A recent article published by the Atlantic discussed one of the benefits associated with the expanding use of hydraulic fracturing at oil and gas wells in the United States. Specifically, contributor Karl Smith, an economics professor at the University of North Carolina, explained how fracking may help make radical swings in the price of fuel less common in the future.
As Smith explains, one of the main reasons why unexpected disruptions can constrict the flow of oil so severely is that the establishment of traditional production, transportation and refining infrastructure requires large amounts of time and money. When something goes wrong, whether it is a war, pipeline closure or refinery shutdown, there are limited options for getting the supply chain functioning at full capacity in the short-term.
"Fracking is altogether different," Smith explained. "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."
Unlike conventional wells, which produce moderate volumes of oil for a long period of time, fracked wells produce massive quantities upfront but see their output decline relatively quickly. This makes the construction of pipelines and other infrastructure less attractive in areas where fracking is the primary method of production, prompting companies to make alternative transportation arrangements in regions where there are not already well-developed pipeline networks.
For example, a substantial portion of the oil coming out of North Dakota's Bakken formation is being transported by train, which is in some ways less efficient than pipeline transport, but is far more flexible. If one refinery is closed for maintenance, a train-borne shipment can more easily be diverted to another facility, lessening the impact of the reduction in capacity.
Smith also noted that because oil produced through fracking tends to be lighter in composition than crude traditional sources, it requires a less intensive refining process.
"As a result, older East Coast refineries that were once slated to be shut down have been revived as destinations for fracked crude" Smith wrote. "These refineries cannot compete with the sophisticated operations on the Gulf Coast and Midwest when it comes to processing thicker grades, but they can handle the light, fracked oil just fine."
Combined with the flexibility of a rail-based transportation system, this means that the industry will be better able to react to disruptions and keep oil flowing from wells to consumers.