Producers look to hedge oil futures
Sunday, March 13, 2016
Comparing the current oil market crash to the oil bust of the mid-1980s, Fuel Fix reports that some analysts believe this year’s decline in U.S. production could realign supply and demand by early 2017.
What’s different between the 1980s crash and today is that shale production didn’t exist in the 1980s. Shale production can more quickly respond to lower prices than conventional production. Still, more than 70,000 U.S. shale jobs have been lost and 1,400 rigs have been out of operation since late 2014.
On March 9, oil prices rose to $38 a barrel, a price closer to the levels that may make producers hedge some of their 2017 production.
Read more: Fuel Fix > Oil prices edge closer to hedging territory
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Shale FAQ
What is fracking?
Fracking is a slang term for hydraulic fracturing. Fracturing is a process by which highly pressurized fluid is pumped thousands of feet into the ground to fracture rock formations. The goal is to release the natural gas that’s locked inside the rock.
Is it safe?
What most concerns people about fracturing is ground water contamination. The worry is that fractures underground, caused by the process, will extending upwards and into aquifers, releasing gas and chemicals into the ground water supply. There’s been no confirmed reports of such a thing happening. Though surface spills and drill site blowouts can lead to localized environmental concerns.
Will my water catch on fire?
Flammable water is caused by the release of methane gas into a drinking water supply. Methane gas occurs naturally and can be released by any kind of drilling, including water wells. In Pennsylvania officials fined Chesapeake Energy $1 million for contaminating ground water with methane. It was determined that the company had not properly cemented it’s boreholes and gas migrated up the well, between rock and into aquifers.