Gas Expands!

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An amazing and welcome development has been achieved. As the Wall Street Journal just reported, for the first time in six decades, America exported more natural gas than it imported. It has once again become a net exporter of natural gas, and this new export sector will grow rapidly.

The net export volume is starting modestly: in November we exported 7.4 billion cubic feet (BCF) per day, while still importing 7.0 BCF per day. But no one doubts that from this modest start the volume of exports will grow. American gas exports have gone up by 50% over the past six years, and the Energy Department projects that we will be the third-largest exporter of liquefied natural gas (LNG) by 2020 — behind only Australia and Qatar. Citigroup estimates that by 2020 the US will be supplying to the rest of the world about 20% of the natural gas it produces.

No one doubts that from this modest start the volume of natural gas exports will grow.

To cite one example of success: Cheniere Energy opened a facility in the Sabine Pass (on the border of Texas and Louisiana). It was originally intended to import LNG, but the fracking revolution so decreased the price of natural gas that the plant was quickly “reverse-designed” to export it. Since February, when the plant started shipments of LNG, its output has grown to an average of 1.5 BCF exported per day. Not surprisingly, Cheniere is expanding the Sabine Pass plant rapidly, and will open more export facilities over the next two years.

Three years ago, the Freeport LNG facility at Quintana Island, Texas, got approval to export LNG, and it will begin exporting massive quantities of LNG in two years. Next year, Dominion Resources will start exporting LNG to India and Japan.

The only way this US export industry won’t grow is if the government — intentionally or by simple bungling — stops it.

So this trend toward America becoming the dominant reliable supplier of LNG for the whole damn planet will not just continue — it will accelerate. Thank you again, free market: remarkably shrewd private individuals, acting primarily out of self-interest, came up with a way — fracking — to make domestic oil and natural gas plentiful again, and plentiful indefinitely. Government subsidized losers — technologies such as wind and solar energy — but the free market found the efficient answer.

In fact, the only way this US export industry won’t grow is if the government — intentionally or by simple bungling — stops it. The progressive liberal Democrats hate fracking, of course. Obama did everything he could to impede it — such as taking an unprecedented amount of land out of public use — although most of the land upon which fracking operations are happening is private. Hillary Clinton repeatedly stated her total opposition to fracking (not to mention coal), which likely was a major factor in her ignominious loss to Donald Trump.

Speaking of Trump, he may ironically set back the natural gas export boom brought by fracking. For while he certainly claims to support it, the largest customers of our natural gas are, outside of ourselves, our NAFTA partners, Canada and Mexico. Together they are buying a record high of our total output. But Trump — a populist to the core — hates free trade, and has targeted NAFTA as a “bad deal” for America. His bungling trade policy could well get us into trade wars with the very countries that could become our biggest future energy export markets.




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Once Again, Spontaneous Order Beats the Dead Hand of Statism

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A number of recent reports on American energy illustrate anew the power of markets to deliver prosperity — rapidly — and the impotence of government to do the same. In short, spontaneous order has once again accomplished what the dead hand of statism could not.

The first report concerns the unsurprising demise of yet another solar power company. SunEdison is filing for bankruptcy, after seeing its stock price drop a whopping 98% in less than a year. Wall Street mavens such as David Einhorn (billionaire owner of a hedge fund called Greenlight Capital) and Leon Cooperman (of Omega Advisors) had considered the company a sure bet, but it proved to be a sure loser.

SunEdison is just one of an endless stream of solar companies that started, during the reign of the Obama administration, with the promise of giving us cheap power while healing the planet of global warming. Typically, they began with direct or indirect government subsidies — only to fail miserably.

Other stories tell us of better news. Just two months ago — in a nice piece of negotiation for which he received only vilification from the pestilent swarm of populist talk show hosts — Speaker of the House Paul Ryan (R-WI) reached a budget deal with the administration that once again (after a ban of biblical proportions — 40 years) allowed the exportation of domestically produced oil abroad. I have argued before that this is a major geopolitical game changer. We can now sell the fruits of our petroleum fracking revolution on the world market, thus ending, once and for all, the power of the oil cartel (OPEC) to gouge the rest of the world. Oil prices can now be kept low indefinitely. If Russia or the OPEC thieves try to cut back on production to extort more money from Europe and Asia in the form of higher prices, or if the demand for oil goes up because of a future worldwide economic boom, the Great American Frackers can just drill more wells, with no shortage for the foreseeable future.

SunEdison is just one of an endless stream of solar companies that started with the promise of giving us cheap power while healing the planet of global warming, only to fail miserably.

Less remarked upon, but no less remarkable, has been the flourishing of American natural gas production — driven again by the fracking companies. The miracle of fracking has dramatically reduced the prices of domestic natural gas — in fact, driven the price of natural gas to the lowest it has been in 17 years. Moreover, North America’s natural gas production is now about 450% greater than Africa’s, 80% greater than the Asian Pacific’s, 50% greater than the Middle East’s, and only 5% smaller than Eurasia’s; and it is set to grow apace over the next few years.

Why? Because the domestic price is now so low that American energy companies find it attractive to liquefy natural gas and ship it abroad. And that’s what is starting to happen. For example, just last month, the first shipment of American produced natural gas — ethane — left the Marcus Hook terminal in Philadelphia, headed for Europe. The purchaser of the liquefied natural gas (LNG), Swiss petrochemical company Ineos, plans to use it in its Norway facility. (Ethane is primarily a feedstock for plastic production. Methane is what is typically used for heating and power generation.) Given current trends, the US could become the world’s third largest exporter of LNG, right behind Qatar and Australia — in just four years.

Now consider the Cheniere Energy company’s Sabine Pass facility (located on the Gulf Coast), which aims to be fully operational in less than three years. By itself alone it will be able to export 3.5 billion cubic feet (Bcf) per day.

US producers have a key cost advantage: they can reconfigure import facilities to become export facilities relatively inexpensively. So as domestically produced natural gas replaces all imports, we can seamlessly start sending LNG abroad. The US Department of Energy has approved projects that will increase the potential exports of LNG to 10 Bcf per day, and is swamped with new applications that if granted could boost those exports another 35 Bcf per day. That is nearly the size of today’s global market.

Of course, already some people have raised worries that by exporting so much of our domestically produced natural gas, our own consumers will face shortages and see domestic prices soar. This is doubtful. For one thing, the US already has something like four trillion cubic feet (Tcf) of natural gas stored underground, and produces 30 Tcf a year. So even if the Department of Energy approves all the projects under submission, the effect on domestic prices will be limited. One recent estimate by the US Energy Information Administration is that an increase of 12 to 20 Bcf per day in exports would raise domestic natural gas prices by 4–11% per million Btu.

The miracle of fracking has driven the price of natural gas to the lowest it has been in 17 years.

Making the chance that increasing exports will raise domestic prices of natural gas even more remote is the fact that, with the colossal amount of American shale deposits of natural gas — not to mention our immense amount of conventional supplies — the number of fracking operations will grow dramatically as our exports increase. That will increase domestic supplies as well, and hold their price down. Moreover, because building out export facilities is costly, the rate of increase will be relatively tame.

Still, the excellent economic news is that we will have another great export market to exploit, providing hundreds of thousands of high-paying blue-collar jobs all over this country — jobs sorely needed, as our older manufacturing jobs are automated away. For example, it is estimated that America will need 100 more LNG tankers over the next 15 years, as our exports surge ahead.

American natural gas exports will soon be headed to Asia as well as Europe. China is increasing its own production of natural gas, in part because the pollution caused by all its coal-fired power plants is making city life intolerable, but developing its own shale resources is proving difficult. Japan is perennially in need of natural gas (and petroleum as well). The export route to Asia will be dramatically improved by the $5.3 billion expansion of the Panama Canal just being completed. This will cut an average of 11 days off the time it takes to ship oil from the Gulf Coast to Asia.

This is also great geopolitical news. We will be able to supply natural gas to Europe, which right now depends upon the thoroughly corrupt and evil Russian company Gazprom. Russia has shown a vicious propensity to price-gouge when it can, and it uses its supply as an instrument of state power in the revanchist quest to reestablish the Soviet Empire. That quest will be sharply curtailed by American natural gas exports to Europe.

The prospect of American natural gas liberating Poland, the Baltic states, and other formerly Soviet-controlled countries from Russian hegemony was the subject of another recent report. It notes that several countries are eagerly awaiting buying LNG from the United States, and some — such as Poland — are building import terminals in anticipation that American shipments will increase. Russia supplies about a third of all Europe’s natural gas. Some of the former Soviet countries (such as Bulgaria) get 90% of their supplies from Russia.

As Lithuania’s energy minister has said, “In Russia, gas always goes together with politics.” But he added, “Russia is extremely aggressive in gas pricing and the arrival of US LNG will change that.” Goldman Sachs estimates that the arrival of American LNG should drop the price by one-quarter in just two years.

The US will have another great export market to exploit, providing hundreds of thousands of high-paying blue-collar jobs all over this country.

Russia feigns unconcern about the arrival of American LNG. Alexander Medvedev, Gazprom’s deputy chairman, discreetly claimed, “We are very relaxed about US LNG, though very attentive.” Analyst Trevor Sikorski explains that while Russian gas currently costs about $4.60 per million Btus, American gas will cost about $3.60 (when the cost of shipping is included). So Russia could “chase out” the US (as Sikorski suggests) by, say, lowering its price to $2. But I think the Russians are merely whistling past the graveyard. For one thing, Russia has for several years funded European environmentalist organizations, enabling them to propagandize against fracking. If it were so easy for the Russians to undercut the price of gas produced by fracking, why does Russia so oppose it in other countries?

Second, there is a flaw in the argument that Russia can just chase the US out of the European market by dumping its own natural gas at (say) half what it currently charges. The problem with that argument is — against all “dumping” arguments — that the Americans would stay out only as long as Russia incurred that 50% lower revenue stream. But the reduction would severely limit Russia’s ability to continue upgrading its military and taking over more of Eastern Europe. Worse for Russia, the minute it decided to raise its prices back up, American oil companies would need only a day to start shipments to Europe, and only a couple of weeks for the oil to arrive.

It seems likely that Russia will simply lower its prices to match or slightly undercut the American pricing — say, pricing its natural gas at $3.50. But this will still be quite damaging to Russia’s revanchist goals, and therefore good news for the rest of us. Russia will lose 20–25% of its current revenue stream — a major hit indeed. More importantly, even if Russia charges approximately what American companies do, the former Soviet countries will probably still order American gas, the better to keep their freedom from Russian domination.

In sum, American LNG may forever free the Eastern Europeans from Russia’s paws. This is reason for rejoicing.

But there are two reasons for not rejoicing. First, both candidates for the Democratic nomination for president — Clinton and Sanders — have said that they utterly oppose fracking. No doubt whichever one wins the nomination will be lavishly, if covertly, funded by the Russians.

Worse, the two leading candidates for the Republican nomination — Trump and Cruz — would almost certainly lose to the Democrat in the general election. The Republicans are hellbent on losing the best shot they have had to take back the White House in eight years. Go figure that out.




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A Year In Review: 2014

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In many ways — continued warfare (declared or otherwise), the bleeding of the treasury, the erosion of civil rights — 2014 was a terrible year for liberty, at home and abroad. But it was a great year for Liberty Online! Check out some of our favorites from the year past, and let us know any we missed in the comments.

Thanks everybody for reading! We’ll be back with much more in 2015. And if you feel up to it, you can even donate to the Liberty Foundation—and your tax-deductible donation will go toward server costs, platform upgrades, and everything else that will help keep us going through the new year and beyond.



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Fracking Ferment and Malthusian Myths

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The revolution in American oil and natural gas production brought about by fracking continues to roar. Recently, the price of oil dropped to about $65 per barrel, and natural gas is still hovering around record low prices. In fact, as an article in Bloomberg suggests, it is entirely possible that oil may sink to $40 in the near future.

All of this was unthinkable before the last couple of years, but thanks to the miracle of fracking, it is becoming reality. It is Schumpeterian creative destruction with a vengeance. But as the theory of creative destruction emphasizes, revolutionary innovations typically bring deep disruptions in their wakes. And as a flood of recent reports illustrate, fracking is indeed a disruptive revolution.

On one side are the thieves that want to cut back on production to drive the world price for oil back to its recent high levels.

Let’s start at the level of geopolitics. With barely controlled glee I note a recent Wall Street Journal report that our fracking energy renaissance is fracturing OPEC. You remember OPEC, the cartel that drove our economy to the wall with the “oil shock” of the 1970s. As oil prices continue to fall, a split has developed among OPEC states.

On one side are the thieves that want to cut back on production to drive the world price for oil back to its recent high levels. Venezuela is the leader of this fraction, and for good reason. Its particular brand of socialism has devastated its economy (as socialism is wont to do), and it has been living off its oil imports. Well, it can’t now, and as the aforementioned Bloomberg story notes, the arrogant Mini-Me of Marxist Cuba is running out of hard currency and may have to devalue its money, raise domestic gasoline prices, cut oil subsidies to other leftist states (such as Cuba), and cut imports of consumer goods. In this socialist hell, crime is exploding as quickly as inflation, and the consumer goods shortages are growing as quickly as the rioting is.

On the other side of the OPEC rift are countries such as Kuwait and Saudi Arabia, which oppose limits to production. These countries have indicated that they will respond to the drop in prices by exporting more oil. They appear to have several interlocking motives.

First, they are desperate to hold on to their worldwide market shares. The Saudis have been pushing existing customers — especially European ones — to commit to continued purchases of Saudi oil. Clearly, the prospect of the US loosening its ludicrous laws restricting the export of its own oil (which would put us in direct competition with the vile OPEC countries) is concentrating Saudi minds wonderfully. Moreover, Iraq has cut its prices to its existing European and Asian customers, desperately hoping to hold onto its global share.

Second, as a recent UK Telegraph piece explores, the Saudis clearly want to stall if not snuff out the fracking revolution. They want to force US shale production down from the current million barrels a day (bpd) to 500,000 bpd. As the article note, the last eight years of fracking have seen the US cut net its oil imports by 8.7 million bpd, the equivalent of what it was importing from Saudi Arabia and Nigeria, combined.

We now know for sure that we have virtually endless supplies of oil and natural gas right under our own soil, resources that can profitably be extracted at prices from $40 to $80 per barrel.

To what extent the Saudis and other OPEC countries can really contain America’s frolicking frackers is a matter for considerable conjecture. As another report points out, the International Energy Agency notes that only 4% of fracked oil production requires that the market hit $80 a barrel if the production is to be profitable. Most of the oil from the Bakken field (the most productive field currently being exploited in America) would still be profitable even if the price were $42 a barrel. At that price, yes, American frackers would feel pain, but nothing like the pain the Russia and the OPEC states would feel.

As Ambrose Evans-Pritchard recently pointed out, the Saudis are playing a dangerous game: “A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals.” He quotes Harold Hamm, the main genius behind fracking, as saying the most productive shale field is still profitable at $28 per barrel. And as Evans-Pritchard adds, quoting Citigroup, the break-even cost for oil is $161 for Venezuela, $160 for Yemen, $132 for Algeria, $131 for Iran, $126 for Nigeria, $125 for Bahrain, $111 for Iraq, $105 for Russia, and $98 for Saudi Arabia.

Remember this: even if all American frackers had to halt production tomorrow (say, if oil dropped to $20 per barrel), the shale fields, along with the technology now well developed to exploit those reserves, would remain, however long the Saudis and everyone else tried to keep the price low. We now know for sure that we have virtually endless supplies of oil and natural gas right under our own soil, resources that can profitably be extracted, with even today’s technology, at prices from $40 to $80 per barrel. As the technology develops, that strike price will only go down. Any possible “knock-out blow” would knock us out only momentarily.

The third reason the Saudis and other Arab states are so desperate to keep their revenues at present levels — even if it means precipitously pumping down their known reserves — is that the autocrats in charge have been buying their citizens’ passivity with lavish welfare spending. If that ever gets cut, the citizens would probably rise up and cut the heads off the pompous princes and egotistic emirs who have so greedily gorged themselves on the wealth of their lands. As the Wall Street Journal notes, Saudi Arabia needs oil to be at $99 a barrel to balance its budget. So the current low price of oil is making the Saudis use assets from their reserves of foreign currency — which, while extensive, are not inexhaustible.

Another geopolitical change that fracking has introduced involves the Mexican oil industry. A piece in a recent WSJ notes that Mexico is foreseeing a rebirth of its own oil industry, with the aid of US technology and investment. The new president of Mexico, Enrique Peña Nieto, did something last year that no president before him had done, since Mexico nationalized its oil industry 70 years ago. Nieto got the Mexican Congress to pass a law (actually, to change the nation’s constitution) allowing private industry, including foreign industry, to help develop new production. Until now, Mexico has jealously guarded its industry, out of an excess of nationalism. While enjoying its national pride, it witnessed a decline in national revenues; but with the rise of fracking as a tool to get old wells producing again, it now anticipates a resurgence of a lucrative industry. The national oil company, Petroleos Mexicanos (Pemex), doesn’t have any expertise in fracking, but US and other countries surely do. As Joel Vazquez, CEO of DCM, a Mexican-Canadian drilling company, put it, “A boom is coming. Not a week goes by without an oil company contacting us asking about making a joint venture, or saying they’re interested in investing here.”

The UK, like Germany, is discovering that so-called Green energy is grotesquely costly.

Mexico will shortly start auctioning off leases for oil exploration. One hundred sixty-nine blocks of Mexican land will be opened for outside development, with about a third of them within 70 miles of Tampico. Most will require fracking and horizontal drilling. It looks as if BP and Royal Dutch Shell will go after the deep-water sites, while Canadian company Pacific Rubiales Energy and a new Mexican startup will focus on the shallow-water and mature onshore sites. Mexico projects an increase of half a million BPD over the next four years.

Another geopolitical impact of our fracking revolution on other countries is the subject of another recent Journal story. The surge in US oil and natural gas production — we now produce more oil and natural gas than do either Russia or Saudi Arabia — is making the British rethink their energy policy.

British billionaire James Ratcliffe, head of the petrochemical giant Ineos, is urging that the UK push fracking. To overcome NIMBY (not-in-my-backyard, anti-development sentiment), the resourceful Ratcliffe plans to offer a generous 4% royalty to property owners and a 2% royalty to municipalities that allow his company to drill fracking wells on their land.

The logic for the Brits — a most logical people, indeed — is clear. Fracking has lifted American production of liquid petroleum products over the past ten years by nearly 60% (from 7.3 million to 11.5 million BPD) and has lifted natural gas production by 30%. But the UK’s own production (of its North Sea fields by conventional drilling) has plummeted, resulting in rapidly growing petroleum imports.

The UK, like Germany, is discovering that so-called Green energy costs a lot of green; in fact, it is grotesquely costly. Because of a Green scheme, one of the UK’s biggest power plants (one that supplies 7% of the country’s power) is converting to wood pellets imported from the American South. But compared to natural gas, wood is immensely productive of carbon emissions. And the switch to wood is going to increase the electricity rate consumers have to pay by — 100%!

Of course, the prescient Ratcliffe is already facing opposition from the same fatuous fools — i.e., environmentalists — that our own energy heroes have had to face. But my guess is that the Brits, after seeing their power and tax bills rise, will see the light and finally favor fracking.

Doubtless, however, the biggest geopolitical impact of the American fracking revolution is on Russia. This is leading to what can best be termed “the Russian rage.” The Putin regime is clearly distraught about the fact that our oil and natural gas renaissance is eclipsing Russia as an energy superpower. A number of articles explore aspects of this phenomenon.

It is now obvious why Putin has seized Crimea and parts of eastern Ukraine: he wants to stop Ukrainians from becoming another major competitor in exporting natural gas to Europe.

One of them concerns the recent hubristic boast by the Russian oil tycoon and Putin puppet Leonid Fedun that OPEC’s decision to keep pumping oil and let the price drop will ensure the crash of the US shale industry. Fedun prophesied, “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again.… The shale boom is on a par with the dot-com boom.”

Fedun’s claim was that when oil breaks $70 per barrel, most American fracking companies will become unprofitable and collapse, or will do so when their existing hedges (prior contracts to sell their crude oil at $90 per barrel) expire. But he made this boast when oil was still over $70 per barrel. We certainly don’t see any American fracking companies hitting the wall even with oil now in the mid-$60 range, and as indicated by the Evans-Pritchard article discussed earlier, other exporters believe most production from the Bakken field would remain profitable in the range of $40 or even lower.

Also amusing was an article in the Russian regime’s propaganda newspaper Russia Beyond the Headlines by Pat Szymczak. She writes about Ukraine, the country that the dictator Putin has invaded repeatedly and dismembered. Her argument is that Ukraine has tremendous shale gas reserves — the US Energy Information Administration estimates them at 42 trillion cubic feet, the third largest in Europe; and Ukraine’s Black Sea oil potential might exceed that of the North Sea. But these resources haven’t been developed, she claims — with evident crocodile tears! — because in the 20 years since it became independent, Ukraine has had only corrupt oligarchical regimes. And recently, when Shell Oil drilled some exploratory wells, fighting amazingly and mysteriously broke out nearby between the government and Russian separatists. This forced Shell to close out operations.

With smarmy alarm, Szymczak warns that, “Ukraine’s inability to get its act together and take advantage of its assets has created an opening likely to be filled by North America. The US has seemingly overnight moved from being an energy importer to a potentially massive exporter, at a time when Russia is struggling to maintain its position in the midst of a production decline in its prolific West Siberian fields.”

She adds that the US may be planning (as part of the sanctions) to divert to Europe some of its diesel exports currently bound for Latin America, and that the EU is apparently pushing the US to end its current ban on crude oil exports (about which more below). And one of Spain’s largest power companies has just signed a 20-year deal to import $5.6 billion in American liquefied natural gas.

Of course, this article is hilarious on many levels. It is uproariously hypocritical that this Russian propagandist should point to Ukraine as a corrupt oligarchy. What is Putin’s regime if not a corrupt oligarchy? And who does Szymczak think caused fighting to break out close enough to the Shell installation to force it to shut down, if not Putin himself? The Putin regime is funding and arming the ethnic Russian separatists. It is now obvious why Putin has seized Crimea and parts of eastern Ukraine: he wants to stop Ukrainians not only from achieving oil independence but also from becoming another major competitor in exporting natural gas to Europe.

Indeed, yet another recent piece — a major New York Times article on the wave of anti-fracking protests suddenly sweeping Eastern Europe — touches on the attempt by Russia to stop Western oil companies from fracking development in Eastern Europe. The article recounts what happened in Romania, when Chevron leased land last year to explore for natural gas. Immediately, a large group of violent “protestors” (read: Putinesque paramilitary provocateurs) showed up and started fighting with the local police. The provocateurs — obviously well-funded — were able to portray the mayor who allowed Chevron in as a traitor to rural Romanians and a sellout to American capitalism. The protestors temporarily made him flee.

Reflecting on the fact that his town never before had demonstrations, and that the moment Chevron showed up, so did a horde of vociferous demonstrators, the mayor concludes that they were a rent-a-mob paid by Russia’s state-controlled oil company, Gazprom. (The Romanian prime minister agrees with the mayor’s assessment). The protestors are, in other words, Putin’s posse, aimed at keeping Western energy companies out of Eastern Europe, which is the former Soviet Empire Putin is eager to reclaim.

What is Putin? He is a megalomaniacal narcissist who wants to be another Stalin.

The story notes that this view — that Russia’s oil arm is funding and fielding anti-fracking armies — is shared by Lithuanian authorities, who saw Chevron chased out of their country by organized violent protestors. The departing secretary-general of NATO, Anders Rasmussen, has voiced the same view: “Russia, as part of their sophisticated . . . disinformation operations, engaged actively with so-called nongovernmental organizations — environmental organizations working against shale gas — to maintain dependence on imported Russian gas.” The statement was echoed by Romanian industrialist Iulian Iancu, who sagely observed, “It is crucial for Russia to keep this energy dependence. It is playing a dirty game.” The rent-a-mob anti-fracking “protests” started three years ago in Bulgaria, which went so far as to ban fracking and cancel Chevron’s licenses.

Of course, both Gazprom and the so-called environmentalist groups heatedly deny that there is Putinesque collusion in all this. And Gazprom exec Alexander Medvedev adds the friendly warning to Europeans that they cannot possibly have a fracking revolution similar to America’s, because of the differences in geology and population density.

The NYT article’s author (Andrew Higgins) gives this view some credibility, pointing out that test wells have proven disappointing in Poland, Romania, and Ukraine. But one might reply that these were only a few wells, all drilled by Chevron, hardly the leader in the art of fracking. My advice to these countries is to ask Harold Hamm, the principal genius behind the fracking revolution, to come out and take a look.

What reasons are there to conclude that the Putin regime is behind these seemingly “spontaneous” demonstrations? Many, I would suggest. To start with, as the prescient Anca-Maria Cernea (leader of a Romanian nationalist group) noted, these “spontaneous” protests involved a coordination of groups that have no natural affinity or historical alliance, such as radical socialists and Eastern Orthodox clergy. Furthermore, the state-controlled Russian “news” media blanketed the airwaves with coverage of the protests over and over, along with warnings about ecological disasters caused by fracking.

Additional evidence is the obvious corporate interest of Gazprom. The Romans bade us ask, “Qui bono?” (“For whose benefit?”). If you want to ask why something is happening, ask in whose self-interest it lies. If Chevron (say) develops Eastern European shale fields, not only will Gazprom (and the Russian regime that controls it) lose out on that market. Eastern Europe could easily become the dominant supplier of energy to Western Europe, displacing Gazprom. Oh, and this could unify Eastern and Western Europe economically, putting the former out of reach by revanchist Russia.

Despite assurances from many of its backers that wind is so efficient that its subsidies would wither away after a few years, the subsidies are proving eternal.

Tied in with this point is another clue — a dog that isn’t barking. By this I mean that while Gazprom is itself exploring (through its Serbian subsidiary Nis) both Serbian and Romanian shale fields, there have been no demonstrations opposing Gazprom. The demonstrating dogs know who their master is. They can smell him even in the dark.

Further, as I noted in a piece not long ago, it’s old news that petro countries fund seemingly independent environmentalists to help stop America’s fracking development. The anti-fracking propaganda movie Promised Land was funded in large part by the United Arab Emirates. And Project Veritas investigative reporter James O’Keefe recently caught on tape a couple of Hollywood producers (Josh and Rebecca Tickell) and a couple of environmentalist activist actors saying they would be happy to work with Middle Eastern petro sheiks.

If American Green ideologues are willing to collaborate with those who want to keep their country energy dependent, why would anyone assume that Eastern European Green ideologues — many of whom were communists working to keep their countries part of the Soviet Empire before it collapsed — are unwilling to see their countries energy dependent? As Joan Rivers would say, “Oh, grow up!”

Finally, who controls Gazprom? Putin. What is Putin? He is a megalomaniacal narcissist who wants to be another Stalin. And what is Putin’s background? He was a career KGB agent who was trained in disinformation campaigns and in the suborning of foreign citizens to work against their own countries. Faced with the threat of the US — which he believed he had neutered because he cowed Obama and Hillary Clinton — becoming the dominant petro-power around the world, enabling the Eastern European countries to be energy independent from Russia, Putin, it is reasonable to assume, would use the tools he was trained to use.

And threatened the tyrant is. As political scientist Ian Bremmer put it recently, Putin has been “backed into a corner” by the drop in prices fracking has caused, “leaving him little option but to continue his aggression toward Ukraine and confrontation with the West.” Bremmer added, “I think that lower oil prices simply squeeze him harder, pushing him farther into a corner. He feels he has to fight as a consequence.”

The theme of Russian vulnerability is echoed by Allan von Mehren, chief analyst at Danske Banke, who said, “Russia in particular seems vulnerable [to dropping oil prices].” He notes that the big decline in oil prices in 1997–98 was a major cause of the subsequent Russian default. The reason for this vulnerability is obvious. Oil and natural gas constitute almost 70% of Russia’s exports, and fund half the country’s federal budget. The country has had to spend $90 billion of its foreign currency reserves to stop the utter collapse of the ruble, which has already dropped in value by over a third.

In sum, as fracking flourishes, look for Russia to become even more aggressive.

Turning from geopolitics to domestic policy, a recent WSJ article explains how the fracking revolution is forcing a long-needed change in America’s ban on oil exports.

Yes, believe it or not, since the Carter era of the 1970s we have restricted the export of our own domestic crude, under the delusion that by restricting the market that our domestic oil producers could sell to we would induce them — to drill for more. Despite calls from major oil companies such as Exxon Mobil for the government to end the moratorium, politicians have been reluctant to deal with populist fears that allowing our companies to sell into an international market will somehow drive up our own prices — as if there were just a fixed amount of oil in this country, and if we sold even a drop of it abroad, our own stash would be diminished.

As the fracking revolution has shown, there is no foreseeable limit to how much oil we can produce. But some oil companies are finding ways around the benighted ban. For example, BHP Billiton has made a deal to sell two thirds of a million barrels of “minimally processed” ultralight crude oil abroad without formal approval from the feds. It is selling the petroleum to the Swiss trading firm Vitol. This move — which is called “self-classification” — is likely to open the gate for many other companies to enter.

The amount of fossil fuel that lies beneath our feet is essentially infinite, and if it ever did reach a limit centuries from now, substitutions would be found.

The idea is clever. Under the decades-old law, the US allows the exporting of refined petroleum fuels (diesel and gasoline) but not of crude oil itself. However, some companies (such as Enterprise Product Partners and Pioneer Natural Resources) have prior governmental approval to export minimally processed oil (called “condensate”). BHP is classifying very lightly processed crude as “condensate,” exempt from the law. BHP is doing its light processing without explicit government approval, although the Commerce Department has been quiet about the practice.

It would be great if more companies followed BHP’s lead. That would encourage more drilling in the long term, and help stymie Saudi Arabia’s efforts to throttle our fracking industry, by making sure that our production can be sold abroad whenever we have an excess here. Of course, it would be even better if we just removed the ban on crude oil exports altogether.

As for the crony, corrupt Green energy industries (the so-called renewable energy producers, especially wind and solar), fracking is pushing them to the wall. Consider wind power. As another recent WSJ piece explains, American wind power has been subsidized for over two decades. Despite assurances from many of its backers that wind is so efficient that its subsidies would wither away after a few years — like the state in the old Soviet Union! — the subsidies are proving eternal. Wind power’s subsidy is a taxpayer gift to wind power producers. This subsidy handed these rentseekers over $7.3 billion since 2007 alone, and it will pay them an additional $2.4 billion next year.

With all subsidies accounted for, the Institute for Energy Research reckons that in 2010 (the last year for which conclusive data are available) wind power received $56.29 per kwh in subsidies, compared with only $3.14 for nuclear power and a meager $0.64 for natural-gas produced electric power. That is, wind power sucked up nearly 90 times the subsidies that natural gas power did.

In short, wind power has managed to shred billions of taxpayer dollars as quickly as it has shredded millions of birds. But this subsidy expired at the end of last year, and wind power producers are desperately trying to renew it before the Senate falls into Republican hands. It looks quite possible that in the face of plummeting oil and natural gas prices, the incoming Congress will end the subsidy once and for all. At which point, wind power will be — well, gone with the wind.

Also worth noting is a WSJ article reporting another possible target for fracking’s creative destruction. I refer to the (again) heavily taxpayer-subsidized electric vehicle (EV) industry. Its only real success has been Tesla, whose zippy, stylish cars have sold well compared to all other EVs. But as gasoline prices have dropped, so has Tesla’s stock. It’s down about 8% recently (after a dramatic rise during the last couple of years).

If oil prices remain low, or fall even further, the EV market will be threatened. And if the EPA manages to kill the coal industry, thus dramatically raising costs of electricity, the EV market will become moribund. It only exists now because of those enormous taxpayer subsidies, and it is unclear how much longer Congress will keep them.

As the Journal noted, we can already guess what the advocates of EVs and the other Green companies will start pushing for if gasoline prices continue to drop: massive new taxes on gasoline to force consumers to go Green. Elon Musk (CEO of Tesla) has already proposed taxing gasoline to make it $10 per gallon at the pump — not from self-interest, you understand, but only from a dispassionate concern for the ecosystem. He thus joins Barack Obama, Nancy Pelosi, ex-GM exec Bob Lutz, and others calling for steep gasoline taxes so that their preferred Green schemes (EVs, ethanol, biodiesel, etc.) will survive. We will see if the new Congress complies with their proposals. I rather doubt it will.

People aren’t bacteria. People consume resources, but they also produce them.

Lastly, however, I want to mention a non-material but very important effect of the fracking revolution: the creative destruction of a myth. The myth is the notion of “peak oil.” That phrase comes from the idea that any oil-producing area (be it a field, a state, or a country) will eventually reach a peak of production, then tail off, making something like a statistical bell curve.

The concept of peak oil has been around since the start of the oil era. Eminent energy analyst Daniel Yergin quotes the state geologist of Pennsylvania in 1885 as predicting that the amazing early production of petroleum was only a “temporary and vanishing phenomenon — one which young men will live to see come to its natural end.” But the notion was given a scientific patina by M. Kind Hubbard, a geologist for Shell Oil company, in an influential paper of 1956, predicting that American aggregate oil production would peak in the early 1970s, then decline forever after. It appeared that Hubbard’s theory was empirically confirmed when America’s oil production hit a peak of slightly less than 10 million barrels per day (bpd) in 1974, and started declining.

It is now clear that this theory is about to be refuted yet again. Fracking has pushed our production of oil past Saudi Arabia’s current level of 9.7 million bpd. And the International Energy Agency projects that we will overtake Russia’s production of 10.3 million bpd next year.

People still keep predicting peak oil — as Paul Krugman did in 2010, when he crowed that “peak oil has arrived.” With fracking, indeed, we will reach another peak; but very likely someone will come up with another technological improvement, maybe “smacking.” The amount of fossil fuel that lies beneath our feet is, almost surely, essentially infinite, and if it ever did reach a limit centuries from now, substitutions would be found — perhaps from the vast spread of methane hydrates that lie on the ocean floors.

The theory of peak oil is a myth, and it is just a special case of a bigger myth — Malthus’ myth. Malthus held that, sustained by resources, the members of any living species will incrp/prsquo;s federal budget. The country has had to spend $90 billion of its foreign currency reserves to stop the utter collapse of the ruble, which has already dropped in value by over a third.ldquo;minimally processedease their numbers exponentially, so that no matter how plentiful the resources, the species will soon exhaust it. So he held that while people may increase agricultural production, it will only increase arithmetically, while the population will increase exponentially, resulting sooner or later in mass starvation.

But as economist Julian Simon argued, people aren’t bacteria. People consume resources, but they also produce them. People have mouths, but they also have hands, minds, and hearts. They can find new ways of getting any resource, and new substitutions for it also, for time without end.




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Their Gamble, Our Win

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A recent news piece in the Wall Street Journal caught my attention. Entitled “Germany’s Expensive Energy Gamble,” it reports on that country’s new grand energy plan, the “Energiewende” (“Energy Revolution”). This is now at the top of Chancellor Angela Merkel’s domestic agenda.

Under this plan, Germany will spend a projected trillion euros — and we all know how government projections tend greatly to understate final costs — laying out a massive new network of high-tension lines to carry power from wind plants in the North Sea to the country’s heavily industrialized southern region. Merkel’s government is gambling that this titanic investment will pay off with cheap, inexhaustible energy.

So far, the dream of renewables replacing fossil fuels and nuclear power has delivered only nightmarish results.

While the EU has a set of rules requiring its member states to achieve a goal of 35% of their electricity from so-called renewables by 2025, Germany has set its goal to hit 40–45% by then and to exceed 80% by 2050. Again, this is without using nuclear power.

If achieving this does cost the German economy a trillion euros (about $1.4 trillion), that would equal about half the country’s annual GDP.

So far, the dream of renewables replacing fossil fuels and nuclear power has delivered only nightmarish results. Despite Germany’s history of no major problems with nuclear power, Merkel virtually shut down the nation’s nuclear industry after the Fukushima disaster. Today, only nine nukes remain open, and they are due to be shut down in about seven years.

The result is that over the past five years, electricity prices in Germany have skyrocketed 60%, because the subsidies for the highly inefficient wind farms are passed on to the consumer. German electricity is now over twice as expensive as America’s.

Even riskier for the German economy is the strain this is placing on the manufacturing sector, one of its key components.

As Kurt Bock, CEO of BASF — the world’s biggest chemical company and one of Germany’s biggest companies of any kind — put it, “German industry is going to gradually lose its competitiveness if this [energy revolution] isn’t reversed soon.

BASF, by the way, has every right to be frightened by Merkel’s energy scheme. The company’s main plant employs 50,000 people in Germany, and consumes as much power as all of Denmark. And Bock is not alone in his concerns. A recent survey by the Federation of German Industry and PricewaterhouseCoopers showed that three-fourths of executives at small- and medium-sized industries feel that the rising energy costs threaten German productivity. A survey by the US Chamber of Commerce showed that a similar percentage of American company executives with operations in Germany felt that the Energiewende made Germany less attractive as a place to do business.

While the unfavorable opinions of the manufacturers, either German-based or with German operations, should worry the German government, even more worrisome are the attendant industry actions.

BASF has announced plans to cut investment in Germany by 8.3% of its world total, shifting it elsewhere. SGL Carbon, another German manufacturer, has decided to triple its $100 million investment in its Washington state plant rather than expand its domestic operations, for the reason that electricity costs only one-third as much in Washington state as it does in Germany. And basi Schöberl GmbH will turn to France rather than Germany as the site of its new plant. (France, note well, has kept its nuclear power plants at full strength.)

As Daniel Yergin has put it, the Germans enthusiastically embraced so-called renewable power, viewing themselves as trailblazers, “But now the Germans look back and see there aren’t many people behind them.”

Meanwhile, as another WSJ piece documents, our own energy revolution continues to flourish — even in the face of an administration downright hostile to it — because ours is based on fossil fuels.

The article notes that while naysayers wrote off our fracking revolution under the theory that shale wells don’t produce for long and must be replaced with ever more wells, the fracking revolution enters its tenth year in fine shape. Shale wells have become far more productive.

For example, in 2013 the most fecund shale well produced, at its peak, 5.9 million cubic feet of natural gas per day. But last year — a mere decade later — the best shale well delivered an amazing 30.3 million cubic feet a day — a fivefold increase! And fracking oil wells have seen similar productivity increases over the last decade.

We have a grotesquely obtuse president, so we will no doubt squander this opportunity to get our manufacturing base to the heights it could reach.

In fact, the focus of the American oil and natural gas industry — which has become the world’s largest energy producer — is now on finding ways to get more from existing wells, as opposed to looking for new shale fields. So while the number of wells has remained roughly constant, the production has jumped.

All this has kept American natural gas prices at historic lows.

This would suggest to a shrewd president — if we only had one! — a national strategy for renewing our industrial sector.

The strategy would be to embrace the American energy renaissance. Take back the regulatory agencies, as well as the Department of the Interior, from the environmentalist activists. Return to issuing leases to develop resources, both offshore and on land, leases dramatically curtailed by the Obama administration. Return to selling public lands — the federal government still owns 28% of the 2.27 billion acres that comprise our national territory. And allow our oil and gas to be exported freely. At the same time, reinvigorate our nuclear energy power industry.

In other words, aim explicitly at allowing the market to drive our energy prices, both the price of fuel and the price of electricity. This would create a cornucopia of benefits.

It would add a massive number of new jobs, first in the energy sector, then, as that wealth spread, in every other sector as well. It would drive down the amount of money that vicious dictators such as Putin and terrorists such as ISIS use to maim and murder free people around the world. That would lessen the probability that young Americans will die to protect our interests.

But we have a grotesquely obtuse president, so we will no doubt squander this opportunity to get our manufacturing base to the heights it could reach.

Elections have consequences — alas! But people get the government they deserve.




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Catastrophe, Doom, and Oblivion

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Lately, the climate change movement has been celebrating. A recent International Panel on Climate Change (IPCC) report expressed 95% confidence that half of the warming during the previous 60 years was manmade. In January, the EPA ruled that new coal plants must install carbon capture and storage (CCS) technology — technology that is not yet commercially viable (take that, climate deniers). Then there is the accumulation of almost 500 climate-related laws passed in 66 countries. According to Sen. Ed Markey (D-MA), "This surprising legislative momentum is happening across all continents. Encouragingly, this progress is being led by the big emerging and developing countries, such as China and Mexico, that together will represent 8 billion of the projected 9 billion people on Earth in 2050."

Riding the new-found momentum, climate change elites have sprung into action, reinvigorating the war on carbon and climate deniers. President Obama is conducting a regulatory version of Cap and Trade (legislation that failed to pass during his first term). He even has his own "Climate Change Action Plan." Senate Democrats are holding climate talkathons. John Kerry plans to broker a deal "committing the world’s economies to significant cuts in carbon emissions and sweeping changes in the global energy economy." Climate luminary Joe Biden theorizes, "It would be nice not to have any carbon fuels." To Al Gore, taxing carbon is not enough. "Tax denial," he chortles.

The policies of the past 25 years have failed miserably in reducing global greenhouse gas emissions.

But, the bravado and self-congratulatory rhetoric is a veneer, hiding an astounding lack of planet-saving progress. So too are the pompous slogans and the grandiose policies, built on a delicate foundation of "settled science," "social justice," and wishful thinking. They mask an astounding ignorance of global energy consumption and production trends, not to mention economic realities. God forbid they are celebrating the progress they expect from Obama's action plan and Kerry's climate deal. Their schemes offer nothing new, unless climate scientists discover a way for pompous slogans to reduce GHG emissions.

A litany of ambitious carbon reduction promises and sophomoric flat-earther insults is not a measure of actual planet-saving progress. Nor is a litany of vain and, at best, nebulous "accomplishments" such as laws passed, treaties discussed, money spent, solar panels and windmills produced, and green jobs created. What is the actual effectiveness of the policies? Are we on track to keep GHG emissions below 450 ppm by 2050 (to avert the "carbon tsunami" and our fall from the "climate cliff")? How much do we have to pay developing countries as climate change compensation? How much will it cost to prevent the catastrophic 7.2-degree Fahrenheit global temperature increase that some authorities predicted to occur by 2100? Will these amounts be sufficient to finally save the planet?

One hopes that what is past is not prologue. The policies of the past 25 years have failed miserably in reducing global GHG emissions. They include 20 years of generous subsidies for renewable energy and the splurge of $150 billion in loans to green energy companies such as Solyndra, Abound Solar, Evergreen Solar, and A123 Systems. The current European Union plan (EU 20/20), said to be the world's most significant climate policy, will cost $20 trillion through the end of the century and would reduce the global temperature by 0.1°F. $20 trillion for a 0.1°F decrease? What about the other 7.1 Armageddon-like degrees?

Perhaps Obama's Climate Action Plan — constructed with similar haste, method, and disdain for economic and scientific realities – will be more effective than the EU 20/20 plan. Whatever he has in mind, it had better work fast. At the 2007 Climate Change Conference, U.N. Secretary-General Ban Ki Moon proclaimed that the world is at a crossroads, where "one path leads to a comprehensive climate change agreement, the other to oblivion. The choice is clear." We must choose soon: "The situation is so desperately serious that any delay could push us past the tipping point." What has been accomplished since? No new treaties (toothless or otherwise). The Kyoto Protocol, still the world's only climate change treaty, has actually weakened. Russia, Japan, and Canada have recently dropped out — despite Obama's 2008 heal-the-planet speech. The officially designated rescue fuels (solar, wind, and biofuel) account for less than 2% of the world's energy supply; oil, gas, and coal account for 87%. GHG emissions are increasing, faster than ever. Evidently, we opted for oblivion.

By replacing coal with natural gas, the shale-energy revolution has reduced US emissions by 300 million tons — an amount that exceeds the world's total reduction from solar and wind power combined.

According to a recent UN study, thanks to the abysmal failure of world governments to reduce greenhouse gas emissions, we are probably doomed. English climate change scientist James Lovelock more than agrees; he believes we're only 40 years from global catastrophe. Unlike American climate gurus, Lovelock may have noticed the ongoing global energy shift in which developing countries are expected to consume 65% of the world's energy by 2040. Of all experts, Mr. Obama should have noticed that the developing world is hurtling into the future, furiously burning every calorie it can find of what he calls "yesterday's energy."

As this trend — said to "foreshadow a climate change catastrophe" — intensifies with the population growth of developing countries, other climate change experts warn that the end could come even sooner. Tokyo governor Shintaro Ishihara speculated, "It could be that the 2016 Games are the last Olympics in the history of mankind." Holy shit! No wonder Obama doesn't have time for meetings with the "Flat Earth Society."

This is a glimpse, from the world of climate change believers, of the effectiveness of the policies of their revered political leaders: catastrophe, doom, and oblivion, arriving ahead of schedule. Damn those flat-earthers.

In the real world, however, most people don't see the coming climate havoc with such clarity, or any clarity. Among the reasons for this hazy, infidel view: the temperature trend that produced the Kyoto Protocol of 1997 began to fade in, well, 1998; global temperatures have not increased in the 16 years since 1999. But climate change believers see it; they predicted it — all the horror that, for decades, they have been attributing to climate change. And they see the failure. Yet they refuse to see the vivid connection between paltry emissions reduction and futile policy.

The failure to save the planet is not the result of insufficiently apocalyptic warnings or public ridicule directed at uncooperative climate change deniers. Those who are unaware of the earth's curvature and temperature are irrelevant — all ten of them. Rather, it is the 6.9 billion people (of the 7 billion inhabiting the planet), who pay little, if any, attention to the incessant, shrill, vile, delusional hyperbole of the clueless climate-change elite. They are too busy dealing with bigger problems. The vast majority of people in the industrialized world are much more troubled by economic stagnation, unemployment, and debt. People in the developing world are consumed by the problems of poverty, famine, oppression, ignorance, despair, and natural disasters, to name a few — all the while struggling to be like their industrialized brethren. And when they become industrialized, they will switch to worrying about economic stagnation, unemployment, and debt. Only after that will they worry about climate change. Possibly.

Then there is the irrational insistence that renewable energy, alone, must save the planet. It is clear to anyone, except the political ideologues who long ago hijacked the global warming movement, that solar panels and windmills are not up to the task. At present, only subsidy and delusion sustain them. And who else but boneheads with a pie-in-the-sky political agenda would blithely dismiss more intelligent, proven technologies (natural gas and nuclear power) that could drastically reduce GHG emissions. For example, by replacing coal with natural gas, the shale-energy revolution (not the Obama green revolution) has reduced US emissions by 300 million tons — an amount that exceeds the world's total reduction from solar and wind combined — while reducing American energy costs by $100 billion.

Last September, in Why Climate Activists Need to Dial Back on the Panic, environmentalist Bjorn Lomborg lamented, "Our climate conversation has been dominated by fear and end-of-the-world thinking." He recommended that "instead of being scared silly, we need to realize that global warming is one of many challenges to tackle during the 21st century and start fixing it now with low-cost, realistic innovation." Maybe there is hope for the global warming movement.

There stood the imperious and clueless Kerry, trying to scare people who live in a "ring of fire" into worrying about a little carbon-induced warming.

Maybe not. Only a few months later, John Kerry descended upon Indonesia, brandishing global warming as a weapon of mass destruction (WMD), and promptly accused climate deniers of "burying their heads in the sand." Kerry, no doubt, thought that punching up his vapid climate change rhetoric with an edgy WMD metaphor would persuade Indonesians to turn down their thermostats and pump up their tires. Except that in Indonesia, where the average annual income is barely $3,000, most people don't have thermostats and tires.

Kerry also seemed unaware of the volcano that killed several people just two days before his arrival, and that Indonesia is located in the "Pacific Ring of Fire," so named for its deadly and frequent earthquakes and volcanic eruptions. But there stood the imperious and clueless Kerry, trying to scare people who live in a "ring of fire" into worrying about a little carbon-induced warming. Perhaps his "most fearsome weapon of mass destruction" embellishment will have more success in China, which accounts for almost 60% of the recent increase in global coal consumption, or in India, where the average annual income is $984.

For anyone who is serious about reducing manmade GHG emissions, there is nothing to celebrate. John Kerry (and his ilk) can offer nothing but catastrophe, doom, and oblivion to the global warming crusade.

#39;s energy.




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And We All Frack On

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Several recent stories show that the amazing technology of fracking continues to transform the energy world.

First is the news out of Russia that it has begun drilling a well that aims to tap the huge Bazhenov shale formation. The Bazhenov field, in Siberia, may be the biggest shale formation in the world.

Until now, Russia hasn’t bothered with fracking, even though it has the world’s largest reserves of shale oil (and the ninth largest of shale gas), because it has immense reserves of conventional fossil fuels. But lately its conventional production has begun to stagnate.

So Russia is allowing Royal Dutch Shell and Exxon Mobil to partner with its state-owned Gazprom Neft to start the process of developing fracking operations. How quickly it can mimic the American success in this area is hard to tell — certainly, other countries with large shale reserves (such as China, Poland, and the UK) have yet to get any production going, because the technology is tricky. What Russia has going for it is that — unlike the US — Russia has a leader who actually wants to enhance fossil fuel production, rather than destroy it.

Even more fascinating is the report out of Brussels that the European Commission now wants to cut back on the “climate protection” schemes it has pushed in the past and — wait for it — embrace fracking!

Yes, apparently the Commission’s plan is to step back from its aggressively Green agenda, called “20-20-20,” set back in 2007. The plan then was to achieve a 20% drop in greenhouse gas emissions, raise the EU’s output of renewable energy to 20% of all energy consumed, and achieve a 20% increase in the EU’s energy efficiency — all by 2020. The plan now is to switch to pursuing these green energy goals only on a voluntary basis.

As regards fracking, the Commission now intends to establish only minimal rules, instead of the very strict ones it was considering.

The interesting question is whether Germany’s head Angela Merkel will continue to push for an increase in the use of renewables. She has set the goal for generation of renewable energy in Germany at 60% by 2036. Considering that after Fukushima, Merkel ordered that the German nuclear power industry be closed by 2022, and that half the plants are already shuttered, achieving the renewable goals will drive the cost of German power through the roof.

But she is running into flak from German industry. An article late last year noted that the rising energy prices in Germany and dropping prices elsewhere were beginning to put pressure on German manufacturers to start offshoring much of their operations.

I mean, this is just fascinating: when America is finally free from our current Green president, and we once again encourage domestic oil and gas production, we may find that we get back some of the heavy industry we lost to the Germans decades ago. Hell, maybe their automakers will completely relocate here.

Of course if they do, they will need new names. Instead of Bayerische Motoren Werke, might I suggest Tennessee Motor Works? And Mercedes Benz — well, “Mercedes” is so dated. We might try “Miley” (after our famous twerker-girl pop star). Perhaps “Miley Bends” would work . . .

A recent Wall Street Journal piece noted that many EU companies are moving production to the US, because of our relatively inexpensive energy — and, one might add, because at least in the half of all American states that have right-to-work laws, our labor rules are more realistic.

Finally there is a story about a start-up company called Siluria, which may possibly have solved the technological hurdles in the way of turning abundant natural gas into cheap gasoline — gasoline at about half the price of the current product distilled from petroleum.

Siluria is trying to do what so far has been impossible. While gas-to-liquids plants do exist (plants that convert natural gas to liquid fuels, including gasoline), they are very costly. It takes a lot of energy to do the conversion. For years, companies have searched for a catalyst that would make the conversion more cost-efficient, but so far, no catalyst has succeeded. Siluria has a new approach: it has built an automated system for making and trying out new catalysts. The system has already sifted through 50,000 possibilities, and the company feels that the performance of the catalyst currently in use at its experimental conversion plant justifies opening two larger-scale plants to prove to investors that it has a commercially viable approach.

A number of other companies are trying to find a commercially attractive way to convert natural gas to liquid fuels — none of which, please note, receiving the lavish funding accorded Obama cronies’ multitudinous green energy companies (most of which have failed).

In fact, the whole fracking revolution was entirely the creation of a handful of brilliant entrepreneurs in the private economy, operating in the face of the administration, not with its help. Over the decades, the role of the federal government in confronting our energy dependence on the Mideast has been one of trying to pick winning technologies, and failing every time. Not just failing, but failing at a cost to taxpayers of billions of dollars, all the while impeding private enterprise.

It is time just to end the idiotic Federal Energy Department, and let the free market solve the problem.




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Athena 4, Gaia 0

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From the start of the industrial revolution to the present day, many Green critics have decried the rise of technology. Gaia (Mother Earth) worshipers — Green neo-pagans — have viewed with alarm the dramatic rise in human flourishing, and the key determinant in this flourishing, which has been the development of plentiful energy. From the year 1800 to the year 2000, the world’s average per capita income rose tenfold (in real terms), while the world’s population rose sixfold, thanks to this productive and peaceful revolution. But the Gaia cult has resisted every step of the way.

During the past half century, the Gaia groupies have achieved tremendous political power in America and Europe. (They have yet not been able to dominate in Asia — one big reason Asia is so rapidly rising economically.) It is a struggle between those who embrace technological progress and those who reflexively and viscerally oppose it. The struggle can be viewed as a contest between Greek goddesses: Athena, goddess of wisdom and technology, is fighting Gaia, and Athena keeps winning — thank goddess!

Four recent reports of technological progress in energy production are worth noting. The first is about the fracking revolution, which I believe will be viewed by future historians as one of the major turning points in the evolving industrial age. It conveys the news that the largest American railroad, BNSF, is planning to test the use of natural gas as power for its locomotives. Currently, BNSF uses diesel fuel exclusively, and by its own estimates has the largest diesel-burning American fleet, second only to the US Navy.

It is not because but in spite of the neo-pagan policies of the Oval Office that we have the natural gas miracle.

The reason BNSF is considering the move is that because of the fracking revolution, natural gas is getting very cheap. Under current pricing, while a gallon of diesel fuel costs about $4, the same power can be produced for less than 50 cents worth of natural gas — though there are additional costs when you compress or liquefy it.

This is leading BNSF to follow other industries in moving toward natural gas. Utility companies are rapidly abandoning coal for gas, and manufacturers are moving toward it as well. Many municipal bus fleets have been using compressed natural gas (CNG) for years, and other commercial vehicle fleets (such as garbage trucks) are looking into switching to CNG. Already, tugboats are being fitted to run on liquefied natural gas (LNG). And long-haul freight companies are looking at LNG as well — in fact, Shell is planning to provide LNG in Ontario and Louisiana and distribute it at 200 truck stops.

The hurdle that BNSF faces is that it costs upwards of $1 million to retrofit a diesel locomotive to run on LNG as well, and BNSF has almost 7,000 locomotives to retrofit. So this conversion likely will take time, but given that the cost advantage of natural gas shows no sign of going away anytime soon, the conversion seems inevitable.

Lest anybody be addlepated enough to thank the current Green regime for this flourishing of clean, low-cost energy, let me disabuse him now. The crony-capitalist administration has placed all of its — oops! I mean, the taxpayers’ — money on solar and wind power, bankrolling numerous projects (headed by various Obama donors) that have gone nowhere but bankrupt. The EPA and the Department of the Interior have gone out of their way to stop drilling on federal lands. This is documented in a recent report from Marc Humphries of the Congressional Research Service. The report documents the fact that the fracking revolution has increased American natural gas production by 20% over the past five years alone — a total of 4 trillion additional cubic feet of natural gas pumped into the nation’s supply. But this overall increase hides a revealing disparity: while natural gas production on non-federal (mainly private) lands is up by 40% over this period, production on federal land has plummeted by 33%.

In short, it is not because but in spite of the neo-pagan policies of the Oval Office that we have the natural gas miracle.

But the miracle just might become even more miraculous. The second story about technological advances in energy production is a news release from the Japan Oil, Gas and Metals Corporation, which notes that it is preparing the first test of commercial production of natural gas from methane hydrate layers under the ocean. Essentially, methane hydrate is natural gas (methane) trapped in ice crystals along the ocean’s floor. This source of energy is estimated by some experts as potentially exceeding all of the world’s existing coal, natural gas, and petroleum reserves — combined! Developing the resource will be tricky, given the instability of the layers that have to be processed, but then, the minds of self-interested creative individuals are tricky as well.

The third technological development in energy production worth noting is the advent of a new type of nuclear (fission) reactor.

Nuclear power, of course, can’t get no respect from nobody. Despite its exemplary safety record in the US and other advanced economies (which always excluded, of course, the Soviet Union), people fear it. These fears were only intensified two years ago when a Japanese earthquake led to the destruction of four reactors at the Fukushima Daiichi power plant.

Actually, the quake — a massive magnitude 9.0 one that moved Japan’s main island eight feet to the east and shifted the Earth’s axis by six inches — didn’t destroy the reactors. They were ruined by the tsunami it generated (a tidal wave that destroyed 300,000 buildings and killed 20,000 people). Despite the fact that the reactors’ disaster killed nobody, sickened nobody, and is likely to cause few health problems in the future, organized pressure led to the shutdown of the country’s 53 other reactors. These reactors jointly produced 30% of the country’s electric power. As a consequence, last year Japan ran a record deficit ($78 billion) because it had to import more energy, increasing the cost of its manufactured goods, and reducing exports accordingly.

But nuclear power is by no means dead. There is a new company, Transatomic Power, that is perfecting a design for a molten-salt reactor — a design that may well cut in half the cost of future nuclear reactors. It is the high cost of building reactors, especially in the face of the dramatically dropping price of electricity from natural gas plants, along with the Green Regime’s preference for solar and wind power, that has been holding up the expansion of nuclear power in the US over the past few years. But this new reactor will probably reignite that expansion.

Molten-salt reactors were explored as long ago as the 1960s in the Oak Ridge Lab, but the design now being worked on would produce 20 times the power for the same size reactor. It would allow reactors smaller than the 1,000 megawatt behemoths currently running. Besides the smaller footprint, the reactor under design would save money because it could be factory-built (as opposed to being custom-built on site).

Its chief advantage, though, would be the use of molten-salt rather than water as a coolant. Water is the coolant used in all present reactors. The problem with water is that it boils at 100o C, whereas the fuel pellets in the core operate at about 2,000o C. So in the event of an emergency shutdown, unless water can be continuously pumped over the core to cool it, the water will vaporize and the core will melt down (as one did at Fukushima).

But the salt, which is combined with the fuel, has a boiling point much higher than 2,000o C. So if the reactor core starts to overheat, the salt will expand but not evaporate, separating the pellets and thus slowing the core reaction. In a complete shutdown, a stopper at the bottom of the core container would melt, and the molten fuel and salt would flow into a holding container, where the salt would solidify and encapsulate the fuel.

If global warming is real — as all good, pious Gaia supplicants believe — then it’s either nukes or solar and wind power, and the latter is clearly not economically viable.

The clever pups behind this innovative design are the cofounders of Transatomic Power, Leslie Dewan and Mark Massie, who are still only Ph.D. candidates at MIT. These two are Schumpeterian entrepreneurs of the best sort. America is lucky to have them, as the Chinese are also working on a similar design.

This all comes at a crucial time for nuclear power. For as a recent Wall Street Journal article notes, the fracking revolution has lowered natural gas prices so much that gas powered electrical plants are driving both coal-fired plants and many nuclear plants (especially the smaller ones, and the ones facing expensive repairs) out of deregulated markets.

For examples, Excelon has announced that it will soon close its Oyster Creek, New Jersey nuke, ten years before its license expires. And Dominion Energy has announced that it will soon close its Kewaunee, Wisconsin nuke, a full 20 years before its operating license expires.

Pricing makes the reason for this clear. The fixed costs to run a nuke are $90,000 per megawatt; the fixed costs for coal fired plants are $30,000; for natural gas fired plants, only $15,000. And, of course, existing nukes require intensive security and safety costs, precisely because of the risk of meltdown. In the first 11 months of 2012, natural gas plant output rose by 24%, while the output for nuclear powered plants dropped by 2.5%.

This all presents an interesting dilemma for the Gaia communicants. As natural gas prices continue low, gas will, absent extensive subsidies or other protection for other forms of energy, supplant nuclear power. Now, natural gas emits just half the carbon that coal does, but nuclear plants emit none. So if global warming is a hoax, we could easily go all natural gas. But if global warming is real — as all good, pious Gaia supplicants believe — then it’s either nukes or solar and wind power, and the latter is clearly not economically viable. All this is clear except to the blindest Gaia devotees (and the greediest Green crony capitalists).

And indeed, there has been an interesting schism in the Green faith. In a recent piece, the excellent science writer Robert Bryce calls this “the rise of the nuclear Greens.” He notes that an increasing number of Gaia votaries now support nuclear power. One prominent convert is British environmental activist George Monbiot, who has now admitted — belatedly, to understate it massively — that solar energy (in the UK, and by extension everywhere else) is “a spectacular waste of scarce resources,” and that wind power is “largely worthless.” Referring to the Fukushima disaster, he concludes, “Atomic energy has just been subjected to one of the harshest of possible tests, and the impact on people and the planet has been small. The crisis at Fukushima has converted me to the cause of nuclear power.”

Wow.

Monbiot now joins other Gaia disciples Stewart Brand, Ted Nordhaus, Michael Shellenberger, Mark Lynas, James Lovelock, and Patrick Moore (co-founder of Greenpeace) in favoring nuclear power. This is nauseatingly ironic: it was the environmentalist zealots who stopped the growth of nuclear power 40 years ago. But the pro-nuke Gaia devotees are still a distinct minority. Most of the cult still lights candles in front of wind and solar power.

The fourth interesting development concerns an energy source that has been tantalizing but elusive for many decades: fusion power.

A news report out of Europe indicates that an important international project is moving forward. The “Iter” (Latin for “the way”) project is a collaboration of 34 nations working on building a pilot fusion nuclear reactor. Nuclear fusion is, of course, what powers the sun and other stars. In principle, it offers a chance to provide virtually unlimited supplies of reliable, consistent energy at the levels needed to power an industrial economy. And it would provide that power from clean, nontoxic fuel (extracted from water), with no possibility of any kind of core meltdown.

The new Iter experimental reactor has received an operating license. It is projected to be the first fusion reactor (“tokamak”) to generate more power than it uses — ten times more, in fact. The Iter design would serve as the prototype for the first generation of commercial fusion power plants.

The foundations for the reactor are now being laid, but the work of putting together the million or so components (made at factories all over the world) will take a long time. The tentative date for firing it up is about 15 years in the future — though with a project of this enormity, it will probably be longer. And it has cost about $20 billion. However, it signals that by the second half of this century, commercial fusion power will be a reality.

That would be nothing less than the crowning achievement of the industrial revolution. It would be the human mind harnessing the power of the stars to secure permanent prosperity for our species.

In spite of the Gaia cult, Athena is ascendant.




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Fracking, Jawohl?

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A recent Wall Street Journal piece indicates that the Germans are beginning to face the consequences of their devotion to the environmentalist faith. Two years ago, under pressure from their Greens, the German government announced that it would end its use of nuclear power, and move to the so-called “renewable” energy sources of wind and solar power. It stopped any expansion of nuclear power and started phasing out the sector, with six of its plants due to close over the next seven years.

But this Green revolution has resulted in the same problems that have been experienced everywhere else it’s been tried. Both wind and solar are massively more costly than even nuclear power, which is itself more costly than conventional power, derived from fossil fuels. This is because both the wind and the solar facilities are at best only intermittent (much of the time, the wind doesn’t blow and the sun doesn’t shine), and because the power source is comparatively feeble (winds don’t often blow very hard, and the sun is 93 million miles away). So you need huge installations that have their own environmental costs. All of this requires massive taxpayer subsidization.

In Germany, the subsidies are directly passed on to the consumers, which has resulted in German households seeing what were already some of the highest electricity rates in Europe soar by a staggering 40% in just the past five years. German families now pay 15% more than the average for the EU zone.

Not only are average consumers feeling the pain, but businesses are as well. As you might surmise, businesses that use a lot of energy (such as many manufacturers) are cutting back their investment in Germany.

Ironically, the move to terminate nuclear power has hurt the environment. Since the only scalable and affordable alternative is fossil fuels, mainly coal, Germany say its CO2 emissions actually increased last year by 1.6%. If it has to rely on coal to replace all the nukes it plans to shut down over the next seven years, these emissions — as well as the emissions of other major pollutants — will skyrocket accordingly.

So — surprise, surprise! — fracking is beginning to look good to both the German government and many of its citizens. And — again, surprise! surprise! — German Greens are rising in opposition. Like environmentalists here, they typically only support sources of power that don’t actually work very well.

The German government, seeing the problems that “renewable energy” is causing, now proposes to allow fracking so long as it is not near any water sources, nor in any national parks or other conservation areas, and is subject to regulatory oversight.

While Germany has nowhere near the amount of frackable natural gas as nearby countries such as Poland and Ukraine, it still has an estimated 50-year supply.

But the German government should be under no illusions here. No matter how tightly it regulates fracking, the Greens will oppose it. They will oppose it not because they fear it won’t work, safely and efficiently, but precisely because they know it will.

The hard core of the Green movement consists in many cases of nature-cultists, people who view humans as a blight on the otherwise pristine, garden-of-Eden planet. They want economies to fail, so that humans will die off.

These worshipers of Thanatos can never be happy with anything that helps humanity flourish.




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Enviromentalists vs. the Environment

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A brilliant piece by Robert Bryce highlights one of the more incredible recent developments in the Green Gaia world — the rising opposition of the soi disant “environmentalists” to a proven weapon against the dreaded Anthropogenic Global Warming that threatens destruction to Mother Earth. That weapon is natural gas — which, to put the point in a scatological way, is an afflatus of said Mother Earth.

Specifically, in the last year, the two major energy bureaucracies — oh, pardon me, “agencies” — have reported what one would naively suppose is very good news: America is dramatically cutting its CO2 emissions, thus sparing Earth further defilement! On May 24, the International Energy Agency (the IEA) in Paris and the US Energy Information Administration both reported that America’s CO2 emissions dropped by nearly 8% (430 million tons) since 2006, the greatest reduction recorded by any country in any region.

Yahoo! We’re number one! (Let’s all chant together: U-S-A, U-S-A!)

The reasons the IEA gives for that drop are that the US is using less oil, especially during this extended recession. But the biggest reason seems to be the flourishing of natural gas production brought by the use of fracking.

The drop in natural gas prices has led to a dramatic switch from coal to natural gas in generating electric power. Last year alone saw an increase in gas-powered electricity production by 34%, and a drop in coal-powered electricity by 21% — a decrease that lowered carbon emissions (not to mention air pollutants) dramatically.

Lawrence Cathles, professor of earth and atmospheric studies at Cornell, recently published a report arguing that moving our economy to natural gas would be a much quicker and cheaper way to replace coal than by moving to “renewables” (solar and wind energy) or even nuclear power — and it would lower carbon emissions by up to 40%.

But the major environmentalist groups, as well as the government regulatory agencies they control (such as the EPA), are still fighting fracking and pushing “green” energy.

What a joke.




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