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This blog post continues our expert analysis of complex investments and their regulation.
Two new reports are out documenting the bubble in shale gas and shale oil. The first is "Shale and Wall Street" by Deborah Rogers and is published by the Energy Policy Forum. (EPF) The second is "Drill, Baby, Drill" by J. David Hughes and is published by the Post Carbon Institute. (PCI)
The crux of these reports is that a bubble has formed due to: massive over-investment in shale gas extraction, heroic assumptions about shale gas and oil reserves, rapidly declining extraction rates, complex investment products used to finance the exploration, a flurry of Wall Street activity which generated large transactional fees for Broker-Dealers, and a wholesale lack of transparency.
Sounds a lot like the sub-prime bubble.
Our previous coverage of the MLP bubble can be found here, here, and here.