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Fracked crude might not even be first-order profitable. There is an assertion here by a book author being interviewed that the fracking industry is largely not
by dv_dt 8y ago
Fracked crude might not even be first-order profitable. There is an assertion here by a book author being interviewed that the fracking industry is largely not long-run profitable and that only low interest rates allowed them to run speculatively at all.
https://www.marketplace.org/2018/09/11/economy/economics-fracking https://www.marketplace.org/2018/09/11/economy/economics-fra...
This was new to me, and I don't really know if it's a correct assessment. But it's very interesting to mull over. I wonder if anyone has other information in this vein?
- nwsm 8y agoI'm not seeing where he says they are not long-run profitable, only that the oil industry is hard to predict, which has been obviously true for decades. American shale plays can be profitable down to $40/bbl
- dv_dt 8y agoThe author is a she, and when she says this: "And what fascinated me about this industry is it doesn't make money. These companies lose billions of dollars. They've never produced free cash flow. They're really dependent on Wall Street's willingness to fund them. " That's where I made the interpretation that the idea being presented here is that fracking is not long-run profitable. So I now have to wonder, when "profitable" at $40/bbl is quoted, does that might mean some form of operational profit but not payback of capital layout - or maybe not including debt service or equipment wear out if she's talking about free cash flow.
- jessaustin 8y agoLots of commodity producers (...and other businesses) depend on market conditions for viability. There's nothing fake about that.