Fracking vs. Ice Cream: The Guar Gum Connection (UPDATED)

UPDATE: If you had the inkling that guar’s wild ride wasn’t over, you’d be right. Just as fast as the price of guar gum soared into the stratosphere, it has plummeted to earth. A few factors led to the drop: One biggie was that Halliburton stockpiled guar gum in anticipation of any drought-induced shortages that could have resulted in a price spike. Add in the Indian market regulators’ suspension of guar commodity trades to rein in speculation, coupled with smaller guar crop yields because of a late rainy season and there you have the cause of what the Wall Street Journal called a “classic bubble” burst.

For many Indian farmers their fantastic ride with all-in guar production came to a jarring halt and carried with it potential ruin. This is just another stop in the uncertain world of fossil fuel extraction, one whose economic model is based on the old “boom-bust.”

Whether or not hydraulic fracturing is allowed in New York State, the bevy of shale plays from Utah to Texas to Pennsylvania has been plenty profitable for Halliburton and Baker Hughes (among other companies). But earlier this year, Halliburton had some bad news for investors:  profits were expected to drop more than originally forecast.  The culprit? An ongoing run on a little green guar bean that grows best in India. When ground and mixed with water, it produces guar gum, a gel-like — and critical — ingredient in fracking fluid. As well as ice cream. True story!

India produces 80% of the world’s guar gum; the beans are largely grown in Rajasthan, one of the driest, poorest regions in the nation. With the advent of fracking in the United States, demand went up for the gel.

By 665%.

While that pint of Chunky Monkey only needs a pinch, just one drill job uses 20,000 pounds of the beans. In fact, there has been so much demand for guar gum that a shortage is expected in the second half of the year, driving up prices for oil and gas companies who need to buy the gel for use in fracking operations. As matters stand, guar powder used to make the gum has gone from $1.00-2.00/pound to $12.00, and the price of guar accounts for almost 30% of overall fracking costs. You'll want to check out this handy infographic showing you the “wild ride” of guar.

I mentioned earlier that the gum is mainly grown in one of the poorest and most arid regions in India. For farmers there, all of this increased demand for their thusfar-subsistence crop has been life-changing. Reuters shared the perspective of one farmer who said “Guar has changed my life…Now I have a concrete house and a color TV.” And who would begrudge struggling farmers more income? One wonders what will happen after a cheaper, synthetic option is found. In the meantime, just as in American frack boom towns, all of this extra cash is being trumpeted by the oil and gas industry as a terrific benefit.

Guar gum is also celebrated in arguments about the safety of fracking. After all, as one industry professional put it to Time Magazine, “The companies can say: ‘We are using stuff they put in ice cream!'” So how unsafe could fracking be, right? It’s a job creating, wealth-building, natural process! (Here’s the part where I advise you not to eat fracking gel, despite it being sourced from edible products. Seriously.)

Except kidding aside, we know it’s all a much more complicated stew of global trade, a fracking boom and tremendous controversy. And so do Indian officials, who are trying to curb that wild economic guar ride by banning the trade of guar futures on the commodities market and keep completely wild speculation in check.

Given the race to find a synthetic substitute among oil and gas companies, market regulation may not be such a long-term problem. Which begs the question, what happens to farmers on the other side of the world caught up in a Big American Boom?