Sunday, January 19, 2020

A fracking ban would trigger a global recession

The extraction of oil and gas through the techniques of horizontal drilling and hydraulic fracturing (colloquially, “fracking”) has catapulted the United States into leadership of the world’s energy markets. Since 2007, fracking has doubled U.S. oil production and increased gas production by 60%. Instead of a major importer, America is rapidly becoming the largest exporter of oil and is expected to supply the majority of net new energy traded on global markets over the next two decades.

If the U.S. imposed a fracking ban, the supply disruption would trigger the biggest oil and natural gas price spikes in history—almost certainly by more than 200%—which would, in turn, tip the world into recession. Even the expectation that a ban could be enacted would destabilize markets. U.S. imports and the trade imbalance would soar, as would consumers’ spending on energy. To keep the lights on, America would have to nearly double the quantity of coal burned, as well as import up to 1 million barrels of oil per day for dual-fueled power plants that would lose access to natural gas.

Key Findings

1. Fracking technology has nearly doubled U.S. oil production, an increase of some 7 million barrels per day (mmbd) since 2007, as well as another 10 mmbd (in energy-equivalent terms) rise in natural gas production.[4]

The massive increase in supply from U.S. shale fields triggered a roughly 50% drop in global oil and natural gas prices.[5]
U.S. net oil imports have collapsed from 12 mmbd a decade ago to nearly zero now. Exports of crude oil have soared from zero to 3 mmbd following the 2015 legislation that revoked the ban on U.S. petroleum exports.[6]
The U.S. is expected to account for 70% of the global growth in oil supply over the next five years[7] and to supply at least half the world’s new demands for natural gas.[8]

2. A ban on fracking would eliminate 7% of world oil and 17% of world gas supply in a global commodity market where changes of even 1%–2% in the supply/demand balance trigger huge price swings.

When, in 1973, Saudi Arabia implemented an oil embargo and took some 4 mmbd off world markets (approximately 7% of the total at that time), world oil prices jumped 400% and triggered a global recession. Similarly, in 1979, the Iranian revolution took a comparable 5% of oil off world markets and prices spiked over 200%, sparking another global recession.[9]
A 200% price hike would increase U.S. consumer spending at the gas pump alone by over $100 billion a year, an average of $1,000 per household. A collateral spike in natural gas prices would also add billions of dollars in heating costs for 50% of all U.S. homes and offices.[10]
To keep the lights on, electric utilities would need to quickly replace natural gas (currently 35% of all electricity) with coal. This would mean burning an additional 400 million tons of coal a year. That would increase carbon-dioxide emissions by 300% more than the emissions eliminated by all wind and solar capacity in the United States.

3. Alternative energy sources—in particular, wind and solar—could not replace what would be lost from a ban on fracking in time to prevent massive economic and social disruptions.

Oil and gas together supply 54% of global energy, little different from a 55% share a decade ago or the 53% share forecast by the International Energy Agency for 2040. Oil alone powers 98% of all global transportation.
Wind and solar together supply 1.8% of the world’s energy, and electric vehicles have displaced 0.1% of global oil use over the past decade.
The entire world would have to increase global wind and solar installations by 500% to replace the energy that would be lost from an American fracking ban—never mind the additional energy needed to fuel global economic growth.
On the Record

"A fracking ban, regardless of motivation, is anchored in magical thinking that non-hydrocarbon energy sources could fill a massive global energy shortfall if the U.S. exited the world stage as a major supplier of oil and natural gas. Both fuels will be critical for the global economy for decades to come. The key issue is not whether wind and solar can supply more energy—they can and will—but whether a future American administration would reverse the progress of the last decade in lowering energy prices and enhancing geopolitical stability."

—Mark Mills, senior fellow, Manhattan Institute

Some skeptics caution against overreacting to electioneering rhetoric, citing the practical limits of presidential authority to implement a ban on fracking.[11] But “elections have consequences,” executive orders have an impact, and few industries have been subjected to such consistent attack and misinformation. It might be hard to imagine serious proposals to ban, say, farming or at least all grain farms, but it would be theoretically possible to do so by radically increasing imports. Administrative agencies can pursue creative interpretations of the labyrinth of rules and issue aggressive “guidances.” A broad and coordinated set of such actions can slow or outright stop all manner of industrial activities up and down supply chains, including, especially, the construction of vital pipelines and ports.[12] And lest one forget, Congress enacted legislation in 1972 and 1982 to ban oil production on about 90% of America’s offshore domains.[13]

The fracking ban campaign is neither new nor connected only to the politics of this presidential election cycle. The movement emerged from the intersection of two global trends: the expansion of hydrocarbon production; and a time when many pundits and policymakers believe that an “energy transition” to something different is urgently needed. For example, some 400 domestic and international environmental leaders and organizations petitioned the United Nations in September to demand “a global ban on fracking.”[14] Essentially all fracking production is done in the United States.

Fracking Has Changed the Global Energy Balance

The biggest transformation in energy markets in the past half-century was brought about by American fracking technology. This technology unlocked the astoundingly productive “unconventional” shale fields and has led to America’s reemergence as a global exporter.[15] The transformation has saved U.S. consumers $200 billion a year[16] and restructured the global energy balance: the recent growth in U.S. oil and gas production is history’s biggest increase in global energy supply of any kind in such a short time. The second biggest, with roughly half as much growth in total energy production, occurred in Saudi Arabia during the decade after 1965.[17] America’s emergence as a third major source of oil and gas (alongside OPEC and Russia) on world markets has far-reaching geopolitical implications: 75% of the global economy is found in five regions: North America, Europe, China, Japan, and India. All, except North America, are major net energy importers.[18]

Well before the U.S. began to export natural gas or crude oil, global prices dropped in anticipation. In order to preserve market share, even as U.S. oil output soared, Saudi Arabia incrementally increased production, the opposite direction that was needed to “preserve” price, leading to the epic 2014–15 global price collapse.[19] Similarly, once it was clear that the U.S. was completing construction of liquefied natural gas (LNG) export facilities, global LNG prices dropped more than 50% as markets started to realign with the new competition.[20] Prices also dropped for land-based gas pipeline exports from Russia to Europe in order to compete against prospects of cheap LNG arriving on those shores.[21] The net effect of the global price wars has transferred trillions of dollars from producers, such as Russia and OPEC, into consumers’ pockets.

IEA forecasts—which incorporate bullish expectations for wind and solar production—see 53% of all global needs still met by oil and natural gas in 2040, a minuscule decline from today’s 54%. Of geopolitical relevance, the U.S. is expected to account for 70% of global growth in oil supply over the next five years,[22] and to supply at least half the world’s new demands for natural gas.[23] Growth in U.S. natural gas alone is expected to account for twice as much new energy supply as is forecast for all global growth of wind and solar combined.[24]

The Consequences of a Self-Embargo

A ban on fracking would end U.S. exports, cause imports to soar, and increase the trade deficit by hundreds of billions of dollars. The more serious impact would come from the shock to global markets. Global oil prices swing widely when markets are surprised by even a 1%–2% change in the supply/demand balance.

A fracking ban would entail a loss of 7% of global oil production, comparable to the 7% lost with the infamous 1973 Arab oil embargo—an embargo that drove world oil prices up 400% and triggered a global recession.[25] Similarly, the 1979 Iranian revolution took 5% of oil off global markets. Prices rose more than 200%, sparking another global recession.[26]

Today, taking shale production off the market would also constitute an additional 17% loss to global markets in the form of natural gas.[27] Higher energy prices would hit global consumers; Americans would pay more than $100 billion a year at the gas pump alone, an average of $1,000 per household.[28]

Even a slow 10-year production phase-out would trigger an estimated two-year recession in America and eliminate $270 billion of private investment.[29] There would be some winners: Russia and OPEC would derive huge revenue and geopolitical benefits.

Losing the share of new electricity generation that is now fueled from natural gas (produced by fracking) would push utilities to increase the use of existing underutilized power plants where they’re available, which are mainly coal-fired.[30] That would increase carbon dioxide emissions by some 600%—more than all emissions avoided from wind and solar on U.S. grids.[31]

Regions heavily dependent on natural gas but with minimal coal capacity would be faced with rolling blackouts—such as New England (where gas currently provides 49% of electricity), the Mid-Atlantic region (38%), and the Pacific coast (30%).[32] Some of that shortfall could come from burning oil in the 130 GW of gas-fired turbines designed to be dual-fueled.[33] If fully utilized, those turbines would burn about 1 mmbd of oil (necessarily imported), a 10-fold increase in U.S. oil-fired power generation.

The Impossibility of Filling the Gap

The central motivation for the movement to ban fracking is the global abundance of hydrocarbons at a time when many pundits and policymakers believe that an “energy transition” is urgently needed. But America’s shale production could not be replaced quickly by alternatives, at any price, regardless of climate-change motivations. To the extent that there is an “energy transition” to new technologies, it is happening in slow motion.

Politically popular wind and solar power have become far less expensive and have enjoyed massive global subsidies; but together, they still provide only 1.8% of global energy. The 5 million electric vehicles on all the world’s roads now displace 0.1% of global oil use.[34]

Replacing the quantity of energy produced by fracking in the U.S. shale fields would entail (in energy-equivalent terms) expanding all of America’s solar and wind production by 2,000% more than what has been added in the past decade.[35] Somehow accomplishing that miracle wouldn’t help the 99% of Americans driving oil-fueled cars. In fact, because the hydrocarbon market is global, the entire world would have to increase global wind and energy supply by 500% to replace the energy that would be lost from an American fracking ban—never mind the additional energy needed to fuel global economic growth.[36]


Energy Paradoxes Put Europe in a Precarious Position

Despite its cool Green parties and ambitious wind and solar agendas, Europe remains by far the world's largest importer of oil and natural gas.

Oil output in the North Sea and off the coast of Norway is declining, and the European Union is quietly looking for fossil fuel energy anywhere it can find it.

Europe itself is naturally rich in fossil fuels. It likely has more reserves of shale gas than the United States, currently the world's largest producer of both oil and natural gas. Yet in most European countries, horizontal drilling and fracking to extract gas and oil are either illegal or face so many court challenges and popular protests that they are neither culturally nor economically feasible.

The result is that Europe is almost entirely dependent on Russian, Middle Eastern, and African sources of energy.

The American-Iranian standoff in the Middle East, coupled with radical drop-offs in Iranian and Venezuelan oil production, has terrified Europe -- and for understandable reasons.

The European Union has almost no ability to guarantee the delivery of critical oil and gas supplies from the Middle East should Iran close the Strait of Hormuz or harass ships in the Persian Gulf.

Europe's only maritime security is the NATO fleet -- a synonym for the U.S. Navy.

Vladimir Putin's Russia supplies an estimated 30 percent of Europe's oil needs. In times of crisis, Putin could exercise de facto control over the European economy.

In other words, Europe refuses to develop its own gas and oil reserves, and won't fund the necessary military power to ensure that it can safely import energy from problematic or even hostile sources.

It's no wonder that Europe's traditional foreign policy reflects these crazy paradoxes.

Energy neediness explains why the EU was so eager to maintain the so-called "Iran deal" with the theocracy in Tehran, and also why it was nervous about the anti-Russia hysteria that arose in the United States after the 2016 election.

Past European distancing from Israel reflected Europe's fear of alienating Arab oil producers in the Middle East and North Africa.

Europeans are also uneasy about the Trump administration. They see the current U.S. government as nationalist and unpredictable. Americans appear not so ready as in the past to enter the world's hotspots to ensure unimpeded commercial use of sea and air lanes for the benefit of others.

The result is a sort of European schizophrenia when it comes to America and foreign policy in general. On one hand, the European Union resents its military dependence on Washington, while on the other it prays for its continuance. The EU loudly promotes freedom and democracy abroad, but it is careful to keep ties with oil-exporting Middle Eastern autocracies that are antithetical to every value Europeans promote.

Germany agrees with its allies that Russian imperial agendas could threaten European autonomy. But privately, Berlin reassures Putin's Russia that it wants to buy all the gas and oil that Moscow has to sell. Germany increasingly seems far friendlier with a suspicious Russia than it is with an America that protects it.

In sum, what ensures that Europeans have enough daily gasoline and home heating fuel are not batteries, wind farms, and solar panels -- much less loud green proselytizing. They count instead on a mercurial Russia, an array of unstable Middle Eastern governments, and an underappreciated U.S. military.

In a logical world, Europeans would retake control of their own destiny. That recalibration would entail beefing up their military power, and their navies in particular.

They also would begin to frack and horizontally drill. Europeans would push ahead with more nuclear power, hydroelectric projects and clean-coal technologies -- at least until new sources of clean energies become viable.

Europe should applaud U.S. gas and oil development, which has upped world supplies, diversified suppliers, and lowered global prices. Europeans should especially remember that the U.S. military keeps global commerce safe for all vulnerable importers such as themselves.

But these remedies are apparently seen in Europe as worse than the disease of oil and gas dependency.

The result is again chaos. Europe lectures about greenhouse gases while it desperately seeks supplies of fossil fuels. Germany usually sets the tone in Europe, and it is the most hypocritical in both denouncing and buying fossil fuels from unsavory sources.

The danger for Europe now is that the charade may soon be over.

Americans are self-sufficient in gas and oil. They have lost interest in Middle East quagmires and petro-regimes. And they don't like patrolling the world for countries that both count on and ankle-bite the U.S. military. Meanwhile, the more Europeans pander to oil-rich Russia, Iran, and various Gulf states, the less respect they earn in return.

It is hard to be both the world's largest importer of gas and oil and the loudest critic of fossil fuels, but Europe has managed to do it.


Media Sparks Misleading Climate Alarmism Over Global Temperatures

Arlington, VA - The press is reporting that last year was the second hottest on record globally, according to the latest climate data collected by the National Oceanic and Atmospheric Administration and NASA. However, in a rush to judgement alarming the public, they fail to highlight that the data collected only goes back about 140 years, making the issue seem new and sparking a call for more regulations on carbon dioxide.

The CO2 Coalition recently issued a memo to the media correcting the record on how they cover stories related to climate science in an increasingly polarized news cycle.

The memo is written by Dr. Caleb Rossiter, a climate statistician and the Executive Director of the CO2 Coalition, a group of climate scientists and energy economists that includes two former Trump administration officials, White House science adviser Will Happer and former EPA deputy Mandy Gunasekara.

"The press routinely misleads the public by reporting that (X out of the Y) warmest months, years, decades on record have occurred recently," said Dr. Caleb Rossiter, climate statistician and Executive Director of the CO2 Coalition of climate scientists and energy economists. "This has been true throughout the past 250 years, for natural reasons. Temperature has been rising slowly and steadily since the Little Ice Age, well before CO2 levels increased. Slightly higher records are to be expected."

"For too long, the American public has been misled on the science behind about our climate," said Dr. Caleb Rossiter. "We hope this memo to the press can better inform the way these stories are covered to provide a more accurate description of the global climate."

More HERE 

Mass.: DeLeo doesn’t see ‘a whole lot of support’ for a regional climate pact

House Speaker Robert A. DeLeo cast fresh doubts on the prospects of a regional pact designed to curb carbon emissions while likely raising gas prices, saying Wednesday he doesn’t see “a whole lot of support” for it.

Instead, DeLeo suggested the Legislature will plow ahead with its own transportation financing bill, which could include a gas tax hike, regardless of Governor Charlie Baker’s decision to join the multistate effort.

Amid a crisis of confidence in the state’s public transit systems, it remains unclear when the House will pursue the long-promised legislation, with DeLeo saying Wednesday he’s “uncertain as to exactly when” a bill would emerge. But he said lawmakers probably can’t wait for a potential cash infusion from the Transportation and Climate Initiative, whose apparent softening of support throughout New England could complicate an effort that Baker has roundly supported.

“There doesn’t seem to be a whole lot of support for the concept, at least that I see right now,” DeLeo said Wednesday, citing media reports. The Winthrop Democrat suggested he’s “especially concerned” about the uneven backing among Massachusetts’s immediate New England neighbors.

The initiative, known as TCI, would impose a new fuel cost at the wholesale level by establishing a system of carbon pollution allowances for up to a dozen states. The goal, proponents say, is to slice carbon emissions from transportation by up to 25 percent over a decade, but in doing so, it is likely to drive up the costs at the pump anywhere from 5 cents to 17 cents a gallon. The Baker administration expects up to $500 million in new annual revenue once it goes into effect, which could happen as soon as 2022.

New Hampshire Governor Chris Sununu, however, has already opted out, and his counterparts in Vermont, Connecticut, and Maine have all thrown up caution flags, directly or indirectly, in recent weeks. Rhode Island Governor Gina Raimondo has said she’s “fully committed” to TCI’s goals, but Nicholas Mattiello, Rhode Island’s House speaker, has signaled he’s against it.

Officials released a draft agreement in December, and each state could make a final decision later this year whether to participate.

“What I was looking for as we went through this process was to make sure especially that the New England states would be on board,” DeLeo said.

“Now, I’m not saying they’re all off,” he added. “Right now, first of all, for us to wait for that to go into effect, we could be waiting two or three years. I don’t think we can wait that long.”

DeLeo had first said he intended to take up a transportation financing bill last fall before pushing it into 2020. He told the State House News in November that he was “shooting for January” and his transportation chairman, Representative William M. Straus, has said that was still a target.

But DeLeo offered no firm timeline Wednesday other than a possible vote in winter. The bill’s actual contents have, too, remained a mystery, with options ranging from a gas tax hike to increased fees on ride-hail trips through Uber, Lyft, and other companies.

DeLeo insisted that the lack of a clear timetable shouldn’t be interpreted as him “backing off.”

“You can rest assured, first of all, there will be a debate relative to transportation funding,” he said. “It seems to me that every day that goes by, there’s a further example, I think, of the need for transportation revenue and for some work to begin relative to our transportation system.”

The support, or lack thereof, for TCI within the Legislature, meanwhile, probably means more in the public discourse than it does on a legal level. Analysts and state officials say it’s likely Baker can commit Massachusetts to the agreement without legislative approval. In other states, it’s not so clear.

Straus said the public support in other states is important for the momentum of the agreement, not to mention a state’s ability to deter drivers from simply crossing the border to avoid higher gas prices created by the pact.

“That basic argument for TCI seems to have become a more cloudy one,” Straus said Wednesday.


Australia: The Queensland desalination project

The article below was written before 12.12.19.  How do I know that?  Because it refers to the drought.  And for most of 2019 Queensland was indeed unusually dry.  On the night of 12.12.19 however, Brisbane had the mother and father of a storm that delivered 6 months of rain in one hour.  And there was a similar storm down the coast a couple of days later. So both the Wivenhoe and the Hinze dam (which are linked) would have received a big boost

It is particularly good for the dams to get all that rain at once. If the fall had been spread out over a long period, much of the fall would have been lost to evaporation and soaking into the ground.

The desalination project was an absolute boondoggle from the beginning. It was started by a Leftist government as an alternative to building a dam. It took years to get it working properly so it is lucky that the rains came and rendered it unnecessary.  It is however some consolation to hear that it is finally working and being marginally useful

DESALINATE or die. That was the dire warning from then-premier Peter Beattie as he was confronted by a lone protester at the under-construction Gold Coast desalination plant during the so-called "Millennium Drought" in 2000.

The protester, local green activist Inge Light, had slipped through a security detail to shirtfront Beattie about the controversial $1.2 billion project's environmental and financial costs.

"I've got to be honest with you, we're going to build it(the plant), we've got no choice -- unless you go up there and play God and make it rain for me," the premier declared. "If you don't allow us to get desalinated water, frankly no one's going to be alive. "If we don't have desal, we're not going to have any water. "If you don't have water, you're dead.'

It may not be quite life or death. Beattie, wasn't averse to a bit of hyperbole — but as Queensland grapples with arguably its worst drought on record, the Tugun desalination plant is playing a key role in keeping water flowing to residents in the state's south-east.

Largely on "hot standby" since it opened in 2009 due to consistent rain events, the facility has been cranked up to full capacity after a tinder-dry spring and early summer which has seen dam levels plummet.

Since hitting 100 per cent production on November 18, the plant has pumped more than two billion litres of water into the southeast Queensland water grid. It represents about 15 per cent of the region's water use, currently averaging at 212 litres per person per day, up from 183 litres this time last year.

The first large-scale desalination plant on Australia's east coast (Perth's plant opened in 2006), the Tugun facility occupies a sprawling site next to Gold Coast Airport, a few hundred metres from the beach. It was originally planned as a much smaller Gold Coast City Council facility. But as the Millennium Drought bit deeper, the Beattie government invested almost $870 million in the project to more than double its capacity to 133 megalitres per day.

Gold Coast mother and environmentalist Inge Light wept at Gold Coast City Hall in October 2006 after councillors voted 12-2 to approve the project, saying it would worsen global warming and damage the marine environment "I'm emotional because I see my children's future being affected by global warming," she told The Courier-Mail at the time. "It's incredibly sad and incredibly frustrating that we've got yesterday's politicians making tomorrow's decisions."

But the council, led by green-leaning mayor Ron Clarke, decided  overwhelmingly that the desal plant was needed, and urgently. "The region will run out of water if we don't deal with this and make the hard decisions," then finance committee chair and now Southport MP Rob Molhoek said.

Construction began irmnediately by an "alliance", incvolving  French water giant Veolia, construction firm John Holland, infrastructure company Cardno and engineers Sinclair Knight Metz.

In 2007, The Courier-Mail revealed that Veolia expected to take in at least $351 million from running the desal plant over the following decade. Anna Bligh, who had succeeded Beattie as premier, took the first sip of desalinated water at a Tugun open day in December 2008.

The plant officially opened in January 2009, but the State Government refused to accept ownership after a raft of serious defects were revealed, including rusting pipes, cracking concrete and faulty valves, as well as concerns over potential contaminants leaching from the former Tugun rubbish dump on which the facility was built.

In April 2009, the plant, supposedly the showpiece of the $9 billion south-east Queensland water grid, was shut down for almost six weeks as technical experts crawled through pipes to pinpoint faults. A year later, the plant was again shut down, this time for three months, as a giant barge was brought in to make repairs. Only months later, south-east Queensland was hit by the devastating 2010-11 floods.

Critics have labelled the desal plant a costly white elephant, but it has been used to help supply water during floods as well as drought, and when water treatment plants have been shut down for upgrades.

The Courier-Mail recently took a tour of the plant with its manager, Tina Feenstra. Right on cue for our visit, the heavens have opened. "It's a running joke for us here: whenever we're at full capacity, it starts raining," Feenstra says, handing us umbrellas.

Feenstra explains the desalination process, which begins with sea water being fed through a 4m mushroom-like inlet on the seabed, about 1km offshore, and into a pipeline to the plant. Larger particles are screened out before the water passes through a finer filter which removes smaller particles. The water is then pre-treated in large tanks which blend small suspended particles into clumps which are then removed by sand filters.

Next, the main process begins — removing the salt. The water passes through thousands of reverse osmosis membranes to purify the water. It ends up being so pure, Feenstra explains, that chemicals and minerals then have to be re-added to make the water suitable to drink before it is pumped into the water grid.

Desalinated water does not come cheap, costing up to $800 a megalitre to produce. It's also energy-intensive, consuming the equivalent electricity of about 12,000 houses a day when running at full capacity.

"But when it's hotter and drier than average as it is now, having use of a facility like this is a real asset, particularly when we don't know how long this drought will last," Feenstra says.

From the Brisbane "Courier Mail" of January 4, 2020


For more postings from me, see  DISSECTING LEFTISM, TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC and AUSTRALIAN POLITICS. Home Pages are   here or   here or   here.  Email me (John Ray) here.  

Preserving the graphics:  Most graphics on this site are hotlinked from elsewhere.  But hotlinked graphics sometimes have only a short life -- as little as a week in some cases.  After that they no longer come up.  From January 2011 on, therefore, I have posted a monthly copy of everything on this blog to a separate site where I can host text and graphics together -- which should make the graphics available even if they are no longer coming up on this site.  See  here or here


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