Everand Logo

Welcome to Everand!

  • Discover millions of ebooks, audiobooks, and so much more with a free trial

    Only $11.99/month after trial. Cancel anytime.

    Saudi America: The Truth About Fracking and How It's Changing the World
    Saudi America: The Truth About Fracking and How It's Changing the World
    Saudi America: The Truth About Fracking and How It's Changing the World
    Ebook135 pages2 hours

    Saudi America: The Truth About Fracking and How It's Changing the World

    By Bethany McLean

    3.5/5

    ()

    Read preview

    About this ebook

    Fracking is making an increasing impact on the world, but most people are familiar with it from an environmental standpoint. Saudi Americagoes beyond that to examine the true story of fracking's impact -- on Wall Street, the economy and on geopolitics. McLean tells the neglected story of the financial gambles that are the reasons for over-optimism and inflated promises. It's a bit like the return to the Enron story: over eagerness in partaking in a boom leads to all types of problems, including ignoring reality and risks, and in the case of Aubrey McClendon, deception.
    LanguageEnglish
    PublisherColumbia Global Reports
    Release dateSep 12, 2018
    ISBN9780999745458
    Saudi America: The Truth About Fracking and How It's Changing the World
    Author

    Bethany McLean

    Bethany McLean is a contributing editor at Vanity Fair and the host of the podcast Making a Killing. She is also the co-host, along with Luigi Zingales, of the podcast Capitalisn’t. Her books include The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, which she co-authored with Peter Elkind, and All the Devils Are Here: The Hidden History of the Financial Crisis, which she co-authored with Joe Nocera. She is a columnist for Yahoo Finance, a contributor to CNBC, and a board member at the University of Chicago’s Stigler Center.

    Related to Saudi America

    Related ebooks

    Industries For You

    View More
    View More

    Related podcast episodes

    Related articles

    • Article

      China Is Still On Track To Be Top Dog

      Aug 12, 2022

      Tensions between China and the West are rising all the time. Over the last week, the country has been launching a series of alarmingly aggressive military exercises around Taiwan. Even if that does not lead to an invasion, or a blockade, it is a scar

      3 min read

    • Article

      The Yasin Malik Files

      May 28, 2022

      The Yasin Malik Files
      4 min read

    • Article

      Don’t Write Off Big Oil: The Geopolitics Of Energy And Security

      Oct 13, 2020

      Daniel Yergin’s “The New Map” provides a guide through the energy landscape, but gives short shrift to methane emissions and environmental activism.

      3 min read

    • Article

      The Power Of The Permian

      Jan 14, 2019

      The Power Of The Permian
      9 min read

    • Article

      From Boom to Bloodbath

      Jul 1, 2020

      From Boom to Bloodbath
      15 min read

    • Article

      US Seeks Energy 'Dominance.' But Is That A Shield Against Geopolitical Risks?

      Feb 22, 2018

      The Trump administration has set the goal of US 'energy dominance' in world markets – and outlined the strategic benefits. Yet, while America's role is rising, its oil and gas exports are still modest compared with Saudi Arabia's and Russia's.

      4 min read

    • Article

      Surging Gasoline Prices Bring Back Memories Of Past Energy Wars

      Mar 13, 2022

      American gas stations displaying high prices this summer and fall will matter more than all the campaign billboards put together in affecting the November midterm elections.

      7 min read

    • Article

      Obama’s Misleading Oil Boast

      Nov 30, 2018

      Presidents -- regardless of party -- tend to take credit for good things that happen under their watch, regardless of how much influence their actions may have had. Exhibit A: Former President Barack Obama said the fact that the United States is now

      4 min read

    • Article

      Why America May Emerge Stronger

      May 8, 2020

      Why America May Emerge Stronger
      2 min read

    • Article

      Stop Private Oil Companies From Dictating Energy Policy

      Jul 11, 2022

      In the wake of Russia’s invasion of Ukraine, concerns over energy security have surged. The price of crude oil soared past $120 per barrel, while the average price of a gallon of gasoline in the United States exceeded $4. Despite the looming threat o

      7 min read

    Related categories

    Reviews for Saudi America

    3.5/5

    16 ratings1 review

    What did you think?

    Tap to rate

    Review must be at least 10 words

    • 4/5
      Saudi America: The Truth about Fracking and How It's Changing the World, by Bethany McLeanIn an effort to reduce its dependence on foreign energy sources, the United States oil and gas industry invested in research and technology. Aubrey McClendon began his career investing in the natural gas industry as somewhat of a superstar, but he ended it, and his life, in infamy with accusations of criminal conduct and fraud. McClendon was determined to make America a dominant figure in the energy industry and, as a byproduct, make it less dependent on foreign imports. He envisioned an America that exported energy as well as consumed it.To further interest in the natural gas industry, McClendon demonized the coal industry as “dirty”. He was talented as a salesman and his charisma was well known. He sold a bill of goods to everyone, obtaining financing even when the ground beneath his reasoning was shaky, no pun intended, and when he was over leveraged, living large and ignoring the increasing weight of his mounting debts. He always believed he would land back on his feet in spite of all the obstacles he faced.Was he a hero or a villain? Did he dupe the investors or was he a victim of a world situation outside of his control. He was impetuous and often acted by the seat of his pants without carefully considering the consequences. Did he ignore the warning signs of the demise of his industry, of the increases in cost which would doom him, even if temporarily? Did he not see that Putin and Russia were expanding their own opportunities? EOG, which was formerly the now defunct Enron, was becoming a major competitor after it rose like the phoenix from the dust, in much the same way that Chesapeake Oil had once risen from out of nowhere. As the oil profits from fracking rolled in and increased, the natural gas industry declined. Conspicuous consumption by those reaping the profits from both the natural gas industry and the fracking industry was widespread with their purchases of mega mansions and sports teams, among other things. Would these fortunes last? They never showed a profit. Investments in their businesses were based on a wing and a prayer.In 2008, McClendon watched his fortunes dwindle and become debts, as the oil industry overtook his natural gas industry and shattered his dreams. He went from being high on the hog, in the black, to being in debt, in the red. He bore it well, though, as was his inclination in all things. C’est la vie. He believed that the price of gas would rise again, and this over mortgaged giant of a man thought he, too, would rise again. Ultimately, he did, but it did not last. Soon the price of gas declined again. The energy market was capricious, and competition from other sources was interfering with his market.Meanwhile, though, the fracking industry was also suffering losses. The combination of fraudulent reporting, over indebtedness and lack of profit was a perfect storm for failure. When Opec became wary of falling prices, they realized that it was far cheaper for them to get oil out of the ground than for the frackers, but the fear of losing market share kept them from trying to manipulate the world market. Doing nothing worked better, and the price of oil that was fracked continued to weaken. For awhile, the energy industry in the United States was in decline.On a personal level, McClendon was being investigated and was finally indicted for price rigging. Others afraid of being contaminated by associating with him threw him under the bus. He was abandoned by the top brass of the company he founded. As criminal charges and demands for financial damages assailed him, what was he thinking? On the outside, he seemed his same optimistic self, but he suffered a violent death, in an accident, which some people thought was suspicious. His life was falling apart around him, and they wondered if he took his own life. From the king of the industry, he became its pariah.As the price of oil and gas continued to fall, so did the fortunes of many in the energy industry and some companies went bankrupt. Finally, though, when the export ban on oil was lifted, fracking became profitable and became the hope, again, of making America energy independent. Hence, the title Saudi America; the United States would produce enough to eliminate imports and perhaps provide enough to begin exporting as well as providing for the lion’s share of the country’s needs. McClendon did not see the industry’s return to solvency, and one can only hope the industry remains healthy.Because of the author’s association with far left interests, I scrutinized her information very carefully. I wondered if she might have a political agenda in the presentation of her facts. Energy independence is to be desired, but at what price becomes the question. Will fracking make us energy independent? Will the return of the coal industry be a positive or will it increase pollution. Actually, the production of natural gas has turned out to produce more methane and not be quite so good for the environment. Our fossil fuels will one day run out., anyway, so we must develop alternatives; the current administration, she believes, and so do scholars and others in prominent positions, is not giving the problem its proper due and is squandering the resources we have by not restricting its use, and by creating a bit of chaos in the worldwide energy industries with the current energy policy.The book is informative and raises many questions that need to be answered abut the future use and supply of energy, whether fossil fuel or renewable.*I received this book as part of a promotion on shelf-awareness.com

    Book preview

    Saudi America - Bethany McLean

    Introduction

    In the late afternoon on New Year’s Eve, 2015, the Theo T, a hulking, dark gray Bahamian tanker, gingerly maneuvered in the light rain through a channel from the North Beach Terminal at the port of Corpus Christi in southern Texas into the open waters of the Atlantic Ocean. The Theo T was fully loaded with American crude oil that had been drilled by Conoco Phillips in Texas’s Eagle Ford shale, a rock formation deposited over sixty-five million years ago that became, in the modern age of fracking, one of the most prolific oil fields in the United States. The oil had traveled one hundred miles through pipeline owned by San Antonio-based NuStar Energy. Twenty days after the Theo T disembarked from Corpus Christi, the oil would arrive at Marseilles in the Mediterranean Sea, more than five thousand miles away, where Vitol, a huge international energy trader, would take ownership of it.

    The Theo T’s seemingly routine journey was anything but. Two weeks earlier President Barack Obama had lifted the ban that for some four decades had essentially prohibited the export of American crude oil.

    Ever since a series of 1970s era laws, all of which were passed during crippling fears of oil shortages, the export ban existed as both a great rebuke and a great contradiction. On one level, the ban flew in the face of the free market ideals America holds so dear. But even as presidents from Ford to both Bushs emphasized the importance of energy independence, the country had in fact become more and more dependent, particularly on the Middle East, and more and more embroiled in the region’s politics. By the spring of 2006, U.S. net imports of crude oil and petroleum accounted for almost two-thirds of our consumption.

    By the time Theo T set sail, carrying the first American oil export of the twenty-first century, the energy world had been entirely turned upside down by an epic development few had foreseen. America was an oil powerhouse, ready to eclipse both Saudi Arabia and Russia, and was the world’s largest producer of natural gas.

    Few people saw this coming. This remarkable transformation in the U.S. was brought about by American entrepreneurs who figured out how to literally force open rocks often more than a mile below the surface of the earth, to produce gas, and then oil. Those rocks—called shale, or source rock, or tight rock, and once thought to be impermeable—were opened by combining two technologies: horizontal drilling, in which the drill bit can travel well over two miles horizontally, and hydraulic fracturing, in which fluid is pumped into the earth at a high enough pressure to crack open hydrocarbon bearing rocks, while a so-called proppant, usually sand, holds the rocks open a sliver of an inch so the hydrocarbons can flow. A fracking entrepreneur likens the process to creating hallways in an office building that has none—and then calling a fire drill.

    In November 2017, production topped the ten million barrel a day record set in 1970, back in the last gasp of the legendary oil boom. This year, U.S. oil production is expected to reach almost eleven million barrels a day, according to the U.S. Energy Information Administration. The country’s newest hot spot, Texas’s Permian Basin, now ranks second only to Saudi Arabia’s legendary Ghawar oil field in production per day, according to oil company ConocoPhillips. Stretching through northern Appalachia, the Marcellus Shale could be the second largest natural gas field in the world, according to geologists at Penn State. Shale gas now accounts for over half of total U.S. production, according to the EIA, up from almost nothing a decade ago.

    Last year, the U.S. imported less than one-third of its daily oil demand, and the Energy Information Administration says it’s possible the U.S. will become a net petroleum exporter, meaning that the amount of exports will more the offset the amount of imports, by 2022. It [shale] is monstrous, says Will Fleckenstein, who drilled his first horizontal well in 1990 and is now a professor of petroleum engineering at the Colorado School of Mines. In part due to ongoing improvements in technology, he says, It is impossible to overstate the hydrocarbons that it is technically and economically feasible to produce.

    The apparent new era of American energy abundance has already had a profound impact around the world. Economies from Russia to Saudi Arabia to Venezuela that were dependent on the high price of oil are struggling, a situation that would have been unthinkable in a world of $100 a barrel oil, and one that is playing out in strange and unpredictable ways.

    More upheaval seems inevitable as America reevaluates its strategic goals. CME Group executive director and senior economist Erik Norland calls fracking one of the top five things reshaping geopolitics. Ever since President Franklin D. Roosevelt met the first Saudi king, Abdul-Aziz al Saud, aboard the USS Quincy in the Suez Canal in 1945, we’ve had a devil’s bargain: our protection in exchange for their oil. The superficial analysis boils down to a simple question: If America doesn’t need Saudi oil, does America need Saudi Arabia?

    Under the Trump Administration, the longstanding dream of energy independence has taken a grander, more muscular turn. Secretary of the Interior Ryan Zinke talks about opening more federal lands like national parks to drilling in order to ensure energy dominance. We’ve got underneath us more oil than anybody, and nobody knew it until five years ago, President Trump told the press aboard Air Force One in the summer of 2017. And I want to use it. And I don’t want that taken away by the Paris Accord. I don’t want them to say all of that wealth that the United States has under its feet, but that China doesn’t have and that other countries don’t have, we can’t use.

    Just what the United States has under its feet is in many ways still a mystery.

    To date, most of the complaints about fracking have focused on environmental concerns. (Even the term fracking is viewed by the industry as a pejorative, as it was created by environmentalists; in its editorial style guide, the Colorado School of Mines says the word should be avoided and suggests fracturing instead.) These concerns aren’t the topic of this book, because they’ve been covered extensively elsewhere, because the science is still evolving—and because there are other, less well-known, reasons to question the notion that a plentiful supply of oil and gas is going to assure our future, extricate us from the Middle East, and allow us to crush Russia, OPEC, and everyone else.

    Start with the notion of energy independence. Even its biggest, most informed proponents admit that what they’re really talking about, under the most optimistic scenario, is that North America, including Canada and Mexico, will produce as much energy as it consumes. Right now, the U.S. consumes twenty million barrels a day, and produces just over half of that. Even if our production somehow catches up to our consumption, it won’t ever completely offset the need for imports because of nitty gritty issues, like demand for different types of oil. I got through seven years without ever saying the words ‘energy independence,’ says a former member of the Obama Administration who dealt with this issue. It’s a dangerous notion. Even more, the market for oil is a global one, and the price of a barrel of oil will continue to be influenced by events outside of anyone’s control. The oil business goes through unsettling boom and bust cycles, and fracking does nothing to change that fact. It is an unpredictable business.

    The biggest reason to doubt the most breathless predictions about America’s future as an oil and gas colossus has more to do with Wall Street than with geopolitics or geology. The fracking of oil, in particular, rests on a financial foundation that is far less secure than most people realize.

    The most vital ingredient in fracking isn’t chemicals, but capital, with companies relying on Wall Street’s willingness to fund them. If it weren’t for historically low interest rates, it’s not clear there would even have been a fracking boom.

    You can make an argument that the Federal Reserve is entirely responsible for the fracking boom, one private equity titan told me. That view is echoed by Amir Azar, a fellow at Columbia University’s Center on Global Energy Policy. The real catalyst of the shale revolution was . . . the 2008 financial crisis and the era of unprecedentedly low interest rates it ushered in, he wrote in a recent report. Another investor puts it this way: If companies were forced to live within the cash flow they produce, U.S. oil would not be a factor in the rest of the world, and would have grown at a quarter to half the rate that it has.

    Worries about the financial fragility of the fracking revolution have simmered for some time. John Hempton, who runs the Australia-based hedge fund Bronte Capital, recalls having debates with his partner as the boom was just getting going. The oil and gas are real, his partner would say. Yes, Hempton would respond, but the economics don’t work. Thus far, the fracking industry, which survived what some saw as a concerted attempt led by Saudi Arabia to destroy it, has been more resilient than anyone would have dreamed. But questions about the sustainability of the boom are no longer limited to a small set of skeptics. Those doubts now extend to the boardrooms of some big investors as well as to the executive suites of at least a few of the fracking companies themselves. The fracking

    Enjoying the preview?
    Page 1 of 1