Wednesday, March 17, 2010

One Nation Over Gas: A Gasified U.S. Economy

From The Economist, an excellent article about how an unconventional glut of natural gas in America is shifting the balance of power in the world’s gas markets:

"North America now has an unforeseen surfeit of natural gas. The United States has enough gas under its soil to inspire dreams of self-sufficiency. Other parts of the world may also be sitting on lots of gas. Those in the vanguard of this global gas revolution say it will transform the battle against carbon, threaten coal’s domination of electricity generation and, by dramatically reducing the power of exporters of oil and conventional gas, turn the geopolitics of energy on its head.

A gasified American economy would have profound effects on both international politics and the battle against climate change. Displacement of oil by natural gas would strengthen a trend away from crude in rich countries, where the IEA believes demand has already peaked as a result of the recent spike in oil prices. Another consequence of the energy market’s bull run, the unearthing of vast new supplies of gas, could bring further upheaval. If the past decade was characterised by the energy-security concerns of consumers, the coming years could give even the world’s powerful oil producers reason to worry, as a subterranean revolution shifts the geopolitics of global energy supply again."

13 Comments:

At 3/17/2010 8:10 AM, Blogger PeakTrader said...

Seems a little too optimistic, at least over the intermediate-term, given electric hybrid autos are cheaper than gas powered autos.

 
At 3/17/2010 8:35 AM, Anonymous Anonymous said...

It is showing Michigan over a shale but i dont see any news of shale drilling of gas here.
On average michigan user pay about $14 or so for MCF ( incl of all taxes and charges .. I care about what goes of my pocket not the print on the bill which is confusing )

 
At 3/17/2010 9:01 AM, Blogger Jet Beagle said...

PeakTrader,

Wouldn't the electricity required for electric vehicles originate in gas-fired power plants? I agree that natural gas will replace very little gasoline as vehicle fuel for at least one decade and probably two.

 
At 3/17/2010 9:21 AM, Blogger PeakTrader said...

Jet, my statement is based just on purchasing prices of autos.

An electric hybrid auto is priced about $5,000 higher than the gasoline auto. A natural gas auto is priced about $7,000 higher than the gasoline auto.

 
At 3/17/2010 9:36 AM, Blogger PeakTrader said...

Institute for Energy Research » Petroleum (Oil) May 2009:

Today, oil meets 37 percent of US energy demand, with 70 percent directed to fuels used in transportation – gasoline, diesel and jet fuel. Another 24 percent is used in industry and manufacturing, 5 percent is used in the commercial and residential sectors, and between 1 and 2 percent is used to generate electricity.

 
At 3/17/2010 9:44 AM, Blogger PeakTrader said...

Institute for Energy Research » Natural Gas May 2009:

The most environmentally-friendly of the fossil fuels, natural gas provides 24 percent of our total energy supply and approximately 21 percent of the fuel used to generate electricity.

 
At 3/17/2010 11:48 AM, Anonymous Benny The Man said...

Terrific post.

We can declare energy independence if we want to, and perhaps should, not for economic reasons but for political-economic reasons.

Other nations, especially oil-thug states, do not honor free trade, contract law, property rights, human rights or any other niceties.

As such, they are extremely unreliable sources of energy--yet we are dependent on thug states for oil.

Happily, cars can easily run on CNG, or methanol, which is easily made from natural gas. I have even seen LPG stations in Thailand.

To top it off, scientists at UT Arlington claim they are able to convert lignite (brown coal) into oil at $30 a gallon. We have gobs of lignite too.

I share reservations about national energy programs--see ethanol, which was President Bush's energy program, and nothing more than a SOP to the Red State Socialist Empire, another farm subsidy in drag, that may actually consume as much energy as it creates. (Growing corn for fuel is not a great idea, and not a free market solution, to say the least).

The good news is that OPEC's lock on energy markets is eroding, thanks to their policy of neither safegaurding price or supply.

Scaring customers with price spikes and shortages is not a buiness model taught at Harvard, I assume. Or even Michigan-Flint.

 
At 3/17/2010 12:11 PM, Anonymous Anonymous said...

Let's remember, these changes don't depend on govt. or bureaucratic policies. Any individual or business can simply convert a gasoline engine to natural gas, and fill the tanks at home or from wherever.
Here in Mexico it is quite common.

And, I wonder if the per/mile costs would be less, since there is no transportation tax (yet) on nat'l gas???

 
At 3/17/2010 12:20 PM, Anonymous Benny The Man said...

Anon-

There are companies building CNG pumps at US stations, and I suspect Oklahoma, Utah and several other states will lead the way to CNG, if oil stays over $100 a barrel. T. Boone Pickens is involved.

see cngvehicles.net for a dealer who will sell you right now a CNG car/truck, used, for under $10k

Natural gas is a dagger pointed at the black heart of OPEC, and not a moment too soon....

 
At 3/17/2010 9:51 PM, Blogger VangelV said...

There goes the Economist again. Don't we all remember the 'Drowning in Oil' cover? The world was apparently awash with oil, and it was likely to remain that way for quite some time. Well, the Economist was far too optimistic about supply and managed to get pretty close to picking a bottom for crude.

This story is likely to be very similar. While there is a lot of natural gas in the unconventional reservoirs, their energy density is quite low. That means very high prices are needed to get a lot of the gas out of the ground and that depletion rates will be very high. If you are really positive on the sector I suggest that a much better play would be to buy shares of the drillers.

 
At 3/18/2010 12:29 AM, Blogger juandos said...

PeakTrader says: "Seems a little too optimistic, at least over the intermediate-term, given electric hybrid autos are cheaper than gas powered autos"...

Hmmm, in way are they cheaper?

Don't Be Fueled:
Gas vs. Diesel vs. Hybrid Power

 
At 3/18/2010 4:30 PM, Anonymous diz said...

It is showing Michigan over a shale but i dont see any news of shale drilling of gas here.

Michigan has the Anrtim shale, which was drilled decades ago. Is not so much a fracturing/horizontal play. Shallow low rate wells. Old school, not shale boom. Getting little hype I am aware of these days.

Someone may get around to trying new technology there and seeing what happens, I guess. Geology may not support it.


http://en.wikipedia.org/wiki/Antrim_Shale

 
At 3/19/2010 12:23 AM, Blogger juandos said...

Hey Professor Mark, did you see where continued use of oil/gas fields have been stopped and the excuse used is fraudulent?

AP story via Newsvine: Climate change cited as Mont. leases suspended

I guess I shouldn't be suprised that the judge is a Clinton apointee...

 

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