{"id":2488,"date":"2011-12-10T22:48:15","date_gmt":"2011-12-11T03:48:15","guid":{"rendered":"http:\/\/jimgworld.com\/blog1\/?p=2488"},"modified":"2011-12-10T22:58:11","modified_gmt":"2011-12-11T03:58:11","slug":"crude-oil-reality-crude-gas-politics","status":"publish","type":"post","link":"https:\/\/jimgworld.com\/blog1\/?p=2488","title":{"rendered":"Crude Oil Reality, Crude Natural Gas Politics"},"content":{"rendered":"

I like charts. So I’d like to share a good one that I saw recently regarding world crude oil output. It was part of an interesting and somewhat troubling article<\/a> on Mr. Gregor’s web site about energy production and standards of living. Here’s my update of his chart, which adds oil prices for comparison purposes (Brent futures in $ per barrel as the green line, use right hand scale on chart).<\/p>\n

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Mr. Gregor’s bottom line is that energy is the key input — and the key limitation — to how well industrial economies do. Therefore, its ups and downs have observable impacts on the overall wealth and quality of life in these economies. And the USA is a sitting-duck economy as far as energy is concerned. The only thing that has absorbed some of the shock, both here and in Europe, has been the massive amount of government borrowing that has transpired. But that game seems to be just about over. The sovereign debt chickens are coming home to roost in Greece, Italy, Spain, Ireland . . . and are not far out from the American shores.<\/p>\n

For better or worse, the industrial nations still depend upon oil. There are alternatives including natural gas, nuclear, coal, wind, solar, and other ‘green energy’ sources. But they are all limited by technological, economic and environmental factors. For the next 5 to 10 years, the only alternate energy source that could significantly expand its role and take up some of the burden on oil without spiking greenhouse gas levels is natural gas. Beyond 10 years, perhaps nuclear energy might get its act together and green energy sources might finally become efficient and effective power generation sources. <\/p>\n

But for at least the next decade, America, Japan, Europe, India and China will continue to depend primarily on oil to meet their existing economic demands along with their desire for growth. Mr. Gregor gives a good review of why America and many other nations need growth. In a nutshell, we need economic growth because we’re in debt above and beyond our eyeballs. We borrowed too much money on the assumption that our economy would continue to grow. The only way we can avoid bankruptcy and still provide a comfortable life for the majority of our citizens is to keep on growing, at a rate of at least 3% per year. As to India, China and the other developing nations, they need growth to continue bringing their populations out of the Middle Ages.<\/p>\n

And unfortunately, oil production doesn’t seem to be growing at all anymore. As you can see, Mr. Gregor’s chart shows the following: From 2002 to 2005, oil production per day increased 9.7% (about 3% per year). From 2005 thru 2011 (projected), the production rate has bounced around; however, the trend over the past 6 years is basically flat-line. <\/p>\n

As to oil prices, they started going up in 2003 and increased faster and faster thru 2008. Price increases were probably slowed at first by increasing oil production thru 2005, then buffered for another year or so by draw-down of reserves. But those reserves were low by 2007, and thus we see that big spike-up in oil prices in 2008. They then crash in 2009 with the big recession (when world gdp contracted by 2%), but immediately started clawing their way up again, quite rapidly. The latest world gdp projections for 2011 are 3.9%, and you can see what that is doing to prices given the mostly static oil output.<\/p>\n

So, unless oil output ramps up significantly in 2012 and keeps on going up over the decade, oil prices are going to increase quite a bit, placing a huge strain on the industrial economies, especially on the mature economies and those supporting big debt burdens. Europe is now facing that crisis, and America is certainly next in line.<\/p>\n

About the only thing I see that can get us thru the next 7 or 8 years is the big expansion in natural gas production, which has stabilized and even driven down energy costs from using gas. If this holds up, you will see more and more uses made of natural gas, including power generating plants and trains, trucks and buses; maybe even autos, at some point. Buying a car that runs on compressed natural gas seems crazy now, but might make a lot more sense when gasoline hits $10 a gallon.<\/p>\n

But of course, natural gas has become a prime target for environmentalists because of the problems with “fracking”, the newest way of recovering gas from shale formations that were once unusable. I’ve followed the arguments for and against how the big energy companies are using hydro-fracturing gas well techniques, and whether these poison water supplies and otherwise pollute the land. <\/p>\n

Not surprisingly, I see fault on the part of both industry and the activists. The environmentalists and their sympathizers in big media (including the increasingly partisan New York Times) are screaming a bit too loudly about fracking. They make it sound like a huge disaster in progress, not considering that fracking has been going on for at least 4 years now and a lot of places are not being despoiled by all the new gas wells. HOWEVER, the energy industry is clearly not being candid either, and is trying to deny that fracking has had negative consequences in some places (including the recent find in Wyoming that toxic fracking chemicals have reached groundwater supplies near one well site, something the industry said could not happen). <\/p>\n

The bottom line, as I see it, is that we need the gas. Really bad things will happen to the USA if we stop all fracking. But the energy companies and state and federal government agencies need to spend what is needed to keep fracking pollution as minimal as possible; and when it happens, identify it as quickly as possible and protect or indemnify all potential victims. Even if that increases natural gas prices by 15 or 20 percent, the gas will still help to hold the US economy together in the face of $200 per barrel oil. <\/p>\n

The environmentalists, politicians, big media, government regulators, and corporate executives involved in natural gas had better stop the current blame game and the “me first”, get-away-with-whatever-you-can plan of attack. We desperately need a new script here so as to keep the whole economy from tanking; a script of patriotic cooperation and reasonableness. Actually, that’s an old script, something akin to what got the USA thru World War 2 and the Cold War during the 1950s. Too bad that we’ve forgotten how that worked!!<\/p>\n","protected":false},"excerpt":{"rendered":"

I like charts. So I’d like to share a good one that I saw recently regarding world crude oil output. It was part of an interesting and somewhat troubling article on Mr. Gregor’s web site about energy production and standards of living. Here’s my update of his chart, which adds oil prices for comparison purposes […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13,7],"tags":[],"_links":{"self":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts\/2488"}],"collection":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2488"}],"version-history":[{"count":6,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts\/2488\/revisions"}],"predecessor-version":[{"id":2493,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=\/wp\/v2\/posts\/2488\/revisions\/2493"}],"wp:attachment":[{"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2488"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2488"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jimgworld.com\/blog1\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2488"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}