For around a year now, America has been witnessing something of a natural gas boom. Thanks to the massive production capable through hydraulic fracturing (fracking), small towns like Bakken, ND were beginning to say the same kind of explosive growth as Tar Sands hotspots like Fort McMurray. Swept away by shale gas madness, many in the business press were beginning to envision the USA as the world’s next big energy exporter, like Canada or Saudi Arabia.

Are you frackin’ kidding me? America would first need to meet its own colossal appetite for energy, which isn’t likely to happen any time soon. The very fact that people believe this could happen (and are investing a heavily in it) is a testament to how little most people understand about energy – who uses it, where it comes from, or how that happens.

America was a major oil exporter decades ago, but production in the lower 48 states peaked decades ago and has been in decline since. Anybody who doubts “Peak Oil” should take a look at these charts, as they paint a very good picture of how this can happen even in a nation as rich and technologically advanced as the US. A nation defined largely by the Texas Oilman suddenly found itself at the mercy of Arab oil embargoes with no ability to pump enough to compensate, and more than three decades of promises to “get off foreign oil” have done nothing to reverse this decline.

In all likelihood, we’re at, near, or already past this point globally. The last decade saw prices skyrocket from under $20/barrel to over $100. This brought a lot more “capacity” online which could never have been practical at former prices – deep offshore drilling rigs, mining tar sands and oil shale or warzones in the Third World. In spite of this, global production has stayed fairly steady since about 2005. This has put an enormous strain on the world’s already weak economy, leading to the only really effective form of conservation we’ve found: recessions.

Natural gas, unlike oil, doesn’t “peak” – the analogy usually used is a “cliff”. Rather than the long, drawn-out declines seen with thick, viscous oil, pressure in a gas well can drop off very quickly. When “good” wells are hard to find, oil production turns to even slower processes like the tar sands. The Gas industry has turned, instead, to hydraulic fracturing (“fracking”), a rather explosive process which moves much faster, accelerating the decline after an initial period of euphoria.

It now looks like that euphoria is starting to fade. Over the past few years fracking has flooded the market with cheap gas, pushing prices to a third or quarter of the price of actually producing it. Prices bottomed out in April, and the number of drilling rigs online has now sunk back to 1999 levels. This ridiculous state of affairs was driven by tens of billions of dollars invested in the dream that Bakken and others like it would become the next Fort McMurray. These investment funds have been used to sell gas at a loss, in the hopes of maintaining the illusion – in essence, a Ponzi scheme. This is the epitome of bad financial planning – as it not only prevents those funds from being used to build new rigs (or rigs in places they might turn a profit), but also because investors inevitably catch on. This process is starting to show cracks, as companies start going broke, scaling back production or finding their wells empty, putting our continent in the position for a huge price shock in the near future.

In many ways, energy has been the domain of large centralised corporations since the days portrayed in There Will Be Blood. Edison himself consciously developed electricity to be a centralized, profitable system, and we’ve seen the process repeated many times with hydro, nuclear and other new means of generation which ultimately became better engines for generating money than energy. Unfortunately, while we can print as much money as we want, energy is subject to the basic rules of thermodynamics: it has to come from somewhere, and only in finite amounts.

America’s fracking boom is in serious danger of becoming a bust. Beyond the danger of groundwater contamination, past the risk of earthquakes and leaving out the obvious consequences of burning all this gas, we must also accept the limits of physical reality. Extracting gas faster doesn’t mean there’s any more in the ground than before – only that we’ll run through it much sooner. It’s time to accept that there are no giant oil or gas fields waiting for discovery or brilliant new ways of accessing them which will solve our growing energy woes. We’ve known for a decade now that this crunch was coming, it’s long-past time to start preparing for it.