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Peak Oil Is Dead - Gasoline Prices Flat to Down Long Term

Discussion in 'Energy, Environment, and Policy' started by WhiteKnight, Aug 16, 2012.

  1. WhiteKnight

    WhiteKnight _____ P85 #549 _____ Sig Red / Sig White

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    http://online.wsj.com/article/SB10001424052702303343404577514622469426012.html?mod=WSJ_Opinion_LEFTTopOpinion

    The U.S. Natural-Gas Boom Will Transform the World

    North America's massive resources are going to shift market power away from OPEC and Russia and to consuming nations.

    By JOHN DEUTCH

    Two summers ago, natural gas cost $4.50 per thousand cubic feet, which was less than half what it had cost two summers earlier. Today the price is under $2.50, as unconventional natural gas production has increased to 20% of domestic supply from 5% in 2008, with 40% anticipated by 2020.

    Meanwhile, North Dakota's Bakken/Three Rivers field produces 600,000 barrels a day of unconventional oil—up from 250,000 barrels in 2010 and less than half that in 2008—making that state the second-largest U.S. oil producer. With such changes happening so fast, it's timely to consider their implications.

    A United States hopelessly dependent on imported oil and natural gas is a thing of the past. Most energy experts now project that North America will have the capacity to be a net exporter of oil and natural gas by the end of this decade.
    This new production depends on advances in directional drilling and hydraulic fracturing, the process that injects enormous amounts of fluid—90% water, nearly 10% sand, and less than 1% chemical additives—into the ground below the water table, typically at depths greater than one kilometer, and laterally over distances of several kilometers.

    To be sure, a North America independent of oil imports still isn't energy independent. The U.S. economy will continue to be subject to world oil prices, and supply disruptions in the world will still create price spikes. Close allies such as Germany and Japan will remain significantly dependent on oil imports from unstable regions, and their dependence will constrain U.S. foreign-policy choices.

    Still, the security benefit of North America's new oil is significant. While this production will not be cheaper than conventional production from Saudi Arabia, the magnitude of North America's economically and technically recoverable oil resources (at, say, $70 per barrel) is about 45 billion barrels, or 10% of the total North American oil in place.

    This would exceed the magnitude available from the Middle East.
    Over time, it would yield a shift in global oil-market power from the traditional producers (OPEC, Russia) to consumers (such as Germany, Eastern Europe, China and India) that will benefit from the more diverse oil supply.

    This revolution is not restricted to North America. Foreign activity lags behind, but during the past two years there has seen a surge of interest in shale and oil reserves believed to be in Europe (Britain, France, Poland, Russia), Latin America (Argentina, Brazil) and Asia (China, Kazakhstan, India). World-wide oil supply is likely to surge, accommodating demand growth and replacing depletion—so that significant declines in prices are possible.

    Demand for natural gas has not kept up with the phenomenal growth in supply. That's indicated by the extremely low current price and the thousands of recently developed unconventional natural gas wells that are shut-in. Unconventional natural gas production from "dry" wells (those that don't produce useful petroleum liquid products) is at a virtual standstill.

    This signals that some recovery in North American natural gas prices is likely—to the range of $4 per thousand cubic feet, perhaps—which would be welcomed by producers. Consumers who heat their homes with gas, and chemical companies and other manufacturers who rely on this raw material for producing petrochemical and polymers, should enjoy several decades of abundant supply.

    It will take time for the demand for gas to grow, and it is uncertain how rapidly and how far it will. Incremental gas production will initially go the power sector, displacing coal-generating plants. Natural gas will offer the cheapest way to produce electricity, at six cents per kilowatt-hour—more than 20% lower than new coal, nuclear or most renewable alternatives. Because of its low price, some natural gas will also be used to extract crude from Canada's oil sands. But the main question will be how much natural gas displaces higher-priced gasoline and alcohol fuels in transportation.

    The historic ratio between the cost of natural gas and oil on an energy-equivalent basis—one to six—means that there is a tremendous economic incentive to develop new natural gas technologies for purposes including compressed natural gas vehicles, gas-to-liquid conversion, and methanol that could be used as a transportation fuel or blended into synthetic diesel fuel.

    Then there's the potential for natural-gas exports from America, which is suggested by the massive discrepancy in prices between North America ($2.50-$4 per thousand cubic feet), Europe ($10) and Asia ($15). The U.S. government is likely to grant several export licenses for liquefied natural gas (LNG), but this promises to be politically controversial. If the U.S. takes a protectionist position, the North American gas market's integration assures that LNG will be exported from Canada and Mexico.

    A critical point is the danger posed by public objections to hydraulic fracturing because of its environmental impact. Hundreds of thousands of wells will be drilled across the country, including in states unfamiliar with oil and gas activities, such as New York, Pennsylvania and Ohio.

    The impact on air and water quality is significant. Above ground, the equipment needed to power drilling, fracturing and perforation emits pollutants that impair visibility and air quality. Production also yields significant amounts of water containing salts and dissolved organic compounds, which cannot be released into the environment. The venting of natural gas is a particular concern since methane is a potent greenhouse gas.

    It's commonly said that the environmental impact is manageable with industry best practices and strong, independent regulation. Unfortunately, I do not yet see actions in the field that justify these statements of good intentions. Cooperation between the Environmental Protection Agency and state regulatory agencies, which share supervisory responsibility for oil and gas drilling on private lands, is strikingly contentious. Comprehensive air and water quality regulations are not set.

    Industry should be commended for its initiatives to assure the public about its attention to environmental concerns, but industry leaders can go further. They should adopt a policy of measuring key environmental indicators such as water use and water composition throughout the process—from initial acquisition to retention in lined surface ponds or tanks, disposition in deep waste water wells, re-use in subsequent fracturing operations, or treatment. The key is to gather performance data from the field, publicly disclose these measurements, and commit to continuous improvement as this industry grows.

    Mr. Deutch, a professor at MIT, has served as undersecretary of energy, deputy secretary of defense, and director of the CIA. He serves on the board of directors of Cheniere Energy and previously sat on the boards of Schlumberger, CMS Energy and Citigroup.
     
  2. Eberhard

    Eberhard #421 Model S #S32

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    go on dreaming - illusions - magic

    but all gas and oil supply will be ended one day - sooner, if we don't care, later - if we move as soon as possible to renewable energy - it has to be done sooner or later anyway - why not sooner?
     
  3. Jaff

    Jaff Active Member

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    Honestly Eberhard, I don't know except to propose that sometimes I think that some politicians and professors that may have little to nil work experience in the private sector tend to view the world through the proverbial rose coloured glasses...


     
  4. Robert.Boston

    Robert.Boston Model S VIN P01536

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    The bulk of Model Ss are going to "run" on natural gas, at least for now. Along the entire West Coast and on the East Coast north of the Carolinas, natural gas is the marginal fuel in the vast number of hours. So, low natural gas prices == low electricity prices. The key difference is that EVs aren't constrained to use natural gas, unlike all the transportation options outlined by Prof. Deutch.

    It's worthwhile to underscore that Deutch is on the board of Cheniere, which is setting itself up to be the first exporter of LNG in the US. Cheniere needs to overcome the political headwinds:
    (a) why should we risk environmental damage from fracking to extract natural gas to sell to the Germans?
    (b) why should we export raw natural resources rather than use those resources to create value-added products like fertilizers and plastics?
    (c) why should we export resources today that we will need in the future?

    Deutch's article subtly plays to these three questions by (a) asserting that fracking is safe, (b) that our foreign policy won't be constrained if our allies buy their oil & gas from the US instead of the Middle East and (c) there's enough oil & gas for a long, long time.

    I'm not convinced.
     
  5. Brian H

    Brian H Banned

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    Re:
    (a)Needs to be deconstructed. Environmental "damage" is tiny compared to most other energy sources, from hydro (flooded valleys, usually the very best valleys), to normal (much shallower) drilling, to solar and wind (which remove large swathes of real estate from other uses, notably including tourism--see Wales and Scotland for egregious examples). Further, new tech ("GasFrac") uses gelled butane from the well itself instead of water, so no drain of water resources, nor injection underground, nor cleanup of "used" water, is actually necessary.
    (b) Oil is almost entirely fungible short- and long-term, Gas in the medium- and long-term. Reduced N.A. imports leave that equivalent supply looking for customers elsewhere. Who sells directly to whom is almost just show. Russia can, e.g., threaten to cut off EU gas--at huge cost to itself, and risking driving its clients to alternate sources, exactly as is now happening.
    (c) The GAO has now assessed the east-slope Rockies recoverable (with known technology) tight oil (very high grade) at about 1.5 trillion bbl, equal to the rest of the world's supply. That's on fed lands, hence not accessible under the current Administration. But it will be. And frac gas estimates are now measured in centuries. Estimates and exploration are likely to flatten out for a long time, now, as anything beyond about 40 yrs. reserves is economically irrelevant, and makes unjustifiable assumptions about market conditions and drilling and other technology.

    The concept of "preserving resources for future generations" is pretty much manipulative emotive bumpf. List, please, all the currently important mineral "resources" earlier times could have consciously refrained from using up that we are now short of.

    There Is No Shortage of Stuff | Musings from the Chiefio

    There is no energy shortage | Musings from the Chiefio
     
  6. Zythryn

    Zythryn MS 70D, MX 90D

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    (only half tongue in cheek) Yes, I so miss being able to use the real estate of my roof. I regret covering much of it up with solar panels when instead I could be using it to more effectively heat my attic:p
     
  7. JRP3

    JRP3 Hyperactive Member

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    GasFrac is interesting but in very limited use as far as I know. As for long term reserves, well, hard to say:
    Industry Insiders Call Shale Gas a Ponzi Scheme, Invoke Enron -- NYT Report - Forbes
     
  8. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    Ah, the monkey's view.

    Resources don't run out, but they get expensive. It's selfish waste that the preservationists are complaining about. We could pretty much run the country using renewables, recycled resources and organic farming, but we don't. The objection is ... cost. So if high cost in the future isn't a problem, why are there so many cost-based objections to making changes now?
     
  9. Discoducky

    Discoducky Active Member

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    We hit $4/gallon in Seattle again with the refinery fire. Wonder how high it goes when Iran makes it move?

    gas prices.JPG
     
  10. smorgasbord

    smorgasbord Active Member

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    Anyone who has been buying lumber for the past 30 years knows that you can't get the quality you used to get, whether you're talking old-growth redwood, true mahogany, or lignum vitae (which used to be important for things like ship bearings).

    Posting links to someone's blog is unconvincing, to say the least.

    Oh, you mean the Republican reports? You can see them here and here. Note the first URL is "Republican" specific, and the second report has the tagline "Report from the Republican Committee on Natural Resources Staff." The first link has this to say:

    It also says that the potential future development of oil shale is at least 15-20 years away.

    The second concludes that these are "Simple Choices," which just isn't true.
     
  11. William13

    William13 Member

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    Shale has been 15-20 years away since the 1973 oil embargo. The same is true of fusion.
     
  12. Mookuh

    Mookuh Member

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  13. TEG

    TEG TMC Moderator

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  14. Doug_G

    Doug_G Lead Moderator

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    Sure, there's lots more oil out there if you're willing to pay enough money, use astonishing amounts of water, and can manage the various environmental impacts.

    Oil shale economics - Wikipedia, the free encyclopedia

    I doubt the situation is anywhere near as rosy as the WSJ article suggests. At the same time dire predictions of world economic collapse due to oil depletion aren't going to happen, either.

    All that said, the much higher cost of energy in the future will have a significant economic impact, as will the growing environmental impact.
     
  15. Norbert

    Norbert TSLA will win

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    However that compares to a US consumption of 19,150,000 barrels a day (2010). So while I'm not familiar with calculations like this, I don't see yet how these are supposed to be large numbers.

    https://www.cia.gov/library/publications/the-world-factbook/fields/2174.html

    19.15 million barrels a day is about 7 billion barrels per year. So 45 billion barrels would last only about 6 and a half years (when used for US consumption only). Am I missing zeroes somewhere, or missing something else?
     
  16. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Oil & gas in country A is only fungible with oil & gas in country B if there is:

    • Secure transportation -- are pirates going to hijack the freighters? or enemy navies torpedo them?
    • Open trade -- are supplies going to be held by countries willing to supply us in the future?
    • Commitments not to impose tariffs -- are monopolies going to impose explicit or implicit tariffs, a la OPEC?
    • Secure supply -- will terrorists or hostile governments seize/destroy production and/or transportation facilities?
    There's a reason why energy independence is a real concern in the Pentagon and the State Department.
     
  17. WhiteKnight

    WhiteKnight _____ P85 #549 _____ Sig Red / Sig White

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  18. Doug_G

    Doug_G Lead Moderator

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    Tight oil: Will it change the world? | Energy | News | Financial Post

    Nothing is ever simple...
     
  19. Vger

    Vger Active Member

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    Indeed. And it is telling that these cautionary notes, while included in the article, where buried at its end. Actually, I see all this as a great tragedy set to unfold. This very short term production will hold oil prices down just long enough to economically disrupt our momentum toward alternative energy. This, in turn, will hasten our headlong rush toward a tipping point with climate change beyond which catastrophic damage to quality of life and the economy will be inevitable.

    Why is it that people can bounce their grandchildren on their knee gleefully, and then go "invest" in such disastrous short-term thinking, that will doom those tiny lives to a non-future of droughts, floods, fire, and famine.

    Shameful, I say.
     
  20. EVNow

    EVNow Active Member

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    Not in the PNW.
     

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