Commodities

The year 2011 marked the fifth time in recent history that has seen widespread fear that the world was running out of oil. The first time was in the 1880s, when oil production was concentrated in Pennsylvania and it was said that no oil would be found west of the Mississippi. Oil was then found in Texas and Oklahoma. Similar fears emerged after WWI and WWII. The reality is something quite different.

During September 2012, natural gas was selling for $2.50 to $3.00 per thousand cubic feet. Production costs for natural gas have fallen dramatically over the past few years, largely due to advances in directional drilling and hydraulic fracturing. Fracturing is the process of injecting enormous amounts of fluid (90% water, < 10% sand, and < 1% chemical additives) into the ground below the water table.