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Guest Post: The Myth Of U.S. Energy Independence

Tyler Durden's picture




 

Submitted by Alan von Altendorf,

Let's begin with the Federal Reserve. Adding $1 trillion a year to its balance sheet sounds like big money. The Congressional Budget Office recently projected an $845 billion federal deficit in 2013. States and localities will likewise disburse more than they take in taxes -- so altogether let's say it adds up to $2+ trillion of fiscal and monetary stimulus, to prop up asset values and hopefully inspire U.S. households to borrow more and spend more. Good news for investors, right?

The fly in the ointment is energy. Global oil supply has plateaued and more demand will push up prices. Americans always think of themselves first, but we're not alone in consumption of energy. China, Japan, Korea, India, the EU, and exporters like Saudi Arabia and Russia are consumers, too. Last week Britain came within days of running out of natural gas until three LNG supertankers arrived from Qatar. Those cargoes were held, waiting to see who would pay the highest price. It was freezing cold in Britain, a pipeline from Belgium went down, and the Brits bid 30% above market for the LNG cargoes to stave off power blackouts, misery and death. Price was no object. They had to have emergency supplies and it's a seller's market.

That's the ugly truth about oil & gas, flat supply and high demand.

Oil inventories in particular are extremely tight. Spare production and market rigging are easily disproved. It's a competitive global market with thousands of brokers, shippers, production operators and service companies. OPEC quotas don't mean squat. Everyone is pumping as much as they can.

 

Oil matters first, most, and always because it powers 95% of U.S. transportation. Farm to market. Bunker fuel. Passenger cars. Jet aircraft. Heavy equipment for construction and mining. Asphalt for roads. Lubricants that every machine, every pump, everything with wheels has to have, including a commercial fleet of 350,000 big rigs and 25,000 diesel locomotives. Oil is our industrial lifeblood.

Are you thinking about natural gas? Good. Much of it came from oil fields. It got separated at the platform and piped away as a byproduct of oil production. There are numerous conventional gas fields in Texas, Louisiana, and the Outer Continental Shelf, all of them historically owned and operated and bankrolled by oil companies. Oil paid the freight for gas development.

Of the top 10 U.S. gas producers, oil companies currently deliver 12 Tcf a year, compared to 8 Tcf from big shale frackers. And there's a dirty secret about shale gas that no one wants to discuss. Bankruptcy. Horizontal fracking for dry gas is a money-losing business. Huge sums were invested in 2008 when gas was north of $10 mmbtu. At the time no one bothered to calculate the "full cycle" cost of drilling and fracturing thousands of pricey horizontal wells.

 

Throughout 2009 and 2010, shale drillers played hide the sausage with hedge contracts, until their bankers and investors saw an ocean of red ink operations. Petrohawk lost $1 billion and needed a particularly dumb white knight to rescue it, which ultimately cost BHP's CEO Marius Kloppers his job. I covered the BHP-Petrohawk acquisition when it was announced (link) with a follow-up (link). If you examine any of the shale drillers' financials, like Chesapeake, you'll find the same green eyeshade heroics of hedging to cover operating losses in 2009-10.

My theory is that they kept drilling to impress unsophisticated investors and stay busy while praying prices would come back. Lets assume they were well hedged at $10/mcf. It still costs them $8/mcf to find and produce that gas, so with the spot price at $4, they are losing $4/mcf. However, they are making $6/mcf on their hedge, for a net of $2/mcf. So basically you have an extremely unprofitable gas company, tied to a very profitable trading / hedging operation. They should have cut their losses on the drilling and cashed in their hedges at $6/mcf... [but] eliminating drilling means cutting staff, so they kept going, even though it was foolish and they ended up destroying a lot of shareholder wealth. [Oil Drum comment]

Two years ago drilling cratered, except to hold acreage by production, and dry gas shale operators started offloading property to foreign investors who liked the idea of bagging hard currency mineral rights. China didn't care if shale gas was a broken business model. It wanted the technology.


Chart adapted from Berman and Pettinger (2010)

Exxon's purpose in acquiring shale driller XTO was to book reserves, not profits. "We are all losing our shirts," Rex Tillerson told the Council on Foreign Relations last June. "We're making no money [from gas production]. It's all in the red." Reserves replacement is a life or death problem for the oil majors. A quirk of accounting rules allow them to comingle assets and pretend that 6 mcf of proved gas reserves worth $20 at the wellhead = $100 barrel of Louisiana Light. As long as they don't have to produce any of that unprofitable gas, it looks good on the balance sheet.

What's happening at the majors is capitulation. Conventional gas production has been deliberately allowed to decline because there's no money in it. But smaller shale players are stuck. They have to keep producing to service their mountain of debt, pay dividends, and pay themselves fat salaries. The next two charts tell a ghastly story. Conventional gas is down, money-losing shale production up.

 

 

Energy maven Michael Fitzsimmons recently wrote that "supply and demand are coming back into alignment. In addition to substantial growth in the electrical generation sector, natural gas is also making significant progress in the transportation sector." [link] He expects a breakout to $5/mcf, once excess underground strorage is drawn down. Maybe so. But shale drillers need $8/mcf to break even, and the majors aren't going to spend another dime drilling for conventional gas. Which brings us to Sean Hannity's pie-in-the-sky reserves.

Mr. Hannity thinks shale gas is an inexhaustible resource.

With a steady supply of gas we'd be able to put people back to work... Environmentalists are unable to see that natural gas is not only more accessible, but more affordable. If America taps into its assets, we could become the world's leading exporter of natural gas.

[Hannity nationally sydicated radio broadcast 3/12/13]

Assuming that the spot price for gas moves north of $6 it's possible to see some more production. But how much, for how long? Forever? 100 years? -- or less than only a dozen years, during which prices will have to gap higher as various consumers bid for increasingly scarce gas?

 

 

The U.S. does not have 100 years of natural gas supply. There is a difference between resources and reserves that many outside the energy industry fail to grasp... The Potential Gas Committee is the standard for resource assessments because of the objectivity and credentials of its members, and its long and reliable history. In its 2011 biennial report, three categories of technically recoverable resources are identified: probable, possible, and speculative. The President and many others have taken the P.G.C. total of all three categories (2,170 Tcf) and divided by 2010 annual consumption of 24 Tcf. Much of this total resource is in accumulations too small to be produced at any price, is inaccessible to drilling, or too deep to recover economically. More relevant is the Committee's probable mean resources value of 550 Tcf of gas. [Berman, Feb 2012]

 

click to enlarge)

The future of natural gas is a long-term shortfall and significantly higher prices to bring production back.

I have long been puzzled by the economics of shale gas. I was never involved in shale, but was involved in drilling exploration wells in the Permian Basin. We stopped drilling for pure gas wells in 2009. We had a ten well project leased and ready to go when gas prices started collapsing. Our breakeven price was about $7/mcf, and $8 gave us a respectable profit. We drilled the first well, but put the rest on the shelf.

[B.J. Doyle]

The Bakken Bust

Another one of Sean Hannity's brainless rants had listeners leaping for joy, because exponential fracking for oil in North Dakota, Montana, and the Texas Eagle Ford can produce an endless cornucopia of abundant, cheap U.S. gasoline, if we get those pesky environmentalists out of the way! America has so much shale oil that we could be the world's Number One oil producer and exporter! Never have to import another barrel of oil from the Middle East!

Okay. Reality check.

Whereas conventional wells like those in the Thunder Horse (deepwater Gulf of Mexico sandstone) reservoir produce at a rate of 40,000 bpd, only 14 of the nearly 9,000 wells in the Bakken produce more than 800 barrels per day, and the average well produces only 52 bpd.

[Derik Andreoli, 12/12/11]

 

(click to enlarge)

Presently the estimated breakeven price for the average well in the Bakken formation in North Dakota is $80-$90/bbl. In plain language this means that presently the commercial profitability for new wells is barely positive. The average well now yields around 85 000 bbls during the first 12 months of production and then experiences a year over year decline of 40%. The recent trend for newer wells is one of a perceptible decline in well productivity.

[Rune Likvern, 1/1/13]

 

While production continues to ramp up daily, there is one part of western North Dakota where the excitement of oil has gone bust. Chesapeake's attempt to find the southern edge of the Bakken is being described as the largest failure in drilling in the state since the 1980s...Tanks are there, collecting nothing. Well heads are in place, abandoned... Director of Mineral Resources for North Dakota, Lynn Helms said: 'There's only one well that's made any measurable oil, and it's about 10 percent oil at best, 90% water.' Chesapeake invested $60 million in the prospect of hitting oil. That excludes money spent on leases. 'Because all the drilling had been taking place north of there and the geological risk was zero, it made it look too easy. So in terms of the technology of drilling and fracking, well prepared, but in terms of geology probably not,' said Helms.

[KXNet.com, 1/1/13]

 

With 55 to 85% yearly decline rates how are those investors going to look in five years; especially in places like the Bakken which have $10 million wells. Eagle Ford has dismal production (143 b/d)...Chesapeake got into the shale gas game early, and is now selling everything the company has to stay out of receivership. Decline rates were much higher than originally projected. The rest of the shale industry will find the same thing happening to them.

[TOD, 2/10/13]

 

(click to enlarge)

The government is going to be pretty damned disappointed and upset if unconventional oil turns out to be a colossal bust. And there is something funny about that EIA chart (above). Ignore the big purple blob of Tight Lower 48 and look closely at the black line and right hand scale. EIA thinks crude is going to $160 a barrel. No wonder DOE policy wonks expect shale drillers to poke around forever in marginal plays. 90% water cut sounds ok all of a sudden at $160 a barrel.

With Bernanke printing free money for the foreseeable future, and incredibly low HY rates of 5-6%, any wacky business plan is good to go, assuming that drilling contractors and completion companies don't go bankrupt with Obamacare. I also doubt their ability to keep costs down in the future. Each horizontal completion needs 1 million gallons of fresh water and someplace to get rid of it after contamination by radioactive, poisonous and corrosive formation chemicals. But broadly speaking, cheap HY funding rocket fueled the shale boom, and in the near term I expect another round of free drinks on the Fed's tab for North Dakota's roughnecks. Yee-haw!

Former Kansas City Fed president and vice chairman of the FDIC, Thomas M. Hoenig, isn't having any of it. "This system [of pumping liquidity into money center banks] distorts the market and turns appropriate risk-taking into recklessness," he warned in a WaPo op-ed last Friday.

Well, duh. Obama is throwing billions at solar and biofuels. Recklessness is the order of the day, all day, every day, to make America "energy independent" and to save the planet, of course.

The U.S Department of Defense is the world's largest consumer of refined petroleum -- gasoline, diesel, and jet fuel -- for which it pays about $3.00 a gallon because it buys tens of millions of gallons at a whack. But DoD is under tremendous pressure to "go green" and switch to biofuels. Here's the price per gallon the Pentagon paid for algae, wax and peanut oil fuel. And they had a clear winner! Fat and sugar were a bargain at slightly over $25 a gallon.

 

Death By Regulation

I'm a very old fashioned, simple analyst. I look at the geology, the balance sheet, and the company management. One of Houston's best is W&T Offshore (WTI) -- and it's a heartbreaker. Currently trading at a $14 handle, if you do the math on shareholder equity and common shares outstanding, it might be worth $7.

Let me repeat, so there's no misunderstanding. W&T Offshore is a superb small company, with the right stuff subsurface and a terrific management team. Absolutely first class offshore operator. Very high rate of success. (Disclosure: No position long or short in WTI and no business relationship past or present with the company or any of its employees or managers.)

No question about WTI's integrity. Reserves are audited by Netherland Sewell. If ever there was a minnow that deserved investor loyalty and a blank check to grow the business, it's W&T Offshore. But I can't recommend it as a buy, and it breaks my heart to say sell.

The succubus that's draining WTI financially is regulation. The latest 10-K calmly explains why this excellent oil finder is hanging on by a thread. If you want to understand why U.S. conventional oil production is trending downward, year after year, this is why:

BOEM [Dept of Interior] may require any of our operations on federal leases to be suspended or terminated... Numerous governmental departments issue rules and regulations to implement and enforce such laws, which are often difficult and costly to comply with and which carry substantial civil and even criminal penalties for failure to comply... Environmental laws and regulations have been subject to frequent changes over the years, and the imposition of more stringent requirements could have a material adverse effect upon our capital expenditures, earnings or competitive position, including the suspension or cessation of operations in affected areas... The Comprehensive Environmental Response, Compensation, and Liability Act imposes liability, without regard to fault, on certain classes of persons that are considered to be responsible for the release of a "hazardous substance" into the environment... In addition, companies that incur liability frequently also confront third-party claims because it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment from a polluted site.

Just boilerplate? Not in WTI's case.

The United States Attorney's Office for the Eastern District of Louisiana, along with the Criminal Investigation Division of the EPA conducted a federal grand jury investigation beginning in late 2010 of environmental compliance matters relating to surface discharges and reporting on four of our offshore platforms in the Gulf of Mexico in 2009... Cameron Parish landowners filed suits in the 38th Judicial District Court against the Company and several other defendants unrelated to us... alleged that property they own has been contaminated or otherwise damaged by the defendants' oil and gas exploration and production activities... During 2012, we settled claims with certain landowners and paid $10.0 million. We assessed the remaining claims to be probable and have accrued $1.3 million in our contingent liabilities... we cannot state with certainty that our estimates of additional exposure are accurate concerning this matter. On September 21, 2012, we were served with a complaint in a qui tam action filed under the federal False Claims Act by an employee of a Company contractor... A qui tam action is a lawsuit brought by a private citizen seeking civil penalties or damages against a person or company on behalf of the government for alleged violations of law. If the claims are successful, the person filing the suit may recover a percentage of the damages or penalty from the lawsuit as a reward for exposing a wrongdoing... The alleged environmental violations include allegations of discharges of relatively small amounts of oil... the same allegations involved in the federal grand jury investigation.

Anyone killed or injured? No. An oil slick? No. A few barrels spilled and a forgotten journal entry. If you've seen a video of an offshore drilling crew at work, it's miraculous that a handful of men control hundreds of barrels of drilling mud and produced water, volatile poison gases that have to be flared or connected to an undersea pipeline, and thousands of barrels of flowing crude without spilling a drop.

A good company ruined -- because a contractor blabbed to the Feds, knowing that it would pay him a fat "whistlebower" reward and civil suits would pay landowners miles away, without proof of damage to their land. Ready for full context? Natural seeps in the Gulf of Mexico spew 500,000 barrels of gooey oil and sticky tar, each and every year. Has absolutely nothing to do with WTI's offshore operations.

 

(click to enlarge)

There is no hope whatsoever of so-called U.S. "energy indepedence" unless three things happen. Environmental rules have to be wound back to 1970 standards -- in other words, disband the EPA and make civil plaintiffs show actual harm, not just hypothetical harm because someone goofed on a sheaf of mandated paperwork. Second, stop wasting taxpayer money on nonsense like $25 per gallon biofuel.

Third and most urgently, stop subsidizing Wall Street. Let the market decide what interest rates make sense, rewarding companies who can find and produce oil, instead of gorging themselves sick on artificially cheap junk bonds that money-losing shale swindlers will never pay off.

Everything the Fed does ultimately leads to less economic activity, less savings and more debt resulting in poverty for Americans, not prosperity.

[Zero Hedge]

 

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Tue, 04/02/2013 - 22:01 | 3401696 dumpster
dumpster's picture

10-4

Tue, 04/02/2013 - 22:04 | 3401704 wee-weed up
wee-weed up's picture

Build the fukin' Keystone Pipeline!

Tue, 04/02/2013 - 22:09 | 3401716 Abraxas
Abraxas's picture

No energy for you! NEXT!!!

Tue, 04/02/2013 - 22:23 | 3401738 Slack Jack
Slack Jack's picture

Like "bank guy in Brussels" said:

"It is a desperate last-ditch scheme to prop up the petro-dollar, i.e., the US dollar as reserve currency, which is at death's door as the BRICS and half the world join bi-lateral trade agreements by-passing the dollar. As IMF chief Lagarde (worked for big American law firm) and Angela Merkel (husband works for US Pentagon companies) are both American agents, they pushed this scheme onto the EU, not caring about damage to Europe. France was so angry at this they sent police to raid Lagarde's apartment..."

"Angela Merkel (husband works for US Pentagon companies) are both American agents..."

Merkel is a Jew; both her married name Merkel and her maiden name Kasner are German Jew names.

Merkel is also (most probably) a communist.

So does Merkel work for the Jews (United States) or communists, or ... ?

I think she works for the Jews (United States) and what you say is correct.

So the Jews (the US) are deliberately trying to start a bank run in Europe. Yes?

Tue, 04/02/2013 - 22:33 | 3401750 otto skorzeny
otto skorzeny's picture

lagarde was sent out into the world by the same chicago zionist jewish families (pritzkers and crowns-latter owns General Dynamics) that plucked an unknown community organizer from chicago from the clutches of "Man's Country" bathouse that he frequented with Twinkletoes Rahm and got him elected as IL senator. also-merkel was stasi which means she had to join the commie party(and everybody knows the hebrew connection to them)

Wed, 04/03/2013 - 04:47 | 3402301 Colonial Intent
Colonial Intent's picture

Now in fairness, the Nazi propaganda effort did play a role in their rise to power.

Of course, far from mainstream reporting, that propaganda mostly consisted of false-flag incidents, made-up controversies, conspiracy theories, and incitement of hate against ethnic and religious minorities, but it's not as though Fox News, Breitbart, Drudge, ZH or the Daily caller ever engage in any of those things.

 

Wed, 04/03/2013 - 04:52 | 3402308 Colonial Intent
Colonial Intent's picture

I cannot tell if you are channelling McCarthy or Hitler?

Its all the jews fault and the communists, yeah its not all down to the emasculated eunuchs that are the american people today.

Your culture is based on fear and greed as its prime motivating factors any attempt to change that will result in the collapse of your culture, the future for america is social darwinism and a mussolini style corporate autocracy.

Wed, 04/03/2013 - 10:16 | 3403039 My Days Are Get...
My Days Are Getting Fewer's picture

It's a shame that you spoil the correctness of your initial assertions with stupid propagranda.

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

Merkel's father was a christian minister.  Her husband has been a university professor forever. 

Tue, 04/02/2013 - 22:16 | 3401721 otto skorzeny
otto skorzeny's picture

but then The Cunt of Omaha's choo choo trains couldn't be used to ship all of the oil instead of the pipeline-duh. you gotta have billions if becky quick is gonna tongue your old flaccid member.

Wed, 04/03/2013 - 04:37 | 3402289 Colonial Intent
Colonial Intent's picture

Buffet makes money on the trains and koch bros makes money from the pipeline, but neither party is in thrall to its financial masters

/Sarc

Wed, 04/03/2013 - 00:21 | 3402047 Individualist A...
Individualist Anarchist's picture

You mean the keystone pipeline that requires eminent domain (land theft) to build?

Wed, 04/03/2013 - 04:36 | 3402287 Colonial Intent
Colonial Intent's picture

Unless the pipeline is built how will the koch bros get all that canadian oil to their coastal refineries so they can export it to china?

American Energy Independance ....LOL thats a funny joke.

Wed, 04/03/2013 - 07:02 | 3402427 Urban Redneck
Urban Redneck's picture

I think the Chinamen would rather build a Chinese owned pipeline to pump the oil to Chinese owned refineries, to refine and load the oil on Chinese flagged VLCCs to carry the oil to Chinese consumers...

Both you and the author seem to have some D/R rodents crawling up your asses.

Here's the simple truth -

 

THE ENVIRONMENT WILL BE FUCKED.  

THE OIL BE PUMPED.  

THOSE WHO DO THE DIRTY WORK WILL GET PAID. 

 

 

Wed, 04/03/2013 - 07:04 | 3402432 Colonial Intent
Colonial Intent's picture

As i said below,

Buffet makes money on the trains and koch bros makes money from the pipeline, but neither party is in thrall to its financial masters

/Sarc

"my eyes are wide open, Tyler"

Wed, 04/03/2013 - 08:05 | 3402532 Taint Boil
Taint Boil's picture

 

[Build the fukin' Keystone Pipeline!]

 

From previous post

 

Too many sources to give credit:

 

There’s a lot of misinformation surrounding the Keystone Pipeline. In fact, the ongoing debate doesn’t even concern the pipeline. The first phase of the pipeline has beenoperational since 2010, running more than 2,000 miles through two Canadian provinces and six U.S. states. The debate is actually about the Keystone XL, an appropriately named addition that would add 700 miles to the original pipeline. 

“By diverting Canadian oil that would otherwise go to the Midwest, TransCanada has admitted the pipeline would increase the price Americans pay for Canadian oil by $3.9 billion. 

………Keystone XL would result in 2,500 to 4,650 temporary construction jobs, this impact will be reduced by higher oil prices in the Midwest 

TransCanada’s job claims are complete fabrications, and the Cornell report concludes that “KXL will not be a major source of US jobs, nor will it play any substantial role at all in putting Americans back to work.

The Keystone XL pipeline is designed for one thing—to send oil from Canada to the Texas Gulf coast and from there to overseas markets. 

According to its own secret documents submitted to the Canadian government, TransCanada expects the pipeline to increase gas prices in the Midwest by up to 15 cents per gallon. Currently, a surplus of gas in the region means that our prices stay stable. If the pipeline is built oil companies will be able to send their product to the Gulf coast for export, which will reduce this surplus and drive up costs for Midwestern consumers 

The real out-of-state special interests are TransCanada (a foreign oil company) and its lobbyists in Washington, who stand to make billions from this project…… 

Based upon the construction of the previous phases of the pipeline by TransCanada, it is very likely that half if not more of the steel pipes to be used in the Keystone XL will be imported from India, South Korea and Canada……… 

“What pipeline advocates . . . fail to mention is that much of the tar sands oil that would be refined on the Gulf Coast is destined for export. Six companies have already contracted for three-quarters of the oil. Five are foreign, and the business model of the one American company – Valero – is geared toward export.”……. 

Learn how to look things up.

 

Wed, 04/03/2013 - 08:40 | 3402648 Seer
Seer's picture

"putting Americans back to work."

I think that this has been misquoted, it was:

"keeping wealthy Americans from having to work."  Fixed!

Tue, 04/02/2013 - 22:06 | 3401711 DoChenRollingBearing
DoChenRollingBearing's picture

dumpster!  Good seeing you around.

***

It's a real shame that the Bakken and the other formations will not live up to their hype.  Energy indpendence would have been a wonderful thing.  But, if we do not have as much oil & gas as we thought, imagine what it will be like for Europe and China.  Even if we do use a lot more per capita.

Wed, 04/03/2013 - 08:54 | 3402687 Seer
Seer's picture

"Energy indpendence would have been a wonderful thing."

It's fucking Skittles and unicorns shit.

This is an economics blog/site and I have to wonder why people check economics logic at the door when they start talking about energy.

When one does "business" one pays close to expenses.  Expenses is "consumption."

Failing to address the component that is "consumption" (rates of) in discussions of energy is like dismissing any talk of "expenses" when discussing business activities.

The US could be "energy independent" in a heartbeat, and probably ONLY for a heartbeat.  It has to do with levels of consumption and rates of consumption growth.  If the US cut its per-capita energy consumption it could be as "energy efficient" as Brazil (though Brazil's energy comes overwhelmingly from non-renewable sources, oil).  The cuts in per-capita consumption rates, however, would affect export revenues (energy available to businesses would also be cut).  This would lead to energy being exported to make up losses in export $$s, which would mean a further per-capita reduction in energy.... circular, reinforcing downward spiral...

Europe is already dead-man-walking: the real story line with Cyprus was the strategic play by the West to get control over the NG fields, which would temper Russia's ability to whipsaw Europe with energy pricing.

China is currently weaving the noose with which it'll hang itself.

The US is in no way better off, because, as you note "Even if we do use a lot more per capita."  Ability to control expenses/consumption is HUGE.  The "advantage" is that there's more meat to protect the bone (can cut more before hitting the bone), but the knife is still coming...

Tue, 04/02/2013 - 22:06 | 3401699 SHRAGS
SHRAGS's picture

More background: "Drill, Baby, Drill" and Energy Watch Group: "Fossil and Nuclear Fuels - the Supply Outlook"(March 2013).

Tue, 04/02/2013 - 22:09 | 3401706 CrashisOptimistic
CrashisOptimistic's picture

The article reads well and suggests he understands things, but the final third of it reads like someone edited him and told him to divert his thrust away from "inevitable disaster" and more towards "let's attract investors to our advice services".

Too bad.  It paints a picture around him of somone whose analysis tells him one thing is going to happen, and it's a very black something, so that means he needs to throw out the analysis and downshift to a basic right wing "all would be well but for regulation" perspective.

Announcement: Geology and 80% annual decline rates derived from the permeability and porosity at issue predate regulation by several million years.

 

Wed, 04/03/2013 - 08:18 | 3402582 SelfGov
SelfGov's picture

Isn't all of this just a "resource scarcity lie" spread by the elites? Bakken wells don't really decline in production do they? :)

 

"What you are doing is perpetuating the elitist propaganda myth of overpopulation. There is quite easily enough resources on the planet for every person to have a garden, an off grid farm, solar power, and yes, even water." - Brandon Smith - Alt-Market.com

Wed, 04/03/2013 - 08:57 | 3402706 Seer
Seer's picture

And a unicorn on every farm!

We need to deploy all the marketing BS we can to sell this shit...

Wed, 04/03/2013 - 08:26 | 3402598 Flakmeister
Flakmeister's picture

Yep,  very well summed up...   pun intended....

Wed, 04/03/2013 - 08:53 | 3402686 sdmjake
sdmjake's picture

Indeed...need more Fossil Fools!

Tue, 04/02/2013 - 22:06 | 3401709 duo
duo's picture

all that flared off gas in ND looks pretty from space

Tue, 04/02/2013 - 22:13 | 3401726 otto skorzeny
otto skorzeny's picture

that hasn't stopped NG from more than doubling in the last year-and here jimmy the ass clown cramer said it was going to $0.00

Wed, 04/03/2013 - 09:00 | 3402719 Seer
Seer's picture

I recall that ND was net positive in tax benefits from the US govt.  Anyone else think that this helps subsidize the margins of the NG industry there?

Tue, 04/02/2013 - 22:12 | 3401722 New_Meat
New_Meat's picture

Well, we know that there will be no data-driven answers from our own GW nor from the Flack-minor.

- Ned

Tue, 04/02/2013 - 22:14 | 3401724 vote_libertaria...
vote_libertarian_party's picture

Say what you're trying to say is buy Facebook?

Wed, 04/03/2013 - 09:06 | 3402745 Seer
Seer's picture

Facebook epitomizes the insanity that we have become.

For illustrative purposes, FB, which produces ABSOLUTELY NOTHING, is capitalized to the tune of $60 BILLION, while ConAgra, which produces bad food, but nonetheless PRODUCES SOMETHING (resembling a fundamental requirement [Food, Shelter and Water]), is capitalized to the tune of about $15 BILLION.

Can anything other than a bubble created by mass injections of QE produce/hide something like this?

Tue, 04/02/2013 - 22:14 | 3401728 kito
kito's picture

this author not seeing the billions already being pumped into nat gas transportation infrastructure....stations are being built..... nat gas engines for trucking being built.......wont be long before the major u.s. trucking corridors are running rigs with nat gas.............there is an abundance of nat gas out there and one companys bankruptcy is another companies opportunity.......the trend has already begun to turn.................much of the transport will be nat gas over the next decade.................

Tue, 04/02/2013 - 22:20 | 3401736 ekm
ekm's picture

not that easy

Tue, 04/02/2013 - 22:29 | 3401754 kito
kito's picture

"not that easy" is a vague statement..easy is not an issue....whats at issue is just how quickly the trucking industry adopts/adapts.......do your homework.....i guarantee all major trucking corridors will be teeming with nat gas stations in 5-10 years.....fact remains the tide for nat gas has turned......and there is NO going back.......too much is already being invested in the infrastructure. 

 

cummings is THe major engine producer for trucking, and they will be pushing their new engine hard:

 

http://www.ccjdigital.com/cummins-showcases-2013-engine-lineup/

filling stations going up at a rapid rate:

http://www.reuters.com/article/2013/03/14/us-enn-lng-usa-idUSBRE92D09Y20...

Tue, 04/02/2013 - 22:41 | 3401784 ekm
ekm's picture

Main hindrance I've read about is safety.

http://www.sltrib.com/ci_10298405

 

I haven't paid much attention to it though. Probably I should.

Tue, 04/02/2013 - 23:34 | 3401946 mayhem_korner
mayhem_korner's picture

 

 

kito...it ain't gonna happen.  You do not know what you are talking about.  I was involved, very directly, with natural gas filling stations 25 years ago (when they were first ready to "take off").  The infrastructure play is prohibitively expensive because you have to build adequate-pressure pipelines, regulators, and metering in far too remote locations to create a viable network.  It could potentially be done in high-traffic, urban corridors where sufficient ng infrastructure already exists.  But that's been the meme for nearly three decades.  Do a little more homework before spouting off...

Tue, 04/02/2013 - 23:37 | 3401956 otto skorzeny
otto skorzeny's picture

it's like trying to reason w/ bitcoiners 

Tue, 04/02/2013 - 23:40 | 3401963 mayhem_korner
mayhem_korner's picture

 

 

well played...

Wed, 04/03/2013 - 05:46 | 3402351 negative rates
negative rates's picture

It's going down hard too, you're mising a criticial link which will snap the gas train dead in it's tracks, with nothing but the bills to pay to show for it.

Wed, 04/03/2013 - 09:29 | 3402821 Seer
Seer's picture

And you have the nerve of blasting ekm for being vague after you promote a bunch of crap with NO numbers backing them up?  "Working on it."

Well, guess what, Solyndra was "working on it."  Tesla Motors was "working on it."

Reality:

http://www.eia.gov/todayinenergy/detail.cfm?id=9991

NG is less efficient than diesel.  For trucking that will mean increased consumption or decreased payloads/miles driven.  Add in the additional capital costs for new equipment/modifications and supporting infrastructure and you're looking at increased trucking costs that will be passed through to the price of the transported goods.  This entire equation is one of contraction, not expansion.

Also, isn't the flashpoint for diesel higher than that of CNG?  Increased risk = increased costs (insurance rates).

The rate of "filling stations going up" is meaningless when comparing to existing infrastructure.  I could state that the murder rate of a given city went up a WHOPPING 50% in one year if there were two murders one year and then three the next.  Point is: it's pretty easy to show a huge increase with small sample sizes.

Do you work in marketing?

Tue, 04/02/2013 - 22:22 | 3401741 otto skorzeny
otto skorzeny's picture

gee-lemme guess who is going to pay(subsidize)for the NG as fuel for vehicle boondoggle-the same fucking idiots that pay for the ethanol subsidy-the US taxpayer- it sure the fuck won't be T Boone Pickens

Tue, 04/02/2013 - 22:33 | 3401765 kito
kito's picture

why would there have to be a subsidy? nat gas is dirt cheap....they are flaming it off at oil wells because its not worth capturing..........this isnt solar or wind that have a cost disadvantage to oil/coal.......... and arent there already major subsidies/tax breaks for the major oil/coal/nuclear producers??? 

Tue, 04/02/2013 - 22:45 | 3401783 otto skorzeny
otto skorzeny's picture

do you realize the massive amount of $ it would take to get even a small amount of vehicles on NG. why would it have to be subsidized- because unless you have been living under a rock US corporations don't do shit any more unless Uncle Sam is footing the bill- that' s why this whole country is fucked. and NG is dirt cheap until they decide to run it up like crude. hell- in 2008 NG was $13/million cubic- it can be run back to that in a few months.

Tue, 04/02/2013 - 22:44 | 3401800 kito
kito's picture

you can thank the chinese....clearly you didnt read my links........the companies are building the engines....the filling stations are already there and many more about to be there....im only talking about trucking for now....but otto, the funding is already there......and while nat gas doesnt have the same density as oil, it still works out to be cheaper in the long run for trucks...........

Tue, 04/02/2013 - 23:36 | 3401953 mayhem_korner
mayhem_korner's picture

 

 

It ain't happening.  Look at the cost of building a gasoline station v. a natural gas station in a location that is more than a mile away from an existing 100psi or better natural gas line (which is about 90% of the U.S.).  The cost of a station starts to get north of $1 million quickly, which cannot compete with the economics of gasoline stations.

Converting fleets of trucks, which can all return to a local network of yards to refuel, can and does work.  But it's been done for 25+ years now.  I'm sorry, but there is no quantum change coming.

Tue, 04/02/2013 - 23:40 | 3401966 otto skorzeny
otto skorzeny's picture

they should switch over cop cars to it- then the cop cars can be callled "ronson lighters" like the brits called our readily flammable sherman tanks in WWII

Tue, 04/02/2013 - 23:45 | 3401978 mayhem_korner
mayhem_korner's picture

 

 

...or they could just call them "Pintos"

Wed, 04/03/2013 - 01:03 | 3402114 Professorlocknload
Wed, 04/03/2013 - 04:35 | 3402286 Colonial Intent
Colonial Intent's picture

Lights first time, every time.

Wed, 04/03/2013 - 04:54 | 3402309 Surprese
Surprese's picture

"It ain't happening". I am sorry to interfere, but there is something I do not understand.

In Europe (where I live) most countries have public buses running on natural gas, I suppose in the US there are also cities with these buses. Of course they have a local natural gas station that refills them at the end of the day.

But this side of the Atlantic most gas stations have a hose for gasoline, a hose for diesel and a hose for oil liquified gas (different from natural gas).

There are lots of cars transformed to run on oil liquified gas (I have one in the family) as it is considerably cheaper than gasoline or diesel.

A part of the natural gas we import comes from Nigeria in ship containers, LIQUIFIED, and can be used in cars, but the engine is specific for that purpose (it is not adapted from a gasoline car, like in the oil liquified gas).

There are also gas stations with hoses for natural gas cars, where the liquified natural gas is stored next to the gasoline, diesel, and so forth, and there are cars running on natural gas.

There aren't more only because they require a special engine, which the Original Equipment Manufacturers aren't willing to mass produce, just yet.

Maybe it isn't economic viable (yet) because it would require the mass production of special engines, but the natural gas at the local station already exists, under LIQUIFIED form.

Wed, 04/03/2013 - 04:54 | 3402310 Surprese
Surprese's picture

"It ain't happening". I am sorry to interfere, but there is something I do not understand.

In Europe (where I live) most countries have public buses running on natural gas, I suppose in the US there are also cities with these buses. Of course they have a local natural gas station that refills them at the end of the day.

But this side of the Atlantic most gas stations have a hose for gasoline, a hose for diesel and a hose for oil liquified gas (different from natural gas).

There are lots of cars transformed to run on oil liquified gas (I have one in the family) as it is considerably cheaper than gasoline or diesel.

A part of the natural gas we import comes from Nigeria in ship containers, LIQUIFIED, and can be used in cars, but the engine is specific for that purpose (it is not adapted from a gasoline car, like in the oil liquified gas).

There are also gas stations with hoses for natural gas cars, where the liquified natural gas is stored next to the gasoline, diesel, and so forth, and there are cars running on natural gas.

There aren't more only because they require a special engine, which the Original Equipment Manufacturers aren't willing to mass produce, just yet.

Maybe it isn't economic viable (yet) because it would require the mass production of special engines, but the natural gas at the local station already exists, under LIQUIFIED form.

Wed, 04/03/2013 - 08:53 | 3402608 Flakmeister
Flakmeister's picture

You clearly have no idea what you are talking about....

The europeans are using LPG, i.e.propane and butane which is not methane. IN other words, LPG \= (CNG or LNG)....

So before spouting off drivel, please educate yourself, we have enough mis-informed asshats here already...

Wed, 04/03/2013 - 11:48 | 3403576 Surprese
Surprese's picture

I know my comment is too long for someone with Deficit Attention Disorder read till the end. Sorry for that.

I mentioned LPG AND Liquefied Natural Gas (LNG). In Europe we have LNG stations and cars, although very few for the motives I exposed.

You could google it, or search the wikipedia.

Wed, 04/03/2013 - 12:10 | 3403704 Flakmeister
Flakmeister's picture

There are essentially zero LNG filling stations... LNG is cryogenic liquid that is applicable in niche situations and will always be narrowly available... You are *still* confusiong LPG and LNG as a widespread transportation fuel...

As for "LNG fuel green corridors" I will believe it when I see it...

 

Wed, 04/03/2013 - 11:48 | 3403577 Surprese
Surprese's picture

I know my comment is too long for someone with Deficit Attention Disorder read till the end. Sorry for that.

I mentioned LPG AND Liquefied Natural Gas (LNG). In Europe we have LNG stations and cars, although very few for the motives I exposed.

You could google it, or search the wikipedia.

Wed, 04/03/2013 - 12:27 | 3403795 Flakmeister
Flakmeister's picture

PS learn how post only once... The first time is an accident, the second shows that you are also clueless...

And would you remind us just how much LNG *Nigeria* exports?

Wed, 04/03/2013 - 15:36 | 3404814 Surprese
Surprese's picture

Don't know why, my posts show up twice,

By the way, I have a LNG station in my hometown, duh!

Yes, NG imported from Nigeria, cryogenized (we don't have shale around here).

Wed, 04/03/2013 - 16:24 | 3405216 Flakmeister
Flakmeister's picture

So if you are in Europe then you paying a very similar price per BTU (compared to diesel), which implies that LNG is purely a fuel tax arbitrage... In other words very liable to disappear and hardly the basis for a massive outgrowth of infrastructure....

LNG will never be more than a niche fuel, primarily for short haul fleets....

 

Wed, 04/03/2013 - 16:50 | 3405371 Surprese
Surprese's picture

OK, you got me there: due to the cost of the cryogenization process, it is not much cheaper than diesel, and also the engines for the cars are more expensive than standard fuel engines.

On the other hand, the compressed NG station (not available around here, yet, but I believe already available in the US as a test, for Honda cars) is already much cheaper.

I am just warning: the process of turning from gasoline/diesel to Oil liquefied Gas (first) and LNG (second) is on the move for a simple reason: Peak Oil.

Oil has a lot of applications (plastics, for instance) that make it more important as a raw material than as fuel.

The Oil liquefied gas was burnt in the refineries just a few years ago, now it is collected and stored for fuel purposes, and it will increasingly be so.

 

Wed, 04/03/2013 - 19:35 | 3406099 Flakmeister
Flakmeister's picture

You know just enough to think that you know more than you think... No insult implied, you simply fail to grasp the big picture.

Yes, Peak oil is here, and guess what? Peak NG is coming right behind, 15 years is nothing in the grand scheme of things...

NG is cheaper here because NG is still a regional market, moreover, if you start replacing, on a significant basis, oil use with NG then NG price to will drift to where there is no longer any arbitrage availible... Simply look at the LNG prices paid in Asia, it is on a par with Oil vis a vis BTUs...

Moreover, because of LNG evaporation and the CHG effect of Methane there is no "green" in NG....

I would not count on NG remaining at discount to oil for transportation purposes for very much longer and that amortizing the cost of conversion will likely result in disappointed people a few years from now...

Wed, 04/03/2013 - 00:36 | 3402071 Eally Ucked
Eally Ucked's picture

What if that shale gas is just a big hoax as that article implies?

Wed, 04/03/2013 - 16:25 | 3403058 Flakmeister
Flakmeister's picture

There will be a lot of disappointed people.....

So what else is new?

Edit: It is not a hoax, there is real gas, but it is not the pancea it is touted to be...

Tue, 04/02/2013 - 22:59 | 3401803 DoChenRollingBearing
DoChenRollingBearing's picture

@ otto

 

Peru has done it, much of their small-car taxi fleet in Lima runs on NatGas.  They have a local industry that converts engines from gasoline to NatGas.  And Peru is poor, if they can do it, so can we.

Tue, 04/02/2013 - 23:36 | 3401949 otto skorzeny
otto skorzeny's picture

there's a way here- but no (political) will. look-the US is broke and the buzzards are picking off the last pieces-NG for vehicles is pretty far down the list.

Tue, 04/02/2013 - 23:52 | 3401997 kito
kito's picture

Why should there be political will. Politics should stay the Fuck out of the marketplace.....

Wed, 04/03/2013 - 04:00 | 3402257 cossack55
cossack55's picture

There is a marketplace?   When did it return?  You must mean Ebay with a Bitcoin-driven PayPal.

Wed, 04/03/2013 - 05:27 | 3402337 Sudden Debt
Sudden Debt's picture

India ALSO!!

Almost EVERY car and TjukTjuk drives on gas.

AND ALSO: THOSE CARS STILL DRIVE AND COME FROM THE STONEAGE!!

Our cars are loaded with electronics, the most advanced engines... and we can't do it...

 

Tue, 04/02/2013 - 23:01 | 3401861 imapopulistnow
imapopulistnow's picture

Not that easy.  The amount of natural gas used for transportation does not even show up on the charts as a percent.  It may take off eventually but it will be decades before it has much of an impact.  If initial tests prove profitable, I suspect you will see the conversion of locomotives sooner than big rigs.  Fleets perhaps but not personal autos. I hope it happens faster. 

The author fails to mention the success in Marcellus where the break even point is substantially less, or the literally phenomenal productivity improvements in drilling that have lowered the costs of production since 2010. 

Further, too many companies have committed too much investment in new chemical, steel, fertilizer, conversion of NG to diesel, and LNG export facilities to believe that we only have 20 or so years of the stuff available.  They are putting up money behind their analyses and hence I would tend to believe they are not all wrong in determining that relatively low cost natural gas is here to stay.

Wed, 04/03/2013 - 09:34 | 3402834 Seer
Seer's picture

" nat gas is dirt cheap....they are flaming it off at oil wells because its not worth capturing..."

Oh, I get it, you're playing MDB here!

I've heard this logic before... all we had to do in That case was open up more McDonalds and we could run EVERYTHING off of used veggie oil!

BTW - I'm a bit biased.  I've got a diesel tractor and truck.  Neither run on used veggie oil, but in a pinch...

Tue, 04/02/2013 - 22:38 | 3401780 CrashisOptimistic
CrashisOptimistic's picture

I won't embark on a point by point here.  I'll just help you.

He's not seeing it because it's not happening.

There are garbage trucks running on natgas, because they have to go to the dump so frequently anyway to offload trash.  Might as well refill during that time.  The existance of such fringe application, miniscule consumption replacement changes essentially nothing, and most importantly, makes very clear how it cannot scale.

When even 30% of US freight transport takes place via nat gas, then you may celebrate.  That needs to happen in just a few years or the crushing scarcity of oil will ensure it never happens.

Tue, 04/02/2013 - 22:47 | 3401810 kito
kito's picture

sorry you are wrong...even fed ex is starting to switch, and will continue to do so at a greater pace....

 

http://online.wsj.com/article/SB1000142412788732362880457834863113717304...

Tue, 04/02/2013 - 22:51 | 3401819 CrashisOptimistic
CrashisOptimistic's picture

Talk is cheap and sometimes can qualify for a corporate tax break.

It hasn't happened.  It won't happen.  It will start to switch, and then it will stop switching.  The pace, molasses slow, will stop.

Tue, 04/02/2013 - 23:01 | 3401856 DoChenRollingBearing
DoChenRollingBearing's picture

Peru has done it, much of our vehicle fleet can switch to NatGas.

See: 3401803

Tue, 04/02/2013 - 23:07 | 3401878 kito
kito's picture

not sure why there is a perception that its so difficult...you are right dochen.........and nat gas will make up at least 25-30 percent of all trucking in the u.s. within 10 years. guaranteed.

Tue, 04/02/2013 - 23:42 | 3401971 mayhem_korner
mayhem_korner's picture

 

 

I'll take that bet.  10 oz of pre-1933s.  U in?

Wed, 04/03/2013 - 01:22 | 3402134 ILikeBoats
ILikeBoats's picture

Are you even aware of how long trucks are kept on the road?  Even if 25% of all trucks sold today and in the future were natgas, it wouldn't happen in 10 years. Besides you are not specifying what unit you are measuring - total # of trucks on the road?  Miles driven? What?

Wed, 04/03/2013 - 02:49 | 3402216 ClassicalLib17
ClassicalLib17's picture

@ILikeBoats,  I will refer you to the rapid disappearance of the cab-over design diesel semi-tractor.  I think the fleet turns over much more rapidly than you think. 

Wed, 04/03/2013 - 09:39 | 3402865 Seer
Seer's picture

And it will come in the unavoidable form of trucking decline.

I do NOT believe that the markets are clear on this.  It's like the US military seeking out alternative sources- THEY will get energy no matter what!  And it's like commercial air travel- it's so fucking highly subsidized that it's not even funny, yet the airline companies have the audacity to pretend as though they are profitable!

When there are two people left who can afford something, will that be "success?"

Major long-haul AIN'T going NG.  Not in any volume that even comes close to what we have now (under diesel).  Again, economies of scale; people just cannot get it through their heads that scale ain't going to be there (trucks won't run if people aren't buying shit- the fewer transport trips, then, start rocketing up costs, which in turn smack down final demand...

Wed, 04/03/2013 - 01:08 | 3402120 Professorlocknload
Professorlocknload's picture

Many fleets, public and private have run on CNG in California for years. More every day.

CNG also gets HOV lane access.

http://www.cnglocator.net/CNGLocationsbyState/CaliforniaCNGStations.html

Tue, 04/02/2013 - 23:39 | 3401961 mayhem_korner
mayhem_korner's picture

 

 

FedEx, UPS, and a number of transit authorities "started" to switch 25 years ago.  Locally-refueled fleets, and some on-a-mission folks who drive 4 miles round trip per day are the only viable market for ng vehicles. 

Wed, 04/03/2013 - 01:37 | 3402149 Professorlocknload
Professorlocknload's picture

Production vehicles such as Fords and Hondas have ranges around 200 miles on a fill up.

Also, a $500 home filling set up is in the works. Honda's filling station was in the $3 k range.

 

Hybrid diesel/CNG is certainly catching on.

Wed, 04/03/2013 - 08:39 | 3402646 mayhem_korner
mayhem_korner's picture

 

 

You are reprinting things that were said in 1990.  Try again.

Wed, 04/03/2013 - 09:42 | 3402878 Seer
Seer's picture

"Hybrid diesel/CNG is certainly catching on."

Oh, WOW! "Catching on" is a really big number, it's something that shareholders shouldn't wait to pounce on, just imagine what great margins that this must represent!

They'll be catching on while "austerity" kill the end consumer...  BIG PICTURE, don't lose sight of it...

Tue, 04/02/2013 - 22:55 | 3401834 steve from virginia
steve from virginia's picture

 

 

 

Set reality free: it's good to see Art Berman's and Rune Likvern's names appear in a ZeroHedge article. Maybe you don't suck so bad after all!

 

:)

 

"Environmental rules have to be wound back to 1970 standards -- in other words, disband the EPA and make civil plaintiffs show actual harm, not just hypothetical harm because someone goofed on a sheaf of mandated paperwork."

 

Oh well, the jackassery is never far away ... read it twice, there has to be a von Mises reference in there somewhere.

 

'Winding back environmental rules' isn't going to get one more barrel or cubic foot of oil/gas onto the market. There are either hydrocarboms in the ground or there aren't.  Getting gas and oil out of the ground isn't a proscribed activity, it's just nobody wants the Macondo blowouts, not even oil companies.

 

BTW: oil rigs follow the same rules as other kinds of ships ... and boats. The Coast Guard will put you in a world of hurt for a fuel drip from your outboard motor.

 

Believe it or not, there are other things that matter besides gasoline ... for that freaking guzzler.

 

 

Tue, 04/02/2013 - 23:08 | 3401877 Totentänzerlied
Totentänzerlied's picture

The message is: boost production NOW ([([so net-energy goes negative even sooner])])

Tue, 04/02/2013 - 23:21 | 3401913 gonetogalt
gonetogalt's picture

Steve, if you don't think over regulation keeps production off the market you certainly have never tried to permit an operation...especially on public land. My experience is in mining, in my case the ore is still in the ground thirty years later, but the idea is the same.  And in the long run, you're right, we are quickly running out and it will bring this whole thing to a violent end.

Wed, 04/03/2013 - 02:06 | 3402184 Professorlocknload
Professorlocknload's picture

The EPA is becoming a terrorist organization. And CARB is the EPA on steroids. Small business is being eliminated one regulation at a time by both.

Encouraged by big corporations with their connected lobby's and exemptions.

Compliance expense becomes gate keeper against start up competition.

Ever wonder why small business is escaping California? 

Some in Silicon Valley say CARB of California built Austin, TX.

EPA and the Federal Reserve have a lot in common in the fields of logic. I speak from experience, but if I presented examples here you would say things like "Impossible, our government would never do anything that dumb," so I'll not.

 

Wed, 04/03/2013 - 08:25 | 3402594 Flakmeister
Flakmeister's picture

A fine example of Conpsiratorial Ideation running amok and the damage that it produces....

Wed, 04/03/2013 - 05:50 | 3402356 negative rates
negative rates's picture

It's not about what people WANT anymore, it's about right and wrong, and actually knowing the difference between the two.

Tue, 04/02/2013 - 23:28 | 3401939 mayhem_korner
mayhem_korner's picture

 

Why does the author postulate this up front...

Spare production and market rigging are easily disproved. It's a competitive global market with thousands of brokers, shippers, production operators and service companies.

...and then conclude with this:

Third and most urgently, stop subsidizing Wall Street. Let the market decide what interest rates make sense, rewarding companies who can find and produce oil,

Complete non-sequitur.

Apart from that, he misses the primary domestic energy implication of environmental regulation (it ain't natural gas, it's coal).

Tue, 04/02/2013 - 23:38 | 3401957 worbsid
worbsid's picture

A few years ago I was paying about a dollar/gallon for gas.  Now I am paying $3.74.  Either that 'hand' thingy isn't doing it's job or we are running low on supply or we are being ripped off big time.  All the words in between are just so much blow.  Thanks for the Cummings link. Interesting, but running an engine on NG is old tech and this is just scaled up.  It is not a diesel on NG but a big sparky.   

Wed, 04/03/2013 - 01:37 | 3402085 NaN
NaN's picture

"Environmental rules have to be wound back to 1970 standards -- in other words, disband the EPA [...]."

After all the detailed points made earlier in this posting, why end with an unsupported, blanket, inflamatory statement like this? London used to have air like Beijing has today, but they cleaned up their act. No one wants crappy air or cesium raining down on them.

Good to see some Bakken reality; too many believe the hype. 

Wed, 04/03/2013 - 03:06 | 3402227 Hobbleknee
Hobbleknee's picture

The air isn't clean because of the EPA; the air is clean because people decided they want clean air.  In fact, America was well on its way to clean things up before the EPA was conceived.  All that's needed to protect the environment is enforce existing laws.  It was illegal to dump toxic waste long before the EPA came along.

What has the EPA done about Fukushima, besides lie about the seriousness of the event--which is still ongoing by the way--turn off radiation monitors and raise the tolerance levels of accepted radiation?

Wed, 04/03/2013 - 08:21 | 3402589 Flakmeister
Flakmeister's picture

Do you really believe what you just wrote?

Wed, 04/03/2013 - 04:28 | 3402278 Colonial Intent
Colonial Intent's picture

Unless the pipeline is built how will the koch bros get all that canadian oil to their coastal refineries so they can export it to china?

American Energy Independance ....LOL thats a funny joke.

 

 

Wed, 04/03/2013 - 08:22 | 3402593 Flakmeister
Flakmeister's picture

Don't forget Valero and Exxon... Read Valero's 10-Q about "exploiting tax-free export zones"....

Wed, 04/03/2013 - 05:28 | 3402339 CEOoftheSOFA
CEOoftheSOFA's picture

Good article. The Devonian Shale was a bust in the '70's and '80's. apparently the Marcellus may not be any different.

Wed, 04/03/2013 - 05:27 | 3402340 CEOoftheSOFA
CEOoftheSOFA's picture

Good article. The Devonian Shale was a bust in the '70's and '80's. apparently the Marcellus may not be any different.

Wed, 04/03/2013 - 06:02 | 3402366 writingsonthewall
writingsonthewall's picture

 and make civil plaintiffs show actual harm, not just hypothetical harm because someone goofed on a sheaf of mandated paperwork

You mean like how the cigarette manufacturers insisted on proof of lung cancer - and how they used their financial muscle to ensure the burden of proof was so high that those bringing the action couldn't afford it?

...or were you thinking more specifically than that?

This is a typical rant - you have one case in mind (probably your own) and you deduce an entire thesis from that anectdotal case.

The fact is that capitalism doesn't allow for human health or well being as it's driven by profit - not morality. Therefore topretend it does is misleading - as the cigarette companies proved - contrary to free market thinking - they didn't need to worry about customer service - or the fact that their cigarettes were killing people - despite the only threat the free marketeers have which is to 'withdraw your custom' - a threat which can be safely ignored by the company in question.

 

 

 

 

 

Wed, 04/03/2013 - 10:39 | 3403155 DYS
DYS's picture

"What does it mean to say a business has responsibilities?  Only people can have responsibilities."   Milton Friedman

Wed, 04/03/2013 - 06:17 | 3402380 Iconoclast
Iconoclast's picture

Is the conclusion that the USA has only 11 years of gas supply? How much H2O is poisoned to recover that supply?

Wed, 04/03/2013 - 10:41 | 3403170 DYS
DYS's picture

With fracking?   Unfortunately, it appears that it will be substantial.

Wed, 04/03/2013 - 07:07 | 3402429 Lumberjack
Lumberjack's picture

Check out the Apex article (BP owns Apex)

http://dailybail.com/home/why-wind-power-wont-work.html

 

BREAKING:

BP to sell US wind assets

http://www.reuters.com/article/2013/04/03/us-bp-wind-idUSBRE93208B20130403

[snip]

(Reuters) - BP (BP.L) has put its U.S. wind farm operation, one of the largest in the country, up for sale, marking the continued retreat of big oil companies from renewable energy investments while oil and gas projects offer them better returns.

 

The picture here is priceless... 

http://dailybail.com/home/obama-fires-up-his-green-energy-sales-pitch.html

Wed, 04/03/2013 - 07:12 | 3402441 Nozza
Wed, 04/03/2013 - 08:01 | 3402530 orangegeek
orangegeek's picture

Nat Gas pricing has been moving sideways since 2009, but we could see a breakout later this year.

 

http://bullandbearmash.com/chart/monthly-spot-natural-gas-closes-resista...

 

 

Wed, 04/03/2013 - 08:44 | 3402663 AnAnonymous
AnAnonymous's picture

Oh, but 'americans' will deliver on their promises of energy independence. Only a fool would doubt that word.

They will deliver on their word the terminal way and this for many sources of energy.

The way it will bring is going to be very simple:

you can only be dependent on things that are.

As 'americans' have put humanity on the path of depletion of resources, it is no risk to declare independency in a near future.

Once the oil to be found in the ME gulf is gone, anyone on the planet will turn independent of the oil that used to come from the gulf.

Once those sources are gone, anyone will be independent from them.

When they are, you might be dependent in a controlled/uncontrolled manner, you might be independent. It is how freedom expresses. As 'americans' are not interested in freedom but parading coercion as freedom, the depency is one that will go down to depletion.

Once those sources are gone, you will be forcefully independent of them. Probably not for the better but nevertheless, you will be independent.

Independence of certain energy sources is nothing arguable in an 'american' world. It is a quasi certainty that can only be averted by disasters like a space rock hitting the world, killing most of humanity (especially 'americans') or very unlikely disasters of that sort.

In all other cases, you are down the road to energy independence. The terminal way.

Wed, 04/03/2013 - 09:14 | 3402767 MrBoompi
MrBoompi's picture

I guess it's no surprise to hear an oil man call for 1970 environmental regulations and fail to promote renewable energy sources. I can certainly agree with the analysis of the hydrocarbon markets, but think the recommendations going forward quite inadequate.

Wed, 04/03/2013 - 10:16 | 3403041 Hohum
Hohum's picture

Even if you have no environmental concerns, it's about the NET energy.  The author does some analysis.  Many of you here do not because it interferes with ideology.

Wed, 04/03/2013 - 10:35 | 3403126 DYS
DYS's picture

It's difficult to say why the EPA was really created in the 1970's when the status quo since then has been a political game of waivers and exemptions for big oil.   The fact is that big oil and the government have a symbiotic relationship.   If, for example, ExxonMobil was to disappear today, so would a substantial part of US GDP and tax revenue.   The use of US military assets is a "benefit" to Exxon, who just signed 20 well contracts in Iraq.   I think it's time to see what the game really is.  So, let's stop pretending that government and big oil are in opposition.   They are in collusion.   If we remove the regulation, it will even the field for all players, but then we need to have a realitic strategy to deal with the environmental disasters that WILL happen... perhaps a superfund for disasters.   I agree the current system is broken and our addiction to oil is not likely to go away any time soon.

Wed, 04/03/2013 - 13:45 | 3404219 dadichris
dadichris's picture

Crony capitalism cannot exist without regulation by the State to protect the near-monopoly at the top of the industry, so they're not going away any time soon.

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