The Coming Energy Abundance (reason.com)
Eric Gisin
September 22, 2008, 12:00:00 | jbu...@earthlink.net (Jon Basil Utley)
As politicians, consumers, and manufacturers fret over the price of oil, there's good news on the
energy front: Natural gas production is booming from "huge shale beds found throughout North
America," reports The New York Times. The improving technology of underground horizontal drilling
and fracturing has opened up trillions of cubic feet of gas that had formerly been thought
unobtainable. And natural gas can also be used to run automobiles (after about $2,000 in conversion
costs). These and other alternative methods of lowering fuel prices could dramatically reshape not
only energy policy but the global economy.
The same report quotes an industry study estimating 842 trillion cubic feet (40 years supply) as
now accessible. Drillable quantities exist in 23 states, much of it relatively close to existing
pipelines. The Times describes one field in Texas, the Barnett, where shale technology was first
developed. Production has gone up tenfold since 2001 and it alone now produces 7 percent of the
nation's gas supplies. A giant new field has been found in Pennsylvania in the energy-hungry
Northeast. New York and Michigan also have large reserves. This year, a 9 percent increase in U.S.
production has already brought about a 40 percent decline in the price since July.
Drilling into coal beds provides another very promising source of gas. Forbes recently described
how this technology already accounts for nearly 10 percent of all U.S. gas production. It also
reported on research into the use of methane hydrates, yet another potentially fabulous new source
of gas in shallow, colder coastal waters. Natural gas is the fastest, cleanest and lowest capital
cost way to generate electricity, compared to coal or nuclear. It would make competition in
electricity production more viable and hence bring down prices.
Gas-to-electricity is not the only promising conversion. The Germans fought World War II mainly
with oil produced from coal. South Africa, when under trade sanctions, produced 70 percent of its
liquid fuel needs from coal. Billions of tons of coal are easily accessible in the United States.
This is an area where Washington might spend sensible money instead of subsidizing will-o'-the-wisp
wind power, or, worse, using heavily subsidized corn-based ethanol, which raises food prices and
costs more in energy and subsidies to convert to gasoline than it produces.
The Washington Times recently described how coal conversion works, estimating the cost equivalent
at $1.85 per gallon using coal priced at $30 per ton. The conversion rate is 1.25 barrels of oil
per ton of coal. "Coal can produce gasoline, diesel and kerosene directly and its use in motor
vehicles does not require addition of costly technologies of reforming or cracking," reports the
article. The conversion process is cleaner than burning coal. Also it uses low grade, cheap coal
and produces electricity as a byproduct. Other industry estimates place the cost of conversion as
equal to $30-40 per barrel oil. See The Energy Blog for what is now generally known about the
technology and costs.
An interesting facet of the 40 percent decline in natural gas prices is how the major media still
parrots the extreme environmentalists' line that offshore drilling won't bring major drops in oil
prices. A recent and representative U.S. News article quotes a Department of Energy report that
"the impact [of offshore drilling] on global oil prices would be insignificant." That view,
constantly repeated by anti-drilling interests, is actually from 2007 when oil prices were around
$70 per barrel. Mainly, however, it is based upon the current time frame of snail-pace leasing and
unending lawsuits (without mentioning them as a cause of delay). The fact is that ending the
prohibition on offshore drilling, along with new laws to allow faster permitting and special courts
to speed up hearing environmental suits, would have an immediate impact upon oil prices. That's
because current prices are based on future anticipation. The same goes for ANWR in Alaska. The
world oil shortage was caused by political reasons, not geological ones.
Extreme environmentalists will not be happy with the news about shale. They will try to block
production just as they do with offshore oil drilling and nuclear electric power. Their mindset is
that all new energy use contributes to global warming, so they don't want production of cheap
energy. Many commercial interests support them. For example, farmers producing high cost ethanol
don't want to see gasoline costs coming down. Beach front owners don't want to see oil platforms
"polluting" their ocean views. Foreign oil producers want to see prices stay high. The shale
fracturing does use much water and, already, there are questions about aquifers and lawsuits
against drillers trying to control their access to water. Perhaps, in populated areas, new
standards will be needed for "frac water" used in drilling.
Shale gas and coal deposits similar to those in the U.S. exist all over the world. Europeans are
now searching for them to ease their dependence upon Russian gas. China is building the largest
coal-liquefaction plant in the world. Nations with the ability to harvest these resources could
become free of their dependence upon a few world oil exporters. Low energy costs could propel the
world's economy back to faster growth and prosperity.
Jon Basil Utley is associate publisher of The American Conservative. He was a foreign correspondent
for Knight Ridder newspapers and former associate editor of The Times of the Americas. For 17
years, he was a commentator for the Voice of America. In the 1980s, he owned and operated a small
oil drilling partnership in Pennsylvania.
Michael Coburn
> http://www.reason.com/news/show/128937.html
>
> September 22, 2008, 12:00:00 | jbu...@earthlink.net (Jon Basil Utley)
>
> As politicians, consumers, and manufacturers fret over the price of oil,
> there's good news on the energy front: Natural gas production is booming
> from "huge shale beds found throughout North America," reports The New
> York Times. The improving technology of underground horizontal drilling
> and fracturing has opened up trillions of cubic feet of gas that had
> formerly been thought unobtainable. And natural gas can also be used to
> run automobiles (after about $2,000 in conversion costs). These and
> other alternative methods of lowering fuel prices could dramatically
> reshape not only energy policy but the global economy.
So far so good.....
> The same report quotes an industry study estimating 842 trillion cubic
> feet (40 years supply) as now accessible. Drillable quantities exist in
> 23 states, much of it relatively close to existing pipelines. The Times
> describes one field in Texas, the Barnett, where shale technology was
> first developed. Production has gone up tenfold since 2001 and it alone
> now produces 7 percent of the nation's gas supplies. A giant new field
> has been found in Pennsylvania in the energy-hungry Northeast. New York
> and Michigan also have large reserves. This year, a 9 percent increase
> in U.S. production has already brought about a 40 percent decline in the
> price since July.
The fall in prices has more to do with investigations into energy markets
than does the new gas finds. There is also the link to oil and the
"demand destruction" that occurred due to extreme prices of gasoline.
> Drilling into coal beds provides another very promising source of gas.
> Forbes recently described how this technology already accounts for
> nearly 10 percent of all U.S. gas production. It also reported on
> research into the use of methane hydrates, yet another potentially
> fabulous new source of gas in shallow, colder coastal waters. Natural
> gas is the fastest, cleanest and lowest capital cost way to generate
> electricity, compared to coal or nuclear. It would make competition in
> electricity production more viable and hence bring down prices.
And the environmentalists are not quite so worried about drilling for gas
in the offshore as they are about the oil.
> Gas-to-electricity is not the only promising conversion. The Germans
> fought World War II mainly with oil produced from coal. South Africa,
> when under trade sanctions, produced 70 percent of its liquid fuel needs
> from coal. Billions of tons of coal are easily accessible in the United
> States. This is an area where Washington might spend sensible money
> instead of subsidizing will-o'-the-wisp wind power, or, worse, using
> heavily subsidized corn-based ethanol, which raises food prices and
> costs more in energy and subsidies to convert to gasoline than it
> produces.
Research in coal liquification and gasification does not look too good.
> The Washington Times recently described how coal conversion works,
> estimating the cost equivalent at $1.85 per gallon using coal priced at
> $30 per ton. The conversion rate is 1.25 barrels of oil per ton of coal.
> "Coal can produce gasoline, diesel and kerosene directly and its use in
> motor vehicles does not require addition of costly technologies of
> reforming or cracking," reports the article. The conversion process is
> cleaner than burning coal. Also it uses low grade, cheap coal and
> produces electricity as a byproduct. Other industry estimates place the
> cost of conversion as equal to $30-40 per barrel oil. See The Energy
> Blog for what is now generally known about the technology and costs.
And the by-product is more carbon than can be handled by the environment.
> An interesting facet of the 40 percent decline in natural gas prices is
> how the major media still parrots the extreme environmentalists' line
> that offshore drilling won't bring major drops in oil prices.
Otherwise known as a _fact_.
> A recent
> and representative U.S. News article quotes a Department of Energy
> report that "the impact [of offshore drilling] on global oil prices
> would be insignificant." That view, constantly repeated by anti-drilling
> interests, is actually from 2007 when oil prices were around $70 per
> barrel. Mainly, however, it is based upon the current time frame of
> snail-pace leasing and unending lawsuits (without mentioning them as a
> cause of delay).
So if we just get out of the way and let the oil companies do whatever
they damned well please we won't have any unfouled beaches any more but
the oil companies will be able to sell us OUR oil and get even richer.
> The fact is that ending the prohibition on offshore
> drilling, along with new laws to allow faster permitting and special
> courts to speed up hearing environmental suits, would have an immediate
> impact upon oil prices.
Absolute lie unless the oil companies _choose_ to give us a lollipop in
return for letting them make trillions of dollars. If the price of oil
is based on the costs (which it isn't) then the oil companies will be
encountering near term costs in the development of the new fields and the
price will therefore be higher. The reality, of course, is that the
price is based primarily on demand. And small increases in supply will
not substantially affect prices even if the stuff was available in only 3
- 5 years. We can produce more from algae based biofuels than we can
from drilling and we can do it in less time.
> That's because current prices are based on
> future anticipation.
LIE! Current prices are based on current demand and the lack of any real
competition and the lack of alternatives. GIVING even more oil to the
people who currently control all the oil is not going to reduce prices.
Alternatives and competition can do that, but giving the oil to the same
multinational corporations that currently control the oil is just plain
stupid and such stupidity will not decrease the price. It would probably
increase the price.
> The same goes for ANWR in Alaska.
Yes. It does.
> The world oil
> shortage was caused by political reasons, not geological ones.
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!
> Extreme environmentalists will not be happy with the news about shale.
Piss on em. I am not a granola fascist or a GW freak. I am a realist
about energy.
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