When we talk about fracking, thoughts usually turn to the environment. But that’s only a small part of the story. Fracking is changing the geopolitics of the world. It’s creating the illusion of moving America towards energy independence. This is impacting Saudi Arabia and Russia; influencing politics in Texas, Ohio, and Pennsylvania; and, counterintuitively, it may be making the US a loser nation.
In this week’s WhoWhatWhy podcast, bestselling financial journalist Bethany McLean, the author of The Smartest Guys in the Room (a book about the Enron scandal) talks to Jeff Schechtman about the real consequences of fracking.
The discovery of fracking, a way to extract oil and natural gas from shale rock, has turned America into the world's top producer of both. This may upend global politics, destabilize Saudi Arabia, and loosen Russia’s stranglehold over Europe. Surprisingly, the outcome may not be so good for America.
McLean tells Jeff Schechtman that the fragility of the economics of fracking, along with the disregard for renewables, is what may turn a temporary boom into a long-term bust.
She reminds us that while Texas alone may be poised to become the #3 oil producer in the world, the future of oil has more to do with Wall Street than with geology. Because fracking rests on a flimsy financial foundation, its future is far less secure than people realize.
The most important ingredient in fracking isn’t chemicals, McLean says, but capital. She explains how the financial crash of 10 years ago actually made fracking viable in the first place. However, many on Wall Street are now dialing down their investment in gas and oil in favor of renewables. It appears that a collision is fast approaching between Wall Street and the White House over energy policy.