Hat for drumming up business ). In the race to find yield in a ZIRP world ( zero interest rate policy ), I can see how folks would overlook physics and just play the musical chairs.
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They have the excuse of desperation. Which, ahem, seems to be a common denominator around here. I don't mean to step on toes, but fracking, while welcome, was always just a temporary fix. Like corn ethanol. “But, Jim, the cows eat the leftover sludge, so the energy is free”. Technically, true. What is the EROI of ethanol NOT made from sugar cane? As low as 1.5 to 1. I'll remind everyone that folks way smarter than I stipulated a bare minimum of net energy to sustain our type of economy is 10 to 1 ( and I think they are optimists. We were at 30 to 1 while the 70's imploded economically ).
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Our Industrial Economy was built on 100 to 1 energy return on investment. One barrel of oil built the oil well, drilled it and transported it to the refinery, and returned 100 barrels of light sweet crude in return. Fracking at the best is no more than 5 to 1, and that is hitting JUST the sweet spots in the best locations. It sure as crap ain't hauling Colorado shale to where the water and energy to heat that is, not to mention the crushing machines, for magnitudes more investment that the $8 million per fracking well.
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Which lasts four years in production ( managed properly, a conventional oil well is economical for forty years ). Okay, you get why I'm so sour on the sour fake fuel. Saying all that, fracking was STILL a miracle. One we desperately needed. Almost from the beginning of the millennia, oil production was at near a standstill. New discoveries were near non existent. If it wasn't for fracking oil ( fracking gas was great for cheaper electrical generation ), there would have been no global increase in oil for near fifteen years. And you need energy growth for economic growth.
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Without fracking oil, I freely acknowledge, the 2008 crash would have taken down the economy. Go, fracking! But like ethanol, or even for solar and wind, it is NOT a solution. It is a stopgap. It is what an energy predicament delivers. It is certainly no solution to a problem. Energy decline cannot be solved, only endured. Look at the economy we had to endure for the last dozen years. It had no solution, even though moronic Democrats tried to borrow it away with welfare and Republican jerk-offs tried to borrow it away with war spending. And you want to vote for either of those?
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If you were smart, or at least paranoid enough to realize the predicament we were in, you understood ethanol was great for keeping Big-Ag providing us with food, and fracking was great for the small amount of economic activity we had ( only slightly negative rather than off the cliff ) , but in no way were they a long term answer to Peak Oil. You kept waiting for the other shoe to drop. I called it late last year, when production of fracking peaked. Now, here is another indicator.
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Yesterday, conventional oil dropped to $31 a barrel ( it will be different by the time of your reading ). Which is friggin hilarious because most oil in the US costs $73 to produce. Yeah, the downside of fracking isn't JUST the low net energy. It is the much higher cost to produce. And here is what is even worse than the selling price. The amount of fracking junk bonds today is worse than the amount of sub-prime mortgages in 2006. Did you get that? The primary cause of the 2008 crash was a financial instrument failure NOT AS BAD as the one we are currently experiencing.
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Now, granted, anything could have popped the housing bubble, just because that is what happens to bubbles. It was going to be some kind of Derivatives failure, because the financial elite have been playing that game since the FIRE sector took over the economy from manufacturing ( and each failure is exponentially worse ). Why do you think the Federal Reserve Bank has been lending into the bank repo market since September of last year? Someone, Douche Bank or HBSC or someone, needs liquidity to keep their derivatives exposure from imploding. The fracking failure is just another straw on the camel, not the primary cause of spine damage.
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Yes, we needed fracking oil. It saved our asses. Cheney invading Iraq saved the PetroDollar, then fracking saved our economy with energy growth. But saving the PetroDollar burdened us with far too much debt, and funding the fracking industry ( along with suppressing precious metals and other games ) grew the derivatives exposure far past unsafe levels. Each kick of the can made us doubly exposed to other problems ( like diverting corn to fuel withdrew the Turd World's surplus food caused the instability in half the world-it was the Tortilla Revolution causing issues in Mexico, not the drugs. Well, plus oil production decreasing, hard ).
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And I'm sad to report, this fracking failure now underway is only SOME of our problems. Some of our exposure to the consequences of a failing system. There will be oh so much more. Just beware of your favorite Happy Motoring Go Juice and its near term fate. Soon to be a casualty of the bankers failures. Enjoy that 200 years of energy independence, bitches!
( .Y. )
( today's related Amazon link click HERE )
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