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Is Oklahoma really OK?

OK Triangle

Finally, someone is starting to pay attention to what is becoming all too obvious...the ground in Oklahoma is becoming increasingly unstable.  And the culprit, which we have all known but many have been in denial about, is a byproduct of fracking.  This morning, CNBC actually posted an insightful story on the subject, which you can read by clicking this link:


The "Reader's Digest" version:

  • Oklahoma is averaging nearly 3 quakes per day!  This is 600x the historical average.
  • The quakes are getting bigger and bigger.  This largest earthquake on record was just last month hitting 5.6 on the richter scale.
  • The OK state government is run by BIG OIL and has been unwilling to do anything about the obvious.  

My additional insight:

The earthquake activity is seeminly taking place in a triangle formation with the midpoint of the OK/KS border at the top, Cushing on the right and a place called Geary on the left.  But along the bottomline of the triangle sits Oklahoma City.  Fortunately, only a couple of smaller quakes have hit near the city.  I am calling this the OK Triangle.

Thus far, natural gas prices have been seemingly unfazed by this very alarming trend.  But if a larger quake hits a larger city resulting in significant damage, I would assume drilling activity would be brought to a grinding hault.  In which case, gas prices could go sky-high.   I am not sure how well retail products like UNG will do as they primarily own the front-month contract.  And the front-month may not do all that well since we have plenty of gas in storage.  It will be the later months that will likely benefit the most as a hault in production will have a larger impact on future supply, not necessarily current supply.  

Furthermore, gas prices will not be the only impact on capital markets.  How would this impact the hi-yield or junk bond market?  Low-quality debt plummetted in 2015 when oil prices cratered because so much of this space is centered around energy production.  When the lawsuits are resolved, the debt of these companies will surely take a sizeable hit.  We know that energy companies make up a disproportionate percentage of the junk bond market so if these companies are proven liable, not to mention having production seized up, the entire space will take a disproportionate hit.  

My hope and prayer is that something is done about this before innocent human life is sacrificed at the alter of the almighty dollar.