Natural Gas "Bubble" Report: Market Tinkering or Shoddy Reporting?

Natural Gas "Bubble" Report: Market Tinkering or Shoddy Reporting?

By Jon Entine - July 1, 2011

This story, originally published on July 1, 2011, was updated on July 5, 2011 with additional information based on a response from Arthur E. Berman and new comments from Deborah Rogers.

The New York Times rattled energy markets this week with a Sunday front page story asserting that many "insiders" in the natural gas industry harbor serious doubts about the long-term viability of the natural gas market. They are keeping mum, determined to cash in on the short-term exuberance over recent reports of sizable shale gas reserves, reporter Ian Urbina wrote.

"[W]e have a big problem," he quoted Deborah Rogers -- portrayed in the story as a "member of the advisory committee of the Federal Reserve Bank of Dallas" -- as saying.

It's one of 10 quotes deployed by the Times sharply criticizing the prospects for natural gas production from shale. Eight of them are from anonymous sources. The only other critic who is named, Houston geologist Arthur E. Berman, said the energy data suggests that gas fields contain far less reserves than claimed. It's "harder and harder to deny that the shale gas revolution is being oversold," he told Urbina.

The explosive article was re-posted literally thousands of times. It was echoed on TV and radio reports earlier this week and was the talk of the markets in the United States and Canada, where natural gas competes with oil, tar oil and coal investments. "Times' Nat Gas Slam Affects Markets," opined The "Natural Gas Stocks Fall," headlined Bloomberg BusinessWeek. (Stories on RealClearMarkets and RealClearEnergy, however, subsequently questioned the Times' reporting in the article.)

Just as importantly, the sharply critical narrative has emboldened a faction of the environmental movement that is campaigning against fracking, the technique used to extract shale gas that some environmentalists claim makes this form of natural gas dirtier than coal.

Anti-natural gas members of Congress jumped on the bandwagon. "I urge the S.E.C. to quickly investigate whether investors have been intentionally misled," wrote Rep. Maurice Hinchey, D-N.Y., in one of three letters sent to the commission by four federal lawmakers, all Democrats. Indeed, Hinchey might be on to something. But in a twist, investigators might end up targeting the New York Times and the key sources for its report.

From the Fringe to the Mainstream

The Times has a venerable history of taking stories that other news outlets have ignored or under-appreciated and, with enterprising reporting, turning them into causes célèbre. Perhaps that was the case here; otherwise this topic choice is puzzling. After all, the "shale gas is a bubble" story has been knocking around the fringes of cyberspace for years.

Almost two years ago, the AP headlined its story on the phenomenon "Analyst: Gas shale may be the next bubble to burst," quoting Berman, who laid out the issues in a way that Urbina would later mimic almost point for point.

The two major promoters of the sky-is-falling thesis are Berman, who runs Labyrinth Consulting Services, and Henry Groppe, an octogenarian patriarch of Texas petroleum industry analysts Groppe, Long & Little. They have been pushing this view for years to wide skepticism and even ridicule from mainstream analysts.

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Jon Entine directs the Genetic Literacy Project and is a senior fellow at STATS and the Center for Health and Risk Communications at George Mason University.

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