Russia Blamed, US Taxpayers on the Hook, as Fracking Boom Collapses

[marmar]

Russia Blamed, US Taxpayers on the Hook, as Fracking Boom Collapses

Thursday, 08 January 2015 00:00
By Ben Ptashnik, Truthout | News Analysis

As Congress removes restrictions on taxpayers bailing out the too-big-to-fail banks, the right is blaming environmentalists and Russia for the demise of the fracking boom. In reality, the banks' junk bonds and derivatives have flooded Wall Street, and now the fracking bubble threatens another financial crisis.

Collapsing crude oil prices due to oversupply are reaching tsunami proportions, threatening Wall Street banks, investors and a dozen countries, foremost Russia, Iran and Venezuela, where revenue losses have caused severe financial degradation, and economies are about to implode. While Americans are today enjoying $2 per gallon gasoline, Wall Street's analysts predict that an imminent energy market collapse will bring financial institutions to their knees once again, and taxpayers are being set up for another mandatory bailout.

At the heart of these tectonic shifts in the entire energy sector is the recent expansion of the hydraulic fracturing (fracking) industry, a boom cycle that began in earnest when Congress and the Bush administration passed the Energy Policy Act of 2005, which exempted the new horizontal drilling technology from the Clean Water Act, the Safe Drinking Water Act and the National Environmental Policy Act. By tapping considerable quantities of new oil and gas resources from shale deposits, the fracking boom promised US energy independence, upending the world's prevailing paradigms around renewable energy and peak oil expectations. Environmentalists fought against the huge Keystone pipeline infrastructure that would deliver the fossil fuels to foreign markets, fearing that exploiting these resources would undermine the struggle for the curbing of carbon emissions.

Fracking also threatened the dominance of Russia and Saudi Arabia as the fossil fuel suppliers of Europe when it became evident that the United States would soon become a net exporter. In the United States, fracking was hyped on Wall Street as a get-rich-quick opportunity, attracting massive capital input, and creating an investment bubble. Bloomberg reported this year that the number of bonds issued by oil and gas companies has grown by a factor of nine since 2004.

"There's a lot of Kool-Aid that's being drunk now by investors," Tim Gramatovich, chief investment officer and founder of Peritus Asset Management LLC, told Bloomberg in an April 2014 article. "People lose their discipline. They stop doing the math. They stop doing the accounting," he continued. "They're just dreaming the dream, and that's what's happening with the shale boom." ...................(more)

The complete piece is at: http://truth-out.org/news/item/28406-russia-blamed-us-taxpayers-on-the-hook-as-fracking-boom-collapses

[underpants]

1. Add less demand due to individual conservation and renewable energy sources

Just wanted to
Throw that in there

[bemildred]

2. Yep. Let the hysterical babbling begin.

I like that chart, really makes the dynamic clear. Exponential growth is really exciting, for a short while. Then comes the crash.

I am skeptical about the idea that we asked the Saudis to do this, they have good reasons of their own, and it is a very schizophrenic thing for us to do, but given the otherworldly nature of the thinking of our foreign policy wonks of late I don't consider it out of the question.

[KoKo]

4. This is an intresting bit of speculation at the end of the article:

And, given what many of us have observed in the past decades of strategy and extreme actions from the Repub Right (and now from the current Tea Party Crazies) his speculation here actually could make some sense as to what might be coming down the road.

So, whom will the banks, brokers and investors scapegoat for this upcoming crash? Some predict that they will likely use every available media outlet to blame community activists, Democrats and Obama for stopping the Keystone pipeline and for opposing the fracking industry. And as in the climate change denier movement, the narrative will probably use "communist" and "socialist" rhetoric, which is why the Russian card is so important to play: Hence the Higgins article.

The pundits on Fox will likely play on the patriotism of the right and use their Big Lie ploy (say something enough times, it becomes the truth) to the hilt. Six months from now, while studiously avoiding mention of our "allies," the Saudis, or the Wall Street banks, they will likely be vociferously defending those poor "beleaguered US oilmen" who could have made our country strong and independent again in energy, but were broken by the Democrats and those "commie environmentalists" working for Putin. The market crash will be blamed on the "climate hoax."

[bemildred]

5. They will use the same old shibboleths that they always do.

It's all they got, really. Clinging to the past has it's drawbacks.

[dixiegrrrrl]

3. The key sentence here is this:

Most bank customers and voters don't know that Congress has already written into finance regulations that, in the case of insolvency, financial institutions could grab the assets of depositors and "bail-in."

Not only was the language included in the Budget bill, there are agreements with Central Banks in Canada, Britain and US to do exactly that.
They were written over a year ago.

[GitRDun]

6. The fracking "boom" was always going to collapse.....

..it was just a matter of when.

Everyone in the industry has known for at least five years that unless you are in the fairway of these plays, e.g., the sweet spot, the wells cannot properly cash flow unless commodity prices are really high.

The fairways of these plays were all leased up by the time the public even heard of fracking.

The boom is created because the media does no real reporting and banks are allowed to hype up these wells to "greater fool" investors.

It's always the last guy holding when the bubble bursts that takes it on the chin. There should be no bail outs. Everyone knew or should have known this was coming.