Two short years ago, industry analysts and television pundits were toasting North Dakota as the “Saudi Arabia of North America.” But the fracking rush that made the Peace Garden State the poster child of the U.S. energy boom has gone bust.

North Dakota’s numerous gas flares, which have been notably visible from space, are flickering out as drilling rigs shut down and tens of thousands of energy workers face reduced hours and pink slips. Small North Dakota towns recently bustling with workers and other fortune seekers are returning to the rural tranquility they once knew.

So why has fracking slipped into hibernation? Depends who you ask. Many industry analysts say fracking is a victim of its own success, helping to drive oil prices so low it was no longer affordable to frack new wells. Others point to the drop in global demand, spurred by a slowdown in the Chinese economy, alternative energies and an American public that’s not only driving more fuel-efficient cars, but driving less. Most popular, perhaps, is the theory that the Organization of Petroleum Exporting Countries, led by Saudi Arabia, purposely sabotaged the U.S. fracking industry by maintaining its current production levels while global oil demand falls, causing prices to spiral downward.

There is probably some truth to all three. The U.S. fracking industry, which hardly existed in 2008, doubled U.S. oil output in only six years. Because of fracking, last year the U.S. became the largest oil-producing nation, leapfrogging over Saudi Arabia and Russia.

But fracking is expensive. While much depends on geology and geography, fracking companies need to fetch prices between $55 and $100 a barrel just to break even. As the price of oil is now at $44 a barrel — and threatening to drop even further — it makes little sense to develop or even operate these sites, many run by relatively small energy companies. Meanwhile, many OPEC nations, which mostly rely on less expensive and conventional extraction methods, can still continue making profits even at $30-35 a barrel.

So, while the demise of fracking is a story of supply and demand, it is also a story about how OPEC, particularly Saudi Arabia, has responded to the threat U.S. oil production presents to its preeminence in the global market. OPEC is flexing some muscle, showing the world that it’s willing to wait out a short-term plunge in prices while the thousands of Lilliputian fracking operations that challenge its dominance shut down or fail.

Roughly a third of U.S. fracking operations are now too cost prohibitive to continue, say economists. Lending to companies for fracking operations has stopped and investors may not come back even if oil prices are high enough for them to make meager profits.

“Smart people don’t invest in things that break even,” says energy expert Arthur Berman on Oilprice.com. “Why should I take a risk to make no money on an energy company when I can invest in a variable annuity or a REIT that has almost no risk that will pay me a reasonable margin? So are companies OK at current oil prices? Hell no! They are dying at these prices.”

Of course, many wells are not fracked for oil but for natural gas, but dropping prices for natural gas is affecting production in the Marcellus Shale. Wholesale natural gas prices have dropped from about $13.42 per million BTU in 2005 to about $2.85 today and are still dropping thanks to a milder than normal winter in the Northeast. At those prices, the incentive to justify further investment in fracking operations in the Marcellus Shale is vaporizing.

However, unlike with oil, natural gas fracked in Northeastern states is much less expensive to produce than natural gas from the Gulf of Mexico and Canada. So it's unlikely that currently operating wells in the shale will suffer much from falling natural gas prices.

Not even Gov. Andrew Cuomo’s recent decision to ban fracking in New York enticed speculators to push prices upward. New York was never going to be a big player in fracking, as the state’s available reserves in the shale are minuscule compared to West Virginia and Pennsylvania. Many companies that leased land in New York for fracking decided to pull out, as the high costs of starting up would eat away at any profit. Energy companies have become more gun shy as existing local and state-imposed limitations make nearly two-thirds of the viable land unavailable to be fracked.

Pipeline to Nowhere?

While Congress is pinning its hopes that the Keystone XL pipeline expansion will bring a jobs boom to middle America, cheap oil prices are also threatening this controversial project. The business case for building the 1,179 pipeline just isn’t there. Not only is tar-sands oil from Canada much more expensive to extract (around $74 a barrel), it's more expensive to transport, whether by rail or pipeline.

Tar-sands oil is also not attractive to refiners as it's much harder to convert into transportation fuels, so it typically sells for $20 a barrel less than the North Dakota’s Bakken Crude and $30 less per barrel than Texas crude. The State Department’s study on the Keystone XL pipeline determined that if overall oil prices dropped between $65 and $75, it would erase the profits of tar sands extraction. So at today’s even lower oil prices, it’s all but worthless today, as would be the pipeline.

However, TransCanada, the pipeline’s builders, and supporters say Keystone XL is a long-term investment and they are unfazed by commodity prices.

Some independent analysts, however, say that TransCanada is being overly optimistic and that investors won’t put up with years of losses, or even the notion that the pipeline could become a stone around the neck of TransCanada should OPEC choose to manipulate prices again. Even the conservative Manhattan Institute for Policy research says there are many questions about the viability of the pipeline.

The High Price of Low Gas Prices

While American consumers and businesses might enjoy the lower oil and natural gas prices, there is a dark side to this windfall. As shale exploration is all but dead, and most of it was funded by some $200 billion in bonds and other borrowings, there’s concern that this money will never be paid back, and such losses could lead to major adjustments, possibly even a collapse of the global financial markets similar to the bursting of the dot-com bubble in 2000 and the housing market bubble in 2008.

Low oil prices are already taking their toll on Alaska, which has an economy largely based on fossil-fuel extraction. While only about 20% of Alaska’s wells are fracked, oil production is even more expensive than in western Canada and in North Dakota, costing as much as $78 a barrel to produce.

Alaska has no income or sales tax and virtually funds itself from taxing crude oil. The state’s residents have become used to receiving annual checks from a $51 billion fund from these taxes. Alaska budgeted on the assumption that oil would be about $100 a barrel throughout 2015. But the state will have to dip into its rainy day fund to keep from going belly up, and investment ratings agencies say Alaska will blow through that fund quickly.

“The oil plunge caught them off guard, and now they are trying to recalibrate,” said Ted Hampton, an analyst at Moody’s Investment Services, which downgraded Alaska’s credit rating from “stable” to “negative” in December 2014.

But Alaska doesn’t seem convinced that low crude oil prices are here to stay. While drastic budget cuts and dipping into emergency funds is the plan for the next two years, the state’s acting revenue commissioner, Marcia Davis, is forecasting better days in 2017, with oil prices back to above $90 a barrel.

North Dakota doesn’t rely on funds from fossil-fuel extraction to keep the lights on in Bismarck, so it's better protected from such large swings in oil prices. Still, the loss of oil royalties, taxes on crude oil and taxes collected on oil workers will leave it several billion behind on its revenue projections this year.

The Fracking Undead

Back in November, Russian oil baron Leonid Fedun predicted the fracking industry would crash. He told Bloomberg News it was the objective of OPEC to clean up the “marginal American oil market” and once that goal is accomplished, the price of oil will once again rise above $100 a barrel.

“The shale boom is on par with the dot-com boom,” said Fedun. “The strong players will remain, the weak ones will vanish.”

It’s likely that the larger energy companies will pick up the pieces, at pennies on the dollar, from the smaller ones that fail. These larger companies will be able to weather big swings in commodity prices and speculators will be much more cautious the second time around, making a second fracking collapse less likely.

Cheap oil also might create large changes in how the world consumes fuel, environmental analysts say. They note that when oil prices were this low last time, large gas-guzzling SUVs were de rigueur and conserving and efficiency fell down on the list of priorities. Similar increases in demand could quickly send the pendulum swinging the other way.

"If oil is high, people will burn less; that's a good a thing," Jackie Savitz, vice president for U.S. Oceans at Oceana told NPR.

Fracking as we know it is beginning to wither, ironically at the hands of the same oil markets that spawned it. But nothing lasts forever, not even gifts from Saudi kings. So when global oil production is cut or if we return to our wasteful ways, prices will recover and the fracking boom will spring back to life. Unless that is, anti-fracking activists remain vigilant and kill it first.