Drought Hampers U.S. Production of Oil

With more than 60% of the country experiencing a water shortage, use of fracking to extract oil and natural gas has come under scrutiny.

August 01, 2012

NEW YORK CITY - Across the country, farmers and oilmen are struggling in the midst of one of the worst droughts in American history, CNN Money reports. More than 60% of the country is experiencing water shortages, including Colorado, Kansas, North Dakota, Pennsylvania and West Texas?"all of which extract oil and natural gas via hydraulic fracturing, called fracking.

Fracking uses tons of water to remove the energy sources from the ground, which has become a major problem during a severe drought. "We??re having difficulty acquiring water," said Chris Faulkner, CEO of Breitling Oil and Gas. Two Pennsylvania counties have cut off oil companies from getting water from rivers, and the cost of water from Kansas wells has risen sharply.

Breitling has stopped production on 10% to 12% of its wells. "As the drought continues, those numbers will rise," said Faulkner.

Other companies are experiencing the same problems, although experts say the slowdown shouldn??t trigger higher oil and gasoline prices. However, natural gas production has slowed because fracking extracts most of what the U.S. consumes. Natural gas prices have skyrocketed during the past couple of months, rising 70% in some localities.

"Another rally in natural gas as drought concerns may lead to a cessation of non-conventional shale production," wrote Stephen Schork, energy trader/ publisher of the Schork Report.

Ethanol made from corn has seen prices increase around 30% since June, as corn prices have registered record highs. But the recent upswing in gasoline prices is more tied to increasing oil prices than higher ethanol prices.

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