The financial industry is losing patience with the fossil fuel industry.
Ed Crooks, Financial Times, 6 September 2015, Falling oil prices put groups with high costs under severe financial strain,
The world may run on oil, but the oil industry runs on capital, and for US shale producers that capital is starting to dry up. Earlier in the year it was still relatively easy for US exploration and production companies to raise capital by selling debt or equities, in spite of last year’s oil price crash caused by a global glut. Now those sales have slowed sharply, and the financial strain on the industry is growing.
The next turn of the screw is approaching, in the shape of another round of redeterminations of “borrowing bases”: the valuations of companies’ oil and gas reserves used by banks to secure their lending. The shale industry, which has been responsible for rapid growth in US oil production since 2009, is not about to die. There are plenty of strong companies that have healthy balance sheets, low costs, or both, and they should be able to ride out the downturn. But there are very wide differences in resilience between companies. Those with high costs or high debts, or both, face a turbulent future.
Maybe so, but it’s the fracking boom that’s driving new pipelines, and if that boom is bust, pipelines such as Sabal Trail may be busted, too.