Money $marts: What the frack?

GERRY KRAMER

Ever since the short lived 1974 Arab nation embargo on oil sales to the U.S. and the internal disruptions it caused — rationing, quadrupling of gas prices and long lines at the filling stations — every sitting president and candidate for that office has offered vague proposals for achieving energy “independence.” The fact that the quest has never been satisfied is proof of how little control over energy production is actually exercised by the federal government, except when it comes to curtailing it.

Since the ‘70s global cooling predictions turned into apocalyptic global warming scenarios, the environmental lobby has gained increasing influence over U.S. domestic energy production and regulation. Politicians have responded over the last 40 years by creating the Environmental Protection Agency and the Department of Energy and giving them greatly expanded regulatory powers which have gone too far in dampening domestic energy production.

The Obama administration, along with supporters from both sides of the political spectrum, have gone even further, carrying the fight against “harmful” greenhouse gas producing fossil fuels to the point where any excuse is used to limit fossil fuels development. The provision of subsidies and loans to green energy resources such as wind and solar; usage mandates and subsidies for biofuels production; the moratorium on deep sea drilling following the Gulf oil spill causing a drop of 300,000 barrels a day in deepwater production; the rejection of the Keystone pipeline proposal; and continuing restrictions on Alaska oil reserves development, have all stymied energy production in the U.S.

Yet despite the stream of bungling politicians interfering with energy sources and development, the U.S. is on the brink of an energy resource (oil and gas) boom that will catapult it to the world leader in production. A new oil drilling technique known as fracking is being used to get to oil previously thought to be unreachable in shale deposits. In the U.S. there are a handful of such fields (in North Dakota, Texas, Wyoming and Nebraska) which could aggregately contain as much as 17 billion barrels of oil — more than the largest field in Alaska’s Prudhoe Bay. Using fracking, the U.S. could produce an added two million barrels of oil a day by 2015, raising domestic production by 20 percent.

Besides oil, the fracking technique is currently producing huge amounts of natural gas and could result in U.S. output rising by some 18 billion cubic feet per day by 2020. Natural gas prices have fallen to historic lows leading to producers actually exporting the stuff. Low prices have helped reduce heating costs in the northeast, but also have put the damper on nuclear plant construction, now a more costly source of energy for the utilities generating electricity.

Newfound long term prospects for abundant oil and gas supplies have not positively affected current gasoline prices because the worldwide price of crude oil is determined by other factors such as turmoil in the Middle East. But over the long term we can expect U.S. gasoline prices to stabilize at lower levels; that and finally perhaps energy independence too, unless the politicians frack things down.

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Write to Gerryk3001@yahoo.com.

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