NEW YORK (TheStreet) -- Cheap oil prices are the most obvious risk to Berkshire Hathaway's (BRK.A) $825 million acquisition of Weatherford International's (WFT) engineered chemistry and drilling fluids business, but there's another reason the deal looks risky for Warren Buffett and Berkshire shareholders: water scarcity.
Fracking a typical well uses 2 million to 8 million gallons of water, according to the New York State Department of Environmental Conservation, a problem considering the global water shortage, but especially because of an increasing push to frack in arid regions.
That's why fracking companies are looking for new methods of extracting oil and gas from rocks that use water-free methods, such as carbon dioxide.
Indeed, General Electric (GE) is studying how to make carbon dioxide fracking more economically viable as part of a $10 billion green energy initiative it announced earlier this year. GE is working with Norway's Statoil (STO) on the project, though a GE executive said in April that water-free fracking is a "ways off," according to Reuters.
Still, if carbon-dioxide-based fracking methods become widespread they will create a far bigger long-term headache for Lubrizol, the Berkshire Hathaway unit that bought the business from Weatherford. That's because the business Lubrizol is acquiring makes chemicals used to treat water used in fracking.
For the moment, cheap oil is the bigger threat to fracking. Fracking is an expensive process that made a lot more sense when oil prices hit and even surpassed $100 a barrel, something that has occurred in six out of the past seven years for West Texas intermediate crude. On Monday, however, oil was hitting five-year lows of roughly $64 per barrel.
While cheap oil makes fracking less feasible because it is more expensive, oil prices could rebound any time and suddenly fracking again makes economic sense. But if fracking evolves into a technique that doesn't use water, Weatherford will find itself scrambling to stay relevant, and Buffett will be penning a mea-culpa in a future letter to Berkshire shareholders.