Comments on: Fracked up: The Link between Plastic, Fossil Gas and Methane Pollution. Pt.I https://energytransition.org/2020/05/lng-plastik-klima/ The Global Energiewende Mon, 18 May 2020 17:50:13 +0000 hourly 1 https://wordpress.org/?v=6.1.1 By: James Wimberley https://energytransition.org/2020/05/lng-plastik-klima/#comment-27037 Mon, 18 May 2020 17:50:13 +0000 https://energytransition.org/?p=22305#comment-27037 The US fracked gas industry is in even worse condition than you write. Most companies in the business have negative cash flow, viz. sales minus operating costs and CAPEX (https://ieefa.org/analysis-shows-u-s-shale-drillers-still-not-profitable/). This means that even if Trump manages to abuse the proposed $750 bn bond buyback fund to wipe out all the $125bn of junk bonds issued by the US oil and gas industry, the industry is still unsustainably loss-making at pre-Covid-19 prices. Strong forces will oppose any such bailout: the Fed (still not corrupted by Trump), business Republicans like Romney, and the oil majors, who look forward to picking up the pieces cheaply after mass bankruptcies of the small guys.

The pandemic implies persistent low demand and rock-bottom prices. It brings forward the day of reckoning. My guess is it will happen this year. Note that gas consumption for electrical generation is not elastic to prices. Gas was cheaper than coal before, and it stays more expensive than renewables in marginal cost, which determines grid despatch. At most utilities will accelerate spending on new gas plants, which hasten the fall of coal. But they are not idiots and know the gas prices can’t last, so the investment effect will be minor.

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