Tag: energy

I turned 18 the same year of the Arab oil embargo. Oil prices went way up and we thought the age of inexpensive energy was gone forever. What an unexpected change! The technology of fracking today has essentially created new energy that will last my lifetime and that of my children. And the natural gas is much cleaner than the coal or oil it replaces, a gift from God, with an assist from a stubborn American.

George Mitchell graduated from the Texas A&M as a petroleum engineer. His father was an illiterate Greek goat herder who had the good sense to move to America. George was so poor that he was almost kicked out of school for non-payment of tuition. One of his professors told him that if he wanted to drive a Chevy, he should work for Humble Oil (later Exxon) but if he wanted to drive a Cadillac, he should go into business for himself. George saw himself as more a Cadillac type of guy.

In 1982, Mitchell Energy was in danger of not having enough gas to supply its clients. In those days, experts thought gas would soon run out. Mitchell looked for new sources. He knew there was a lot of gas trapped in the Barrett shale in Texas, but nobody could get it out at a price anybody could pay. He invested $6million and had to put up with twenty years of ridicule from his friends for throwing money away on something that would not work.

It wasn’t until 1998 that Mitchell came up with a permutation of hydraulic fracturing that worked. (Fracking was not a new technology; it just had not been applied in this particular way before.) The way was open to the bright, happy future we now see before us.
Mitchell lived to see his dream work. He is still alive, now 93 years old.

You never know what’s going to work. Mitchell could have ended up wrong and ridiculed, as many dreamers do. Most big ideas fail. That is why we need lots of options and try lots of things.

Of course, this is not the work of only one man. Lots of researchers, investors and workers were involved. (BTW – Mitchell “gave back” contributing $44.5 million to A&M and $159 million to universities and research organizations.) Government provided incentives to unconventional energy. But I wonder if it would have happened w/o Mitchell. There is no such thing as destiny. Things do not have to happen the way they do. Fracking could have remained a “stupid and impractical” idea. That is what most experts thought at the time.

After the fact lots of things look obvious, but they could have gone other ways. There are myriad examples of people sitting on great opportunities w/o using them, ever. So thank you George. Well done.

I continue to be amazed at how different the energy future is today than it looked only a few years ago. The U.S. could soon become a net exporter of energy and we will almost certainly be the world’s biggest oil & gas producer by 2020. There is even good environmental news in this mix. Our CO2 emissions are dropping. We are beating all those people who gave us a hard time about rejecting Kyoto and doing it with none of the pain they told us we would have to accept.

Just about nobody predicted this happy outcome. (If you claim that you did, you must be very rich by now and if you are not you are lying.) Back in 2000, experts told us that we had around 11 years of natural gas reserves if we continued to use it at the current rate. Now we have a couple centuries of the stuff. There is no such thing as peak oil or peak gas except as a theoretical construction as useful as the number of angels that can dance on a pin head. .

The energy center of gravity is moving to the Americas. I look forward to the day, not far off, when a big Middle Eastern oil producer threatens our energy supply and we tell him to go F himself. I already take pleasure in the disorder and confusion of OPEC.

Americans are lucky people. It has been said that there was a special providence for drunkards, fools, and the United States of America. Maybe so. I have found that when people are especially lucky (or unlucky) over an extended period of time, it usually has something to do with their attitudes or behaviors. This energy bonanza is a good example. Although there are plenty of naysayers even in the U.S., Americans generally embrace the progress. We are “lucky” because we are flexible and take advantage of unexpected opportunities. May this national characteristic never change.

This is an unbelievably good situation. All we need do to take advantage of this is to say “yes” and ignore the troglodytes and luddites who want to proclaim the anti-scientific “precautionary principle.”

BTW – speaking of anti-scientific activities, did you hear about the pinheads in Italy who sentenced six scientists to prison terms for not predicting a deadly earthquake? You can rest assured that behavior like this makes you unlucky.

Mostly as a result of the inexpensive American natural gas, U.S. CO2 emissions dropped to 1992 levels. We are also driving less. We reached “peak gasoline”in 2006 and from now on will use less. See the chart below.  I wrote about this here, here & here, among other places.

The interesting thing is that the U.S. is now the world leader in reducing emissions w/o those muscular measures called for in Kyoto. We are doing better than everybody else because of market forces. They really do work also in environmentalism.  

This is not really new news, but here probably is the first place you are reading about this. Back when the U.S. was the “word’s bigger polluter” we had updates every day.

There was an interesting paragraph in the report of the drop. Bold italic are mine. “Many of the world’s leading climate scientists didn’t see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide, a greenhouse gas that traps heat in the atmosphere.” 

Those international experts who claimed that the U.S. “had no plan” just don’t understand how planning works. We have the most superb, sublime and subtle planning mechanism in the world – the free market – and we have the we have the worlds most intelligent, involved and imaginative planners too – the American people. That is why we always beat the centralized planners in practice, if not in theory. 

One more thing from the AP article – “How much further the shift from coal to natural gas can go is unclear. Bentek says that power companies plan to retire 175 coal-fired plants over the next five years. That could bring coal’s CO2 emissions down to 1980 levels. “

We have achieved in environmentalism much more than I dreamed of when I was a bit of a radical environmentalist in the 1970s. We exceeded all the predictions. If anyone had told me back then of the U.S. in 2012, I would not have believed them. I was similiarly pleasantly surprised by how fast we brought down “acid rain” or closed the “ozone hole”. Now we are doing the same with CO2. It is easy to underestimate the imagination and power of freedom. I used to read the writings of the socialists of the early part of the last century. They made bold predictions about how good things could be if we abandoned the free market and went with planning. We have greatly exceeded their slow-moving dreams. We have the best planning system, even if it is too hard for some dreamers to understand.

The U.S. has been criticized for not ratifying the Kyoto Treaty to limit greenhouse gas emissions. Yet according to the latest International Energy Agency (IEA) report CO2 emissions in the United States in 2011 fell by 92 Mt, or 1.7% … US emissions have now fallen by 430 Mt (7.7%) since 2006, the largest reduction of all countries or regions.

One of the biggest reasons for the relative the drop is the widespread substitution of cleaner natural gas for coal and oil. I have written before about the vast reserves of American natural gas made available by new technologies, which is the biggest single positive energy development in my lifetime. The mild winter helped this year, but previous winters were cold. The economic downturn meant less consumption, but the downturn hit our European friends harder, and their emissions increased, evidently w/o regard for their signing of the protocols.

Actually the facts are a little worse than that and demonstrate the unexpected results of rules aimed at making things greener. Some of our European friends are resisting the use of natural gas widely available on the old continent because of the same fracking techniques that are revolutionizing energy in the Americas. With gas unavailable at the very low prices we are currently enjoying in America, when harder economic times come, people turn to coal, which is still cheaper.

Germany is also trying to phase out nuclear energy and shuttered eight of its 17 reactors after the Japanese disaster in 2011. These plants had total 12.3 gigawatts (GW) of capacity. Coal will step into this breach too. How much? To put this in perspective, the increased average annual emissions are the equivalent of 2.8 million U.S. cars. German use of coal will rise 13.5% in 2012 . Ironically, carbon “caps” have served as a floor rather than a ceiling. As the recession slowed energy demand, German industries and utilities were free to increase their use of dirtier fuels essentially to compensate for the decline.

Meanwhile rising energy costs are biting German consumers. These are all self-inflicted wounds and there are fears that electricity could become a luxury in Germany. But I digress.

The bottom line is that detailed rules never can anticipate all the circumstances that could make them obsolete and even counterproductive. I doubt anybody thought that measures meant to decrease carbon use could end up encouraging its use while driving up energy prices. Meanwhile who would have suspected that the U.S. would be the country that most reduced its CO2 emissions despite (because of?) its failure to sign onto Kyoto?