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SNAKE OIL: Chapter 3 – A Treadmill to Hell

SNAKE OIL: Chapter 3 – A Treadmill to Hell. (FULL ARTICLE)

The tiny ghost town of Desdemona is situated in Eastland County, Texas, about halfway between Fort Worth and Abilene. It was founded in the mid-19th century as a fort to protect settlers from Indians, its early economy revolving mostly around peanut farming. In 1918, Tom Dees of Hog Creek Oil Company discovered an oil field nearby, and within weeks 16,000 speculators and rig workers crowded Desdemona’s dusty streets. Fortunes were quickly made—less often on actual oil production than on the trading of stock shares, which appreciated dramatically in value during the first couple of years of the boom. (Some shares that originally sold for one hundred dollars soon fetched over ten thousand.) Fortunes were just as suddenly lost in gambling or robberies. By 1920, rampant lawlessness had drawn the attention of the Texas Rangers, who at the time operated as a paramilitary organization employing tactics like targeted killing and enhanced interrogation. The Rangers effectively ran Desdemona—but they didn’t stay long. Between 1919 and 1921, oil production rates dropped by two-thirds. The value of oil stocks collapsed. By 1936, Desdemona’s city government had dissolved itself; the town’s lone school closed its doors in 1969, and as of 2013 only two businesses remain.

Booms go bust: it is a story as old as civilization. Historically, most booms have been associated with resource extraction—gold, silver, oil, gas, or coal. Often, financial speculation based on an extravagant (and sometimes deliberate) overestimation of resource potential drives the peak of the boom higher than would otherwise be the case, thus making the bust all the more devastating. Though the pattern is consistent, on each occasion the participants assure themselves and one another that “this time it’s different.”

The current fracking frenzy in the oil and gas fields of Texas, North Dakota, Oklahoma, Louisiana, Arkansas, Colorado, and Pennsylvania shows all the signs of being a boom in the classic sense. How do we know it’s not different this time, that itwon’t end in a colossal bust? And if it is yet another instance of the same old story, how soon will the bust come?…

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