How “frack­ing” is chang­ing the global en­ergy mar­ket

The Kurdish Globe - - NEWS - By Swara Kadir

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.

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