The booming shale industry could be headed off a financial cliff, experts say, and environmental groups are asking induxtry will clean up thousands of wells drilled miles beneath the surface if businesses go bust. The meteoric rise of U. Each year, operators bring in more mooney, pushing the United States further ahead of other nations for production. But many observers say the shale th is overheating, as frackers try to keep up the pace of production at high costs and low oil prices. They are warning that Wall Street money is drying up, and that the rate of bankruptcies could climb dramatically. I’m very engaged in what they are doing with their business, and I completely believe that the current model is unsustainable,» said Scott Forbes, vice president of the Lower 48 for Wood Mackenzie.
Fracking companies are hot destinations for investors chasing yields and growth industries, especially private equity companies, in part because of the large appetite the capital intensive industry has for debt. However, several warning signs suggest the fracking industry not only may fall short of investor expectations, but also could actually help to precipitate the next financial crisis. The International Energy Agency earlier this year captured the significance of the U. Growth is led by the Permian Basin [in Texas], where output is expected to double by Listen to the podcast at the top of this page. It has enabled the U. Opinion is divided on whether the fracking industry will find that debt servicing is too much to bear. The bulls in the industry point to technological improvements, such as those used in the Permian Basin, as strengthening the financial foundation of the industry, McLean noted. Everybody who has tried to predict the future of fracking thus far has been wrong. The first is a debt buildup that she sees as being directly linked to the last financial crisis.
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The second impact McLean identified is that as pension funds were no longer able to earn a desirable rate of return on fixed-income instruments, they turned to private equity firms and hedge funds that invested in debt, which in turn provided more capital to the fracking industry. In fact, private equity investors have funded a third of all the investments in the U. The third factor is that the fracking industry has attracted significant interest in the public capital markets as a high-growth industry relative to other industries. Thottam agreed that while it could be argued that the Fed was justified in its low-interest rate policy after the financial crisis, those rates would rise eventually. While the U. The U. For example, Saudi Arabia increased oil production in and caused prices to fall to levels that would be nonviable for shale oil producers. The impact of that price fall was severe over the past four years. That latter figure is significant, considering that the industry is approaching a production level of about 7. Energy Information Administration. The law firm Haynes and Boone tracked bankruptcies in the industry since Yet, the fracking industry rode out that downtrend and showed that it was indeed resilient.
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Fracking, or hydraulic fracturing , is a method of extracting oil from dense rock or sand where traditional drilling is not an option. Due to the nature of fracking , costs are higher than regular oil extraction. With falling oil prices dipping below the highs of recent years, can fracking survive? Traditionally, oil is extracted from natural underground oil reservoirs. These reservoirs are reached by drilling a deep hole into the earth, and the oil is extracted through oil wells and platforms. When oil is in the ground but not in a liquid reservoir, it has to be extracted through other means. Oil can exist in many underground conditions. Some formations contain shale, a rocky and dense substance, or oil sands.
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Fracking contamination ruined local drinking water supply in Dimock. Fracking damages the environment, threatens public health, and affects communities in ways that can impose a multitude of costs:. Drinking water contamination — Fracking brings with it the potential for spills, blowouts and well failures that contaminate groundwater supplies. Health care costs — Toxic substances in fracking fluid and wastewater — as well as air pollution from trucks, equipment and the wells themselves — have been linked to a variety of negative health effects. Habitat destruction and natural resources impacts — Fracking converts rural and natural areas into industrial zones, replacing forest and farm land with well pads, roads, pipelines and other infrastructure, and damaging precious natural resources. Impacts on public infrastructure and services — Fracking strains infrastructure and public services and imposes cleanup costs that can fall on taxpayers. Fracking can leave lasting negative economic impacts Fracking can undercut the long-term economic prospects of areas where it takes place. A study found that Western counties that have relied on fossil fuel extraction are doing worse economically compared with peer communities and are less well-prepared for growth in the future. Download the report Read our latest reports Read about our current work on fracking. Optional Member Code. Join Us. Learn more. Over the past decade, fracking has spread rapidly, leaving a trail of contaminated water, polluted air, and marred landscapes in its wake.
Asked in Salary and Pay Rates. Because they want to make money for the bones and meat. The rate has been criticised by many for being too low, particularly as those without a large fan base are seeing their work hosted on a service that allows people an unlimited number of plays. The bottom line is technology is here to stay and evolution of technology is always going to go on. There is a stark difference between the lifetime fees Spotify generates for artists and the one-off payment received for a single purchase or download. Fracking 2.
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To make money from selling the meat on. Read. Many more things you can do with a cow. Gustavus F. Trending Questions. The consequence of this shift in how people see their media content — emphasising the license over actual ownership — might, in des, have a profound effect on the control an artist can have over that music. It was hoped the music-buying public would be content with downloadable files from the likes of the iTunes Store; sustaining the content model of the labels that owned and distributed music, but turning it digital. It seems strange now to think of musicians being against recorded music, but back then it was a relatively new concept and many artists were paid omney amounts of money in comparison to what they earned performing live. Makf 2. The user is, in legal terms, merely licensing it. If you know the answer to this question, fracoing register to join our limited beta program and start the conversation right now! Detriot has a car industry Boston has a textile industry cloth Pittsburg has a steel industry Chicago has a meat packing industry. If the showpiece event is to command the attention it craves, though, it will need to start finding some solutions to long-standing problems.
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Stratence Partners works with organisations of all sizes to help them increase their profit margins, market share and the value they can deliver to their respective industries. If the showpiece event is to command the attention it craves, though, it will need to start finding some solutions to long-standing problems. The music industry has shifted towards a subscription model, where listeners no longer own the music they love.
Such had been the rise in the use of recorded music, which was subsequently played on the radio, that musicians who had previously made their money through performing live were now finding work hard to come by.
It seems strange now to think of musicians being against recorded music, but back then it was a relatively new concept and many artists were paid minuscule amounts of money in comparison to what they earned performing live.
The idea that people could own recordings of music, which they could then play as and when they liked, meant live musicians were reduced to getting their income from all-too-rare performances, or the meagre royalties that sales and radio plays generated.
It did little to stop the rapid growth of record companies and the demand from the public for recorded music. Such was the appetite that it soon became the norm for people to have large collections of music, while record companies became all-powerful industry bodies that decided who became successful. Ownership vs rental The idea of ownership of music by consumers is one that has only emerged since recorded music became popular. Consumers have come to assume they own the content they have purchased — and this also includes films and books.
However, the rights holders of such content tend to be a combination of record labels that distribute it or pay for it to be made, and the artists who created it in the first place. The user is, in legal terms, merely licensing it.
Policing the use of licensed material became much harder, however, when the internet created an easy way of sharing content quickly, freely and in a manner difficult to detect. Content rights holders found it hard to keep up with the many ways that were emerging to share their work. The dominance of record labels began to wane when the internet opened up alternative possibilities for musicians and fans who felt they had been short-changed by a bloated and cynical industry.
In their efforts to address the decline in sales caused by piracy, large and powerful rights holders scored a number of public relations own goals by going after individuals — including young children — who had traded their work.
The record industry was slow and confused in its reaction to these changes, struggling to find a meaningful and steady form of income with which to replace dwindling sales.
It was hoped the music-buying public would be content with downloadable files from the likes of the iTunes Store; sustaining the content model of the labels that owned and distributed music, but turning it digital. However, while the number of music files being legally downloaded has risen sharply over the last decade, a range of alternative services have emerged to challenge the way in which consumers access such content.
Streaming services such as Spotify and Rdio have attempted to turn people away from music ownership and towards a rental system based around advertising and subscriptions. In the world of film and television, Netflix has begun to make serious strides in cutting the number of pirated films downloaded, while presenting a challenge to the physical market. Recent research has shown these services are both growing rapidly and curbing piracy.
In Norway, research by Ipsos MMI found the number of songs pirated in was million — a mere Piracy of film and television had also halved in that period. These figures could reflect a trend for the rest of the world, one in which streaming is killing off piracy and bringing in revenue for rights holders. But many argue the amounts paid to the holders — particularly by Spotify — are neither enough nor fair to newer musicians with fewer fans.
The music industry has taken its time in finding a suitable model, but the ease of use and extensive catalogue that the leading streaming services offer mean there is now a viable alternative to piracy.
However, there needs to be regulations on copyright that are enforced, says Julian Hewitt, a music specialist and partner at Australia-based Media Arts Lawyers. Subscribers are still licensing the songs, but they have less control over what they can do with them — such as copying them and distributing them among their friends.
This has implications for artists and rights holders that have grown dependent on these sales. Does Spotify pay artists enough? The debate over what Spotify pays artists has raged since the company was launched in The rate has been criticised by many for being too low, particularly as those without a large fan base are seeing their work hosted on a service that allows people an unlimited number of plays.
The debate had begun to simmer down in recent months, following a number of high-profile signings, including Pink Floyd and Metallica. However, others, such as Coldplay and The Beatles, have remained off the service, and more are becoming disgruntled with the low royalty fees. Nigel Godrich — the acclaimed producer of artists including Radiohead, Beck and Paul McCartney — reignited the debate over what Spotify pays artists in July when he announced on Twitter that he was removing his music from the streaming site.
Godrich said the recently released album by Atoms for Peace — a project with Thom Yorke from Radiohead and Flea from the Red Hot Chilli Peppers — was taken down from Spotify in protest at the low royalty fees the service pays new artists.
Mark Kelly, keyboardist for English band Marillion, disagrees. Furthermore, they pay through 70 percent of their revenue, as do Apple. Much of this money is being invested in nurturing new talent and producing some great new music. There is a stark difference between the lifetime fees Spotify generates for artists and the one-off payment received for a single purchase or download. Also, as Spotify is a relatively new service with fewer paid-up members than iTunes, it is likely that, as it increases in popularity, it will be paying out much more to rights holders.
They are happy to negotiate low-rates of royalties safe in the knowledge their extensive back catalogues will earn them money for years to come. Struggling artists, on the other hand, might not be able to last quite so long with such a paltry — if steady — stream of income. One label that has a different stance to many is the Beggars Groupwhich pays its artists 50 percent of streaming revenue. All labels should follow the lead of Beggars Group and pay artists 50 percent of all streaming income.
That, coupled with a 10 or fold increase in paying customers, would mean that streaming would become a valuable source of income for artists and labels alike. Embracing technology Clearly, new technology is not going away, and the industry — both artist and label — needs to embrace it. The bottom line is technology is here to stay and evolution of technology is always going to go on.
One service that is not paying enough to artists, according to Kelly, is YouTube. Solving the problem of online music piracy has troubled the industry for well over a decade. The place to apply the pressure is the delivery system: the ISPs.
They have been profiting from delivering creative content at ever-faster speeds while not paying us, the creators, a bean. Alternatives for artists Finding an alternative method has troubled both artists and executives. From the perspective of an artist, some have looked to give away their songs, hoping their income will come from increased touring and merchandise sales.
Others have used crowd-funding services such as Kickstarter and Bandcamp to raise money. Having spent their career at industry giant EMI, Radiohead decided not to sign a new contract, instead choosing, into offer their album In Rainbows to fans for whatever they felt like paying. Inthe band released a new album in the traditional manner, through independent label XL Recordings. The consequence of this shift in how people see their media content — emphasising the license over actual ownership — might, in fact, have a profound effect on the control an artist can have over that music.
It might make consumers realise the entertainment they enjoy is not really theirs to distribute and share, bringing to an end over a decade of rampant piracy. Notice: JavaScript is required for this content. Sign up Subscribe. Business More in Business. Fall of the Norwegian pirates 1. The Beatles resisted iTunes for a long time, but eventually succumbed in late Illegal downloads: One of the biggest challenges currently facing the music industry.
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All rights reserved. The use of hydraulic fracturing to extract oil and gas from the earth dates back to the s, but only in the past few years has «fracking» become an energy buzzword, alluding primarily to the shale gas boom in the United States and all of the controversy that has accompanied it. Fracking-the high-pressure injection of water, chemicals and sand into shale deposits to release the gas and oil trapped within the rock-in recent years has been combined with horizontal drilling and other improvements in technology to harvest stores of gas and oil that previously were thought commercially unfeasible to access.
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See interactive: » Breaking Fuel from the Rock «. The implications of this sea change are debatable, but the impact is undeniable. In the United States, oil production last year reached its highest level in 14 yearsthanks in part to output from North Dakota’s Bakken Shaleand is expected to keep rising. Natural gas production, already at new highs thanks to shale gas, is expected to grow 44 percent in the U. Future Shaped by Fracking. Now countries around the world, including Chinathe United Kingdom and South Africa, are eyeing shale development as the potential key to unlock a similar windfall of homegrown energy. Debate rages on about whether these worldwide reserves can be tapped safely, and whether environmental damage from fracking natural gas will outweigh the gains from using a fuel that is cleaner than oil or coal, but remains a fossil fuel nonetheless. A few viewpoints on both sides of the issue follow. Today, the industry supports 1. That number could rise to 3 million by It is a bridge fuel to slash our oil dependence while buying us time to develop new technologies that will ultimately replace fossil transportation fuels. By investing in alternative energies while utilizing natural gas for transportation and energy generation, America can decrease its dependence on OPEC oil, develop the cutting-edge know-how to make wind and solar technology viable, and keep more money at home to pay for the whole thing. Boone Pickens’ proposed energy strategy. This is a full-scale mining operation, and I’m all for it.
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