Shale oil and gas: Destroying capital one well at a time

Recently, the former CEO of the largest shale gas producer in the United States told a roomful of conference goers what any competent financial analysis would have revealed many years ago: the shale oil and gas industry as a whole has been destroying capital since its inception.

"The fact is that every time they put the drill bit to the ground, they erode the value of the billions of dollars of previous investments they have made," said Steve Schlotterbeck, former head of natural gas behemoth EQT, at a petrochemical industry conference. "It's frankly no wonder that their equity valuations continue to fall dramatically."

But, the real news here is not that the shale oil and gas industry has from its beginning been destroying capital one well at a time. It's that a major industry insider freed from the constraints of his former job has admitted it.

When software rules the world

I was a young boy when elevator operators still closed those see-through, metal accordion interior elevator doors by hand and then moved the elevator up or down by rotating a knob on a wheel embedded in the elevator wall.

Within a few years all those operators were gone, replaced by numbered buttons on the elevator wall. Today, so many activities that used to be mediated by human judgement are now governed by algorithms inside automated systems.

Apart from the implications for elevator operators and others displaced by such technology, there is the question of transparency. It's easy to determine visually whether an elevator door is open and the elevator is level with the floor you're on so that you can safely exit.

Taking a short break - no post this week

I'm taking a short break from posting this week. I expect to post again on Sunday, June 23.

Alarm bell on decline of nuclear power way too late

Recently, the International Energy Agency (IEA) warned that neglect of the world's nuclear electric generating plants would lead to a precipitous decline in climate-friendly nuclear energy production around the world.

The agency, a consortium of 30 countries which monitors energy developments worldwide, said 25 percent of nuclear capacity could be lost by 2025 and two-thirds by 2040. The cause is clear. Little new capacity is being built and much of the current fleet of reactors is nearing the end of its lifespan.

The IEA's warning comes about a decade too late. That's because the timeline for planning and building nuclear power plants can be that long.

Is there a way to counter the Chinese stranglehold on rare earth metals?

Those of us living in the United States are once again getting an education about the importance of rare earth elements for the production of consumer electronics, electric vehicles, wind turbines, and military equipment such as night-vision goggles. The reason for this education is a Chinese threat to retaliate in the ongoing trade war with the Trump administration by restricting exports of rare earths.

Clockwise from Top Center: Praseodymium, Cerium,
Lanthanum, Neodymium, Samarium, and Gadolinium.

It's not an empty threat. The last time the Chinese restricted exports in 2010 prices skyrocketed on the world market. Back then the Chinese produced more than 90 percent of the world's supply. Ostensibly, the Chinese were reserving these critical metals to bolster domestic manufacturers by forcing production of devices requiring the metals to occur in China. The Chinese eventually relented in the face of an adverse ruling from the World Trade Organization.

To understand this threat in context, first, it is important to know that rare earths are not rare in the earth's crust. Some of the most important are as plentiful as zinc and chromium. However, rare earth elements do not occur in concentrated deposits nearly so often as zinc, chromium and other plentiful metals. That means that rare earths are expensive to mine.