The Fracking Ponzi Scheme Is Fracturing

Even the most junior of parasite guildists know shale energy fracking is the perfect Ponzi scheme. It is used to get a short-term, temporary financial benefit while dumping the negative externalities, hidden at first, on the public at large.

The flash in the pan helps keeps the U.S. hegemony going a few extra years. The regulatory hurdles can be steamrolled by buying off politicians and putting up legal obstacles against enforcement. It lends itself perfectly for Ponzi finance using Aunt Millie’s money because the financial optics look good in the early years. A shale gas well produces for a year or two, and then a new one is drilled. The key to the longevity of this Ponzi is debt finance.

Interestingly, in some kind of butt-covering exercise, the Energy Department’s EIA has crunched some numbers:

Based on data compiled from quarterly reports, for the year ending March 31, 2014, cash from operations for 127 major oil and natural gas companies totaled $568 billion, and major uses of cash totaled $677 billion, a difference of almost $110 billion.

But that wasn’t enough.  To raise more cash, they also sold $73 billion in assets. This left them with a pile of additional debt and fewer assets to generate revenues to service this debt. Conducted over a four year period, this Ponzi operation is now a poorly collateralized,  half a trillion dollar, junk debt bomb.

Now it looks like this Ponzi is blowing up. The stocks involved formed a classic double top and are now in steep descent. The story I just wrote on the 3 billion gallons of fracking chemicals dumped into the California aquifer went viral, even as the mainstream media ignored it.

If the financing dries up, the rigs will not be renewed, and you will see the rig counts shown below roll over. So from a game theory perspective: the US has bet full on the fracking card and built a huge infrastructure to support it = major bust.