Why Fracking Could End the Age of Gas Price Spikes

For decades, a specter has haunted the U.S. economy: surging gas prices. From the malaise years of the 1970s to the early 21st century spike when a gallon of gas climbed from $0.90 in 1999 to more than $4 a gallon in 2008, families lived in fear that we were one Middle East conflict away from another painful bite into our paycheck, says Karl Smith, an assistant professor of economics and government at the University of North Carolina.

But what if we could end that pain with one word: Fracking. Hydraulic fracturing (" fracking") is the drilling technology that has produced a slew of cheap domestic natural gas. Some energy analysts suggest that it could do the same for oil and gasoline.

• Getting oil from Earth's crust to your car is an arduous process that makes it susceptible to price surges. Oil fields have to be discovered, wells dug, pipelines constructed and refineries erected. Each one of these investments is enormously expensive.
• Once in place, the system can produce constant flow for decades: up the well, down hundreds of miles of pipeline, into a refinery's distillation tower, through a series of chambers for oxygenation and blending, and ultimately poured out as consumer-ready gasoline.

Fracking is altogether different. It's not just an innovative way to get at previously unreachable oil reserves. It alters the very nature of the oil and gasoline supply chain.

• A traditional well might produce 50 barrels of oil a day when it opens, but it will produce close to that for more than a generation.
• Newly fracked wells have been known to produce over 7,000 barrels a day. That torrent will slow to a trickle in as a little as 18 months, but the rush of oil fundamentally changes the dynamics.
• Oil is produced so quickly there often isn't time to lay pipelines. Much of the oil from North Dakota's prolific Bakken Shale has made it to market by train, which is more expensive but more flexible.
• The oil itself is also different in composition. Much of it nearly qualifies as natural gasoline -- very close to the stuff you that you put in your car and requires relatively mild refining and blending.

Crises will continue to erupt and global oil supplies will continue to be threatened. Yet, now we have the means to fight back. The production of gasoline from domestically-sourced, hydraulically-fracked oil can be ramped up within months, and ever increasing pain at the pump can finally be relieved.

Source: Karl Smith, "Shut Up and Drill: Why Fracking Could End the Age of Gas Price Spikes," The Atlantic, August 8, 2013.

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