Halcón Resources

Warren Buffett, Fear, and Greed in Fracked Oil Fields 

Read time: 7 mins
Oil pumpjack at sunset

Warren Buffett, CEO of investment holding company Berkshire Hathaway, is considered one of the top investors in history and can back up that track record with a personal wealth of around $90 billion. Buffett is known for advising investors to be “fearful when others are greedy and greedy when others are fearful.” 

In the U.S. fracked oil industry, this month can be read like a textbook version of Buffett’s fear and greed adage. The shale industry showed plenty of signs of fear while Buffett made a massive “greedy” bet on the future of the Permian Shale in Texas and New Mexico, assuming it will produce oil profitably and investing $10 billion in Occidental’s purchase of shale producer Anadarko.

Why It Matters If Fracking Companies Are Overestimating Their ‘Proved’ Oil and Gas Reserves

Read time: 12 mins
Oil pumpjacks in silhouette

Back in 2011, The New York Times first raised concerns about the reliability of America's proved shale gas reserves. Proved reserves are the estimates of supplies of oil and gas that drillers tell investors they will be able to tap. The Times suggested that a recent Securities and Exchange Commission (SEC) rule change allowed drillers to potentially overbook their “proved” reserves of natural gas from shale formations, which horizontal drilling and hydraulic fracturing (“fracking”) were rapidly opening up.

Welcome back to Alice in Wonderland,” energy analyst John E. Olson told The Times, commenting on the reliability of these reserves after the rule change. Olson, a former Merrill Lynch analyst, is best known for seeing the coming Enron scandal 10 years before the infamous energy company imploded in 2000.

Today, those same rules have allowed shale drillers to boost their reserves of oil, as well as natural gas. As a result, these “proved” reserves, which investors and pipeline companies are banking on, could potentially be much less proven than they appear.

And the unprecented degree to which this is happening in the shale industry casts a shadow of doubt on the purportedly bright future of America's booming oil and gas industry.

"I Hate That Oil's Dropping": Why Mississippi Governor Phil Bryant Wants High Oil Prices for Fracking

Read time: 6 mins

Outgoing Interstate Oil and Gas Compact Commission (IOGCC) chairman Phil Bryant — Mississippi's Republican Governor — started his farewell address with a college football joke at IOGCC's recent annual conference in Columbus, Ohio.

“As you know, I love SEC football. Number one in the nation Mississippi State, number three in the nation Ole Miss, got a lot of energy behind those two teams,” Bryant said in opening his October 21 speech. “I try to go to a lot of ball games. It's a tough job, but somebody's gotta do it and somebody's gotta be there.”

Seconds later, things got more serious, as Bryant spoke to an audience of oil and gas industry executives and lobbyists, as well as state-level regulators. 

At the industry-sponsored convening, which I attended on behalf of DeSmogBlog, it was hard to tell the difference between industry lobbyists and regulators. The more money pledged by corporations, the more lobbyists invited into IOGCC's meeting.

Perhaps this is why Bryant framed his presentation around “where we are headed as an industry,” even though officially a statesman and not an industrialist, before turning to his more stern remarks.

“I know it's a mixed blessing, but if you look at some of the pumps in Mississippi, gasoline is about $2.68 and people are amazed that it's below $3 per gallon,” he said.

“And it's a good thing for industry, it's a good thing for truckers, it's a good thing for those who move goods and services and products across the waters and across the lands and we're excited about where that's headed.”

Bryant then discussed the flip side of the “mixed blessing” coin.

“Of course the Tuscaloosa Marine Shale has a little problem with that, so as with most things in life, it's a give and take,” Bryant stated. “It's very good at one point and it's helping a lot of people, but on the other side there's a part of me that goes, 'Darn! I hate that oil's dropping, I hate that it's going down.' I don't say that out-loud, but just to those in this room.”

Tuscaloosa Marine Shale's “little problem” reflects a big problem the oil and gas industry faces — particularly smaller operators involved with hydraulic fracturing (“fracking”)  going forward.

That is, fracking is expensive and relies on a high global price of oil. A plummeting price of oil could portend the plummetting of many smaller oil and gas companies, particularly those of the sort operating in the Tuscaloosa Marine.

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