The global fracking industry has a fundamentally broken business model which is: Let’s produce as much oil and gas as we can and hope that prices rise as a result.
“It’s completely backward”, says IEEFA’s Clark Williams-Derry.
“What we’ve ended up with is a global supply glut and weak demand.”
With COVID-19, oil and gas prices have plummeted, supply is absolutely bulging, tankers filled with oil have nowhere to go, and fracking bankruptcies are the latest boom.
“This is the new normal,” says Williams-Derry. “There is too much LNG, and prices are too low to make a profit.
“As a result, a lot of producers and buyers will be in a difficult position, but so too will investors.
“The U.S. is starting to export its gas glut to the world.
“The result will be a mass destruction of wealth. You can’t produce cash when the prices are too low.”
This week, IEEFA’s Gas Chat is joined by IEEFA analysts Clark Williams-Derry from the U.S. and Bruce Robertson from Australia to talk about what’s happening around the globe in the oil and gas industry.
Listen to the podcast here: Even before COVID-19, the oil and gas industry’s model was broken