How Government Restrictions on Domestic Drilling Drive Up Gas Prices
The term “mineral estate” refers to the ownership of minerals, including oil and natural gas, under the Earth’s surface. The federal mineral estate contains 2.46 billion acres made up of 1.76 billion acres in the Outer Continental Shelf (the ocean floors off America’s coasts) and 700 million onshore subsurface acres.
The state and private land mineral estate is around 1.5 billion acres by comparison. Even though the federal estate is almost 1 billion acres larger than the state and private mineral estate, most of our oil and natural gas comes from private and state lands. For perspective, one billion acres is about six times the size of Texas.
The United States simply doesn’t allow the energy potential from this vast federal estate to be unleashed. Historically, oil from federal lands (onshore and offshore) was consistently under 20% of total U.S. production until the late 1990s. Then, production percentages increased (primarily offshore) to over 30% in the early 2000s and reached a high point in 2009, coincident with declining production on non-federal lands in Alaska and other states.
But the numbers have come back down. According to the Department of Interior and the Energy Information Administration, federal offshore oil production was only about 15% of total U.S. oil production in 2020 and federal onshore production was only about 8%.
These low numbers are expected to get much worse for American consumers because of President Joe Biden’s moratorium that has essentially stopped most new leasing on lands and waters owned by U.S. taxpayers. They will also decline because of the increasing fees, rentals, and royalties—plus regulations—that he has imposed on oil and gas producers through executive actions and that Congress has imposed through the so-called Inflation Reduction Act.
The fact is, trying to produce energy from federal lands is unnecessarily hard, which is why the standout states that have led to the energy revolution—Texas, North Dakota, and Pennsylvania—have low federal land ownership of 1.4%, 4.2%, and 2.5%, respectively.
The impacts of who owns and manages lands are astounding. For example, from 2009 through 2013, oil production from state and private lands increased 61%, but on lands controlled by the federal government, oil production dropped 6%.
States and private landowners aren’t required by distant landlords and “green” interest groups based in Washington or Manhattan to entertain every last objection their lawyers can conjure up to stop investment projects. Instead, they negotiate the terms and conditions of leases, reclamation, and environmental protection with the knowledge that it is their land, their water, and their air that will be affected.
Apparently, states and landowners agree that mutually beneficial contracts are superior to the federal government’s Byzantine rules and regulations and all their second-guessing, armchair quarterbacking, and denials through delays.
Permitting
Another way government impacts gas prices is through the permitting of pipelines necessary to transport energy in the most efficient, economic, and environmentally sound way. America has, literally, millions of miles of energy pipelines, out of sight and out of danger from surface accidents.
While not connected to the price of gasoline at the pump, it is worth noting that the natural gas system alone has over 3 million miles. Petroleum and petroleum product pipelines account for about another 225,000 miles. The permitting of these pipelines keeps surface transportation incidents with trucks and trains to a minimum, reduces environmental impacts, and is the most economic means of transport.
Denying construction permits simply forces products onto already burdened surface transportation systems, as is the case with Biden’s cancellation of the Keystone XL pipeline cross-border permit on his first day in office. The pipeline would have allowed nearly 1 million barrels per day of Canadian and North Dakota oil to economically be transported to refiners in the Gulf Coast, which would have induced Canada to invest more in the development of its enormous oil sands reserves.
Alberta Premier Jason Kenney stated his province could provide 1 million barrels per day of additional oil to the U.S. within two years if a pipeline were allowed to be built.
Instead of draining our Strategic Petroleum Reserve of 1 million barrels per day of emergency supplies, as the Biden administration has been doing in an attempt to temporarily reduce gas prices, a pipeline would be a strategic investment with one of our closest allies and would benefit both sides of the border. It would also ensure decades of additional safe and secure energy supplies equal to 5% of our current oil use.
Signals From the Government
Often those who oppose the use of oil and gas—and who also recognize that the more of both we produce in North America, the lower their prices will be—will argue that each individual project won’t make a difference or that they will be too long in coming. That’s simply nonsense and is proven wrong by historical facts and the evidence.
In July 2008, prior to the horizontal drilling/hydraulic fracturing revolution that more than doubled U.S. oil production and gave us energy self-sufficiency in 2019, oil was approaching $150 per barrel under President George W. Bush. On July 14, 2008, Bush announced the repeal of a decades-old moratorium on drilling on most of the Outer Continental Shelf first put in place by his father.
Even though any oil leased, discovered, and produced wouldn’t come to market until 10 years in the future, owing to rigorous federal laws and regulations, the price of oil dropped $9.36 immediately upon his announcement, to $136 per barrel.
By the way, none of those areas that were opened for leasing have been leased to date and are still on hold pending actions by the federal government to lease them.
Oil and natural gas are purchased in markets that look to signals from the government about which way the pendulum is swinging in its attitude about future supplies. If the government wants more oil production and takes steps to make it happen domestically, prices will fall. If, on the other hand, the government seeks to regulate, legislate, and increase costs on the domestic production of energy, prices will rise.
Conclusion
The federal government plays a huge hand in the price families and businesses pay for their energy, including what they pay at the pump.
When it comes to energy, more energy means lower prices. Imagine if the federal government embraced increased energy production on the massive federal estate and a larger pipeline system that could more quickly, efficiently, and economically transport it to refineries and its final destinations in an environmentally friendly way. The benefits in terms of lower prices would be massive.
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Energy crisis pushes German industry to the brink
German businesses are growing concerned that without an energy price cap, a wave of insolvencies could wash over the country in coming weeks and disrupt the supply chains serving Germany’s largest industrial sectors.
Starved of the abundant Russian energy that long fired the nation’s industrial engine, German businesses have already been curtailing production and halting investments. Business and consumer confidence is tumbling, approaching the lows reached during the 2008 global financial crisis. Germany’s government is now drawing up plans to cap the price of electricity and gas, officials said this week, acting in case a similar proposal by the European Union isn’t enacted swiftly.
Long Europe’s growth engine and its manufacturing nerve center, Germany’s economy has become one of the most vulnerable on the continent. It is likely to grow by just 1.2% this year and shrink by 0.7% next year, by far the worst performance among major industrial economies, according to a forecast published this week by the Organization for Economic Cooperation and Development, a Paris-based think tank. Economists at Deutsche Bank expect a 3.5% contraction next year, driven by shrinking private consumption, investment and net exports.
Four heavyweight German think tanks slashed their growth forecasts for the German economy on Thursday, blaming the energy crisis. They now expect an economic contraction of 0.4% next year, after forecasting growth of 3.1% last spring, according to a twice-yearly report prepared for the federal government. While gas shortages should ease somewhat over time, prices are likely to remain well above the precrisis level, the report warned. “This means a permanent loss of prosperity for Germany.”
More than half of German small and midsize companies now worry that the energy crisis could put them out of business, up from 42% last month, according to a survey published Thursday by the Federal Association of Medium-Sized Businesses, a trade group. “The situation is growing more threatening from day to day,” said the group’s chairman, Markus Jerger.
After initially resisting the decision, Germany’s government is now drawing up plans to cap the price of electricity and gas, officials said this week. Business lobbies have warned that an insolvency wave could be just weeks away and that it could start a chain reaction of business failures. Volkswagen AG, Germany’s flagship car maker, said last week it was concerned about its supply chain because of possible gas shortages this winter.
“I’m very worried... Affordable energy is the foundation of the entire German industry,” says Max Jankowsky, chief executive of GL Giesserei Loessnitz GmbH, a 173-year-old foundry in the east German state of Saxony.
The company sits at the heart of Germany’s large auto industry, which employs around 800,000 people and exports about three-quarters of what it produces. Its clients include BMW AG, Daimler AG and Volkswagen.
Mr. Jankowsky used to pay 100 euros, equivalent to $96, each time he switched on his gas-powered industrial furnace which melts metal to produce the machines that mold car bodies. Today, it costs Mr. Jankowsky about €3,000 each time, a 30-fold increase. To save money, he now turns on the furnace twice a week instead of three times.
Mr. Jankowsky expects his annual electricity bill to increase by €2 million next year, an enormous burden for a family-run firm with €20 million in annual sales. After his previous contract ran out, he started buying gas on the spot market, paying vastly higher prices.
“Next year will be decisive. Supply chains could be reoriented toward countries with cheaper energy,” Mr. Jankowsky says. His customers are currently accepting large price increases, but he expects demand to decline next year.
Even so, he is skeptical of the German government’s plans to subsidize energy use, which he worries will keep prices high while burdening future generations.
“The economy needs to work without subsidies, we always complained about those in China,” he says. He wants the government to produce a road map for guaranteeing supplies of affordable energy. “I don’t see a concept in the federal government,” he says.
One in 10 German auto companies have reduced production as a result of high energy costs, and another third are considering doing so, according to a survey this month by the German Association of the Automotive Industry, a trade group. More than half of companies have canceled or postponed planned investments and nearly a quarter want to shift investments overseas, the trade group says.
Output in Germany’s manufacturing industry is likely to decline by 2.5% this year and by roughly 5% next year, according to Deutsche Bank analysts. Exports, a cornerstone of the country’s recent prosperity, are languishing below prepandemic levels after adjusting for inflation.
With energy prices likely to remain structurally high, only some of the German production facilities priced out of the market are likely to come back on stream, the analysts said. That is likely to reduce the country’s long-term growth potential, which is already under pressure from an aging workforce.
“The current energy-cost and thus inflation crisis is not only a cyclical phenomenon but has a major structural component as well, requiring significant government intervention to prevent serious medium- and long-term damage to Germany’s economic prospects,” says Timo Klein, an economist at S&P Global Market Intelligence.
In addition to sparking an energy crisis, Russia’s war in Ukraine has shaken confidence in a German export model that has prospered by forging deep links with autocratic regimes with fast-growing economies, especially China.
Government officials are now concerned that Germany’s economic dependence on China—it is the country’s largest trade partner and the biggest single market for many German companies—would translate into an even bigger shock for the German economy should Beijing close ranks with Moscow against the West.
“If I see the disruption of the global economy caused by the war of two economic dwarfs, Russia and Ukraine, I am afraid what a [tussle] between China and Taiwan and the U.S…. would cause to the global economy,” says Oliver Betz, managing director of systec Automotive GmbH, an auto supplier based near Munich.
Mr. Betz has roughly 160 staff in China and makes about half of his annual global sales there—about 250 million yuan, equivalent to $35 million. He says he wouldn’t invest in another company in China due to heightened geopolitical risks. Instead he is trying to expand in new markets including India and the U.S. He thinks the transition will be difficult because the markets are very different.
“It will take a long time to substantially replace our Chinese business,” Mr. Betz says.
For now, German unemployment remains low, but that could change as high inflation erodes household spending, economists say. The nation’s unemployment rate edged up to 5.5% in August, largely due to an influx of Ukrainian refugees, according to the federal labor agency. German businesses are likely to furlough some two million staff over the coming months as the economy shrinks, according to Deutsche Bank.
Borrowing costs are rising as the European Central Bank aggressively raises interest rates to combat high inflation.
Even so, Germany’s inflation rate is likely to decline only slightly next year, to 7.6%, still more than double the expected rate in the U.S., according to the OECD.
Thilmann Brot GmbH, which operates 20 bakeries in western Germany, filed for insolvency in mid-September. The family business was unable to pass on increased energy and raw-material costs as customers switched to cheaper alternatives, according to Jens Lieser, the company’s provisional insolvency administrator.
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British Labour’s Green Energy Plan Is To Double Down On More Unreliables
The key policy unveiled by Labour is to replace one unrealistic objective with another. Boris Johnson’s aim to have a carbon-free energy grid by 2035 has been brought forward to 2030 by Sir Keir Starmer.
This is to be achieved by quadrupling offshore wind farms, doubling the number on land, and tripling the production of solar power, all within six years, assuming an election in 2024 that Labour wins.
Sir Keir said this would deliver a new era of economic growth and permanently lower energy bills by turning the UK into a green “superpower”.
Countries like China and India have committed to net zero but not for decades – arguing their economies are at different stages from the West.
America has lowered its emissions [thanks to natural gas] and is working on many of the new ‘green’ technologies, but has a target of 2050.
For as long as the biggest emitters are still pumping out CO2, the UK’s contribution is minuscule.
Sir Keir said the aim was to make the UK self-sufficient in electricity by the end of the decade but this is simply not possible.
We will need to continue importing gas for electricity long after 2030 because renewables will not produce enough energy, not least on windless, cloudy days.
Moreover, the way the energy market is currently constructed, electricity from renewables is priced at the same high level as gas.
This needs to change.
Labour’s plan is essentially to make the country more dependent on imported gas, not less, certainly in the medium term.
Using our own resources, including shale, is a better approach.
https://principia-scientific.com/labours-green-energy-plan-is-to-double-down-on-more-unreliables/
************************************************Europeans increasingly burning trees for energy
European consumers and businesses are increasingly turning to biomass energy sources, including wood-derived fuels for heating and cooling, as the energy crisis continues to wreak havoc across the continent.
The shift to biomass energy, which already accounts for the majority of renewable energy generated in the European Union (EU), has come as the Ukraine crisis disrupts energy supplies and alternate forms of energy production fall short, according to Bioenergy Europe, a leading industry group based in Belgium.
The group said Europe's biomass energy is largely sourced domestically while fossil fuels and green energy technologies are mainly imported.
Amid the crisis, Europeans have been forced to take drastic measures to conserve energy and keep bills low while governments have imposed rationing rules and introduced relief programs.
"During this period of increasing uncertainty due to the war in Ukraine and the ongoing crisis which highlights the EU’s reliance on foreign fossil fuels, bioenergy stands as a clear counterpoint," Maija Lepistö, a spokesperson for Bioenergy Europe, told FOX Business. "Over 96% of the biomass used for bioenergy is being produced domestically within the EU and the rest coming from trusted streams."
Prior to the current crisis, biomass energy accounted for 57.4% of total renewable energy production and nearly 12% of total energy consumed in the EU. Forestry products — such as logging residues, wood-processing residues, fuel wood and wood pellets — are the bloc's main source of biomass for energy, according to the EU's Joint Research Center.
Lepistö said more consumers are turning to biomass energy thanks to it being a "local and affordable" alternative to traditional sources of energy.
"The current energy crisis in Europe has not placed the supply of biomass raw material at risk," she told FOX Business. "Unlike fossil fuels with their high import rates and other renewables supplying their technology from outside the EU, biomass has the benefit of being locally sourced, produced and dispatched as well as supply of the necessary equipment."
"Just as with other markets, the ongoing war is affecting the bioenergy sector," she added. "However, the EU’s internal market can continue supplying bioenergy to the end users, and more businesses and citizens are turning to this renewable, local and affordable solution, which has more potential to grow and (reinforce) the EU’s green goals."
In 2021, the EU consumed a whopping 23.1 million metric tons (MMT) of wood pellets, a year-over-year increase that can be attributed to increased German residential use and an uptick of co-firing of wood with coal in power plants in the Netherlands, according to a U.S. Department of Agriculture (USDA) report.
The report said demand in 2022 is projected to increase by another 1.2 MMT in 2022 due to even greater expansion in residential markets and increasing prices of fossil fuels.
Overall, the vast majority of biomass energy power generation in the EU is generated by the industrial sector at combined heat and power plants, Lepistö added. The remainder produces electricity and transportation fuels.
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My other blogs. Main ones below
http://dissectleft.blogspot.com (DISSECTING LEFTISM )
http://edwatch.blogspot.com (EDUCATION WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://australian-politics.blogspot.com (AUSTRALIAN POLITICS)
http://snorphty.blogspot.com/ (TONGUE-TIED)
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Jim Hansen and his twin
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