Who’s To Blame For The Oil Price Crash?
When we think of the recent drop in oil prices, the question is not only who started it, but who’s responsible for keeping the prices falling.
Probably no one would dispute that the price plunge began with the eager and copious production of oil from shale formations in the United States. From the American perspective, that was beneficial because it was bringing energy self-sufficiency to a country with the reputation as the world’s largest importer of oil.
Despite unproven concerns about hydraulic fracturing, or fracking, a common way to extract oil and gas from underground shale rock, the practice has proven extremely productive. And that’s the source of the oil glut that began driving down prices in late June 2014.
Related: Oil Rebound May Come Sooner Than Expected
Even one of fracking’s biggest supporters, legendary oil man T. Boone Pickens, blames the US shale boom for triggering the price slough that’s been hammering the energy industry. He’s doesn’t subscribe to the environmental concerns about fracking, but he says he can also recognize when his industry has latched on to too much of a good thing.
“I’ve fracked over a thousand wells,” Pickens, the chairman of BP Capital Management, said March 23 at a panel discussion in Monterey Calif. “I’ve never had a failure on one of them. … Texas, Oklahoma lead in fracking wells and it has been a great success for both those states.”
Yet Pickens thinks it’s time for US companies to take a break from their frantic production to allow oil prices to achieve some balance. In an interview with theFinancial Times published March 18, he said shale companies have “overproduced,” and that it’s up to them to rein in output to help restore oil prices to a more profitable level.
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