Strategy, Technology, and Current Issues in the
Energy Overview / Current Issues in Energy
Susan Smith Nash, Ph.D.
Bubble Economies and Carbon Economies / Fire sales
Critics of both “bubble economies” and over-reliance on fossil
fuels have pointed to the possibility of a major crash coming
again due to overvalued stocks that rely on oil, gas, and coal.
A “carbon bubble” could lead to a collapse of interconnected
economies, and the resulting “fire sales” could lead to problems.
A flock of vultures is formally called a “committee,” which seems
appropriate to what is occurring in the oil industry. New
technology has allowed previously uncommercial reserves to be
exploited, but that success has come at a price: plunging gas
prices. Because many operations are not commercially viable, it
has been seen as an option to sell them with the hopes that prices
will start to rebound within 3 or 4 years, when more uses of
natural gas hit the market, and demand increases. In the meantime,
the vultures are circling distressed properties.
Arthur Berman, a highly published pundit and, to some, a
Cassandra, has asserted all along that the fire sales and
“vultures” are going to continue in shale gas plays for the
• the success in horizontal drilling and
hydraulic fracturing has led to an oversupply of gas
• leasing the acreage in a shale play and
drilling to establish production in order to hold the lease both
involve “tsunamis of cash” (Berman’s words)
• the completion and stimulation techniques are
not technologically advanced enough to keep the oil and gas
flowing; there are steep decline curves
The only real question, if one believes Berman’s prognostications,
is whether or not the vultures who snap up shale plays at fire
sale prices will be able to operate them economically.
Some of the companies and acreage that have found that they took
on too much debt in order to provide capital for aggressive
leasing and drilling programs included Sandridge, who sold their
producing properties in the Permian, and Chesapeake, who sold
properties in the Mississippian (Kansas / Oklahoma), Marcellus
(Pennsylvania), and Eagle Ford plays.
It is useful to note that not everyone believes that the current
shale play is a bubble. They believe that future success is a
matter of technology, and new technologies in drilling,
stimulation, water treatment, communications technology, and
computing power will transform now-uneconomic oil and gas plays to
highly profitable ones, with much higher ultimate recoverable
Further, there are others who believe that the new plays will
transform U.S.’s position in energy and lead to energy
Carbon bubble will plunge the world into another financial crisis
Trillions of dollars at risk as stock markets inflate value of
fossil fuels that may have to remain buried forever, experts warn
Oil and Gas Asset Clearinghouse
Midwest Energy Auctions
Expert: Shale Gas Boom a Bubble About to Pop
What is a bubble, in economic terms?
What causes bubbles? What causes them to get bigger? What makes
them “pop” or collapse?
What are the pros and cons of generating growth / investment by
creating conditions conducive for bubble formation?
Once the bubble collapses, what are some typical survival
Where are distressed properties / assets in a bubble “pop” and how
can they be a part of a company’s strategic plan?
What kinds of companies are in a position to take advantage of a
What do those who are skeptical about the viability of shale gas
say to support their position?
What is the role of technology in the shale revolution?