TPT-January-2015

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74 January 2015
Global Marketplace
Among the factors working against fare hikes, Mr Seaney
said, are a reluctance on the part of airlines to charge more
on a route than Southwest. And filling empty middle seats will
always requires discounting, especially on low-demand days.
But the October fare hike was sticking, despite concerns
that fliers would be deterred by the Ebola outbreak that had
reached the US after killing thousands of people in West
Africa. Charisse Jones of USA Today reported that the
airlines, backed up by some traveller surveys, were saying
that demand had not diminished.
› The US airline industry’s first successful system-wide
domestic fare increase since April offered an example of
how a bane to some people is a boon for others.
In an investor’s note quoted in USA Today, Jamie Baker of
JPMorgan wrote, “Evidence of domestic fare traction can
hopefully allay investor concerns that lower fuel prices will
simply be handed over to passengers in the form of lower
fares.”
Of related interest . . .
› If US travellers by air are not benefiting from the decline in
fuel prices, others are.
When, on 14 October, the Paris-based International Energy
Agency published a report lowering its estimate for growth
in gasoline demand for last year and this, Americans were
spending some $230 million a day less on the automotive fuel
than they were on 4 July. The savings – based on price and
consumption calculations by AAA, the biggest US motoring
group – is easily explained. The Organization of Petroleum
Exporting Countries was reporting its highest production in
over a year and US oil output was at the highest level since
1985.
The falling price of gasoline in the US was following a drop in
the broader oil market. Brent Crude, the global benchmark,
closed at $86.16 a barrel 17 October on the London-based
ICE Futures Europe exchange after slipping the day before to
$82.60, the lowest level since November 2010. US benchmark
West Texas Intermediate settled at $82.75 on the New York
Mercantile Exchange, after trading below $80 on 16 October
for the first time since 2012. The lower cost of filling the tank
represents the most tangible benefit yet that US consumers
had seen from a record boom in domestic oil production, a
surge contributing to the global crude glut and helping reduce
international prices.
Two presumptions about
‘fracking’, both open to challenge:
its environmental threat and its
virtually limitless potential
Coverage of hydraulic fracturing, both in the general press
and in scientific journals, tends to centre on two aspects of the
controversial method of producing natural gas from shale: its
danger to the environment and its promise of financial reward.
Recent reports suggest that, in both cases, conventional views
of “fracking” are questionable.
As distinguished from a gusher oil well, the term “well” here
denotes a drilled access to the exploitable rock. Shale gas
producers commonly bore a deep vertical well that is then
extended horizontally in several directions into the rock, like
spokes from a hub. In fracking, water and chemicals are
injected at high pressures into these spokes, creating fissures
and releasing the trapped natural gas.
The principal environmental concern is that fracking could
cause the gas to migrate into drinking water aquifers. But
a study of tainted water in areas of the US with extensive
deposits of gas-bearing shale exploited over years by means
of fracking shows that such contamination is more likely due to
leaky wells than to the extraction process itself.
As reported by science writer Henry Fountain in the New York
Times, the study, published 15 September in the Proceedings
of the National Academy of Sciences, looked at seven sites in
Pennsylvania and one in Texas where water wells had been
contaminated by methane and other hydrocarbon gases. The
researchers found no evidence that fractured shale led to
water contamination. Instead, they faulted the cement used
to seal the outsides of the vertical wells, or the steel tubing
used to line them, for allowing gas to leak up into the wells
and into aquifers. (“Well Leaks, Not Fracking, Are Linked to
Fouled Water,” 15 September)
“In all cases, it basically showed well integrity was the
problem,” said Thomas H Darrah, a researcher at Ohio State
University and the study’s lead author. Rather than deriving
from the shale itself, the leaking gas was mainly traced to
shallower gas-rich pockets through which the vertical wells
were drilled on their way to the shale formations. The good
news, Dr Darrah said, is that “improvements in well integrity
can probably eliminate most of the environmental problems
with gas leaks.”
› Richard J Davies, a professor at Newcastle University in
Britain and a petroleum geologist not involved in the study,
told the Times’s Mr Fountain that it confirmed what he and
others had shown earlier: that the fissures created by fracking
were generally not long enough to affect aquifers.
“It is good to know which parts of the fracking process are the
ones we need to worry about,” Dr Davies said.
The assumptions of ‘the shale
revolution’ rest on recovery
rate estimates that may be too
optimistic by far
“By calculating the production numbers on a well-by-well
basis for shale gas and tight oil fields throughout the US, Post
Carbon concludes that the future of fracking is not nearly as
bright as industry cheerleaders suggest.” The work cited by
Steve Horn, of the Montreal-based Centre for Research on
Globalization (CRG), touches on the second major perception
of hydraulic fracturing: its association with handsome profits.