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Barron’s Weekly Estimates Over $1 Trillion of Capital Spending Spurred by “Fracking”

January 26th, 2014 | by Morris Beschloss | Comments

Although hydraulic fracturing (fracking) has engendered the possibility of shale-produced oil and natural gas, vaulting the U.S. into the world’s number one spot in fossil fuel production (oil, coal, natural gas), the prestigious financial weekly, Barron’s, has now estimated that up to one trillion dollars in capital goods spending will be generated to make this happen by 2025.

These infrastructural expenditures will include pipe-valve-fittings, railcars, storage tanks, pumps, and refinery equipment. Although an ancillary national infrastructure will be necessary to maximize this gusher of oil and natural gas into the most effective routes to refineries, such massive expenditures to make this happen have not yet been estimated. However, such a program will easily necessitate another trillion dollars to affectuate this simultaneously.

A study from IHS Global, financed by the American Petroleum Institute (API), is extremely bullish on the energy industry as a whole, and the materiel producers, fabricators, and marketers involved in this dramatic expansion.

IHS Global times this infrastructure boom to have taken off in 2012, when investment rose from over $50 billion to $60 billion per annum; and then quickened to a $90 billion annualized rate later in 2013. IHS believes this level will be maintained at that level for the next six years, cooling down to $60 billion annualized after 2020.

The study emphasizes that direction of production support facilities will get 60% of the overall revenues generated from these producers of shale oil and natural gas. Engineers, surveyors, and thousands of construction workers will be in greater demand themselves. The varied industry giants such as Foster Wheeler, Western Energy Services, Fluor, Baker Hughes, and General Electric and their subsidiaries will profit generously, and quickly expand to meet the increased demand.

The study concludes that the vast amount of capital spending needed to keep this fracking surge alive will be greatly advantaged by the monetary liquidity of participating corporations, which has been festering in their balance sheets, and their borrowing power, at a time of relatively low credit terms.

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