How “fracking” is changing the global energy market
Few people are familiar with the word “fracking” and what it is. But it’s been one of the main reasons why oil prices have plummeted down to a four year low level of below $80 dollars per barrel. This technology may change the energy industry in a very big way.
“Fracking” is a new oil and gas horizontal drilling technology that stands for hydraulic fracturing; it produces what is called shale gas and oil from shale rock. Fracking gets shale oil and gas out from shale rock that is widely available. This is different to the traditional vertical oil wells that dig into pre-existing oil reservoirs underground.
Currently the United States, Canada and some other industrialized countries are fracking shale gas and oil on a wide scale. As a result they have significantly reduced their oil and gas imports. They are the winners from this shale gas and oil boom along with other heavy energy industry consumers like China who need oil and gas at low prices.
Fracking has been one of the main factors in reducing oil prices. There are other reasons of course. The slow- down in the global economy particularly in China and Europe has significantly reduced demand for crude oil. The question is; could it fall to the alarming prices of 2009 and 2010 when it dropped to around $35 dollars per barrel?
It is quite unlikely that oil prices will fall down significantly in the long term. Demand for crude oil is set to rise in the future. Currently the world is consuming around 90 million barrels of oil per day; it is estimated to rise to 104 million barrels per day by 2040, according to the reputable International Energy Agency.
What does this mean for Kurdistan as a burgeoning oil exporter? It needs to tighten its economic belt in the short term due to the low oil prices and use alternative means to generate national income through tourism and agriculture which are strong sectors that has not been heavily invested in. It can loosen the belt in the long term when demand for crude oil increases and the oil boom returns again.