Wednesday, August 29, 2012

Is the Shale Gas Boom Another Bubble That is Bound to Pop?

From Seeking Alpha:
It is looking highly likely that once again the public will get the short end of the stick in a few years as the supply of gas from these shale formations runs out much faster than estimates, leaving the public with a large glut of natural gas fueled cars and trucks and natural gas fueling stations, all of which were built on the promise of 100+ years of supply at cheap prices and the dream of energy independence. As this surplus demand infrastructure is built out and as supplies run out quicker than expected, prices will naturally rise dramatically.
The production levels drop dramatically after the first 20 months on the majority of shale wells and a huge amount of wells have been drilled over the past 5 years so the ability to find high producing wells will diminish quickly and the ones that have already been drilled will be producing far lower supplies. The natural gas market should begin to feel this constraint over the next three to 12 months. Consumers will be stuck with natural gas cars that cost more to fuel than cars that take unleaded gas and they will be left with home heating bills that will be skyrocketing. Add to this the potential reduction in supplies from exporting liquid natural gas to foreign markets by 2015 and we could see a massive bull market in natural gas.
We can thank CHK [Chesapeake Energy] and others now for what will be yet another popped bubble. In 5 years Congress will shamefully trot out the executives of these companies, putting on a show for the public as they publicly condemn them for what turned out to be a giant investment scam. However, none of them will be willing to admit they were warned when ahead of time by the likes of Arthur Berman, The New York Times, The Rolling Stone, and other sources. It will all play out just like every other scandal we have seen over the past 13 years, from the dot com bubble to the housing boom to the Madoff Ponzi Scheme, etc.
Given all of the bubbles we have been through over the past 13 years, we all know to be cautious when we hear the words "This time is different." Well, the natural gas industry would like the public to believe that this time is different, that we can gain energy independence on the back of an unlimited supply of natural gas that can be drilled at dirt cheap prices.
Does the average person believe those words yet again?
Read the rest of this article here.

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