It's happened many times before; a frenzy to make a quick buck without the bother of hard work, sacrifice, or even risk. All one had to do was to be ahead of a money-making stampede. Almost anything could ignite a speculative hysteria, even tulips.

The first financial bubble ballooned in mid-17th century Holland. Someone imported a rare plant reputed to have medicinal uses. Bulbs of this plant were sold for a handsome profit. Subsequent buyers and sellers of the bulbs made still higher profits.

Soon sanity took a sabbatical. A single bulb was selling for the dollar equivalency of $2,500. It was the tulip bubble. When it crashed thousands were financially crushed.

In our time, most of us remember the dot-com bubble. Brick-and-mortar stores were as out-of-date as polyester suits. Internet buying was the rage. Many dot-com start-ups were listed on the New York Stock Exchange. Their share prices soared. But most came to a thunderous crash in 2003, leaving investors with pennies on a dollar, if that.

And the real estate bubble. It took up when the dot- “con” mania ended in the early 2000's. Get a mortgage for a $100,000 house then flip it for $120,000. Next, use the profits to secure more mortgages for more houses that would also be flipped for a sizable profit on each sale.

Housing prices peaked in 2006 and declined steadily until the market bottomed out in 2012. The U.S. Secretary of the Treasury called the bursting housing bubble “the most significant risk to our economy.”

But like Lawrence Welk's bubble machine, new bubbles are always inflating, the latest is the natural gas (NG) bubble.

All financial bubbles, including NG, are like zombies. They have an unnatural, artificial life; a vita force of deceptive economics, false promises, and desperate gambles. Let's examine each.

First, the deceptive economics.

A NG well in Dimock produced 158,000 thousand cubic feet during its first year of operation, from 2010 to 2011. At the (then) price of $4.39/thousand cubic feet the dollar yield was $694,000. Pretty good. One year later production fell to 42,000 thousand cubic feet, earning (at the 2011 price of $2.79/thousand cubic feet) only $117,000. Pretty bad. Why?

According to a study by the University of Pittsburgh, the cost of drilling an average NG well in the Marcellus Shale is $7.6 million. Recouping that cost and making a profit is often a losing gamble.

Energy expert Arthur Berman, a geologist with 34-years of experience in gas and petroleum production said, “Shale gas has lost hundreds of billions of dollars and investors will not keep on pumping money into something that does not generate a return.”

Making a bad situation worse is the precipitous well depletion. “The decline rates are incredibly high,” said Berman. “In the Engleford shale, which is supposed to be the mother of all shale oil plays, the annual decline rate is higher that 42 per cent.”

Second, false promises.

NG will make us energy independent promised the shale gas companies. “Well, that's garbage,” said Berman. “Anybody who knows anything about oil, gas, and coal, knows that's absurd.” Currently, the U.S. is awash in NG, yet we still import 9 million barrels of petroleum. NG cannot replace petroleum nor make the U.S. energy independent.

And third, desperate gambles.

Last year the New York Times did an in-depth analysis of NG drilling. It quoted a score of insiders under headings that read, “Shale Gas Called a 'Ponzi Scheme;'” “Drill Fast, Con Wall Street;” and, “Always a Greater Sucker.”

Recently, Chesapeake Energy, the second biggest company in NG drilling had to sell nearly $7 billion in assets to meet its debt obligations. Chesapeake has decided to shift its focus from NG drilling to petroleum exploration.

And there's one more fact about zombie enterprises; like soap bubbles, they always pop.

Sincerely,

Bob Scroggins

New Milford, PA