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Guest Post: The Limited Economic Impact Of The US Shale Gas Boom

Tyler Durden's picture




 

Authored by Mathilde Mathieu, Thomas Spencer, & Oliver Sartor, via Vox EU blog,

The recent rapid growth in the production of unconventional oil and gas (shale gas and tight oil) in the US has led to a significant decrease of natural gas prices as well as reduced oil imports. This has raised questions about the impacts of the unconventional oil and gas revolution on the US macroeconomy, industrial competitiveness, and energy sector. It has also raised questions about its implications for the EU (e.g. Beffa and Cromme 2013). Given the considerable discussion about the impacts of shale, in a recently published study by the Institute for Sustainable Development and International Relations (IDDRI), we aimed to address these questions empirically (Spencer et al. 2014).

Energy-sector impacts of unconventional oil and gas in the US

Between 2005 and 2013, US production of natural gas increased by 33% from 18 to 24 trillion cubic feet per year. Most of this was due to production of shale gas, which increased from 0.75 to 8.5 trillion cubic feet (Gruenspecht 2013). Over the same period, US production of liquid fuels increased by 52%, and the contribution from tight oil increased from 0.29 million to 3.48 million barrels/day.

As a result, net oil imports have also fallen, from over 11 million barrels/day in 2007 to 8 million barrels/day in 2013. Less well known, however, is that this has occurred as much due to a broader drop-off in energy demand. Alongside greater domestic production, US energy consumption has been moderated by a combination of recession, new energy efficiency standards, and changed consumer behaviour – in particular in response to higher global oil prices and an ageing population. For example, in 2012, per capita energy use in the US actually fell by 5% versus 2011, despite economic growth in that year.

The conventional wisdom also holds that the US consumer has received a massive boost from lower energy prices resulting from the gas glut. In reality, the unconventional oil and gas revolution has actually had a quite uneven impact on consumer energy prices. Gas prices for residential consumers have fallen around 20% from their pre-2008 peak, while industrial and power-sector gas prices fell by about 50% from their 2008 peaks. Residential electricity prices have continued to rise, and industrial electricity prices have also risen – albeit at a lower rate. For households, however, the effects of the unconventional oil and gas revolution have been largely outweighed by continued rises in electricity and in particular gasoline prices (Table 1).

Table 1. Average household energy expenditure, 2005–2012

Data: US Census Bureau, 2012, Consumer Expenditure Survey.

Outlook for the US energy sector

It is likely that the US will become a net gas exporter around the end of this decade, subject to political approval of export infrastructure. This would lead to some narrowing of price gaps over time between US and regional gas prices. However, the range of scenarios assessed in the study suggest that the US will remain a significant importer of crude oil in coming decades. Policies to improve the efficiency of the transport sector will therefore be crucial for reducing US crude imports and costs to US motorists.

The scenarios examined do not suggest that the US shale revolution will lead to a significant emissions reductions from the US energy sector. Indeed, historical data shows that the recent decline in the share of US coal-fired electricity was due to the cyclical drop in natural gas prices, which has largely reversed (Figure 1). Longer-term production cost expectations for shale gas are closer to $6–$10/MBTU. In the absence of further policy, such as the currently-proposed emissions standards for new power plants, the shale revolution will be insufficient on its own to drive coal out of the US power fleet or decarbonise the US energy sector.

Figure 1. Coal-gas share in US electricity and natural gas prices for power generation

Source: US Energy Information Administration, 2013, Net Generation by Fuel Type, Natural Gas Electric Power Prices. http://www.eia.gov/oiaf/aeo/tablebrowser/

Macroeconomic impacts of the unconventional oil and gas revolution

  • Impact on productivity and GDP of lower gas prices

The impact of lower gas prices on US productivity can be broadly categorised into two parts: a) the income effect, resulting from the fact that the same economic good, gas, can now be produced more cheaply and so, if the same amount of gas is consumed as before, more income can be spent on other goods; b) substitution effects, resulting from the fact that changing gas prices may change the relative prices of other goods in which gas is an input and this may in turn have a range of knock-on consequences for productivity in other sectors.

A detailed microeconomic analysis suggests that the impact on GDP of these latter effects is likely to be negligibly small, affecting sectors representing only 1.2% of the US economy (see Figure 2). Assuming a persistent gap of -$4/MBTU to -$8/MBTU between US gas prices with shale compared to the no-shale scenario, we estimate a total income effect of around 0.575% of GDP on average between 2012 and 2040. This is a long-term increase in the level of GDP, not the growth rate. A multi-model comparison study by Stanford University came up with a similar figure for the long-term GDP impact of shale gas (0.46% of GDP) (Huntington 2013).

  • Improvement in the US trade balance due to decreased oil imports

Increased production of oil and gas has lowered US imports. Since gas imports are small at the level of GDP, essentially this means that oil producer surplus is being transferred from non-US oil exporters to US oil producers and thereby into the US economy. Assuming a long-run marginal production cost of around $70–$80/barrel for light tight oil and a long-run oil price of $114/barrel, we estimate that the long-run GDP effects of reduced oil imports would be roughly equivalent to a 0.35% increase in the level of GDP in the period to 2040 relative to 2012 levels. This may be offset slightly, but not entirely, by a small increase in the exchange rate and other crowding-out effects in US capital and labour markets, but we ignore these effects. As with the point above, this is a long-term increase in the level of GDP, not the growth rate.

Combining the two calculations would lead to a change in the long-run level of GDP of 0.875% on average over the next two to three decades. As discussed further below, we do not see a significant positive impact on the US manufacturing deficit in aggregate.

  • Stimulus effect due to the recessionary circumstances in which the unconventional oil and gas revolution took place.

The US economy was not and is not at full employment of labour and capital during the recent shale boom. We estimate the short-term stimulus of lower gas bills and increased investment, employment, and spending on intermediate inputs in the oil and gas sector at 0.13% of GDP and 0.48% of GDP, respectively.

Impact on manufacturing competitiveness

Figure 2 shows the share of gas as a feedstock and fuel in value added in gas-consuming manufacturing subsectors. This is compared with sectoral expenditure on employer-sponsored health insurance in order to give a point of comparison. Gas-intensive sectors make up a relatively small share of the US manufacturing sector, and only about 1.2% of US GDP. There is no evidence that the shale gas revolution will contribute to a ‘reindustrialisation’ in the US at the level of the manufacturing sector as a whole. Exports have increased in gas-intensive sectors, but only to a total of $23.6 billion in 2012 compared to a US manufacturing trade deficit of $779.4 billion (Figure 3). Coupled with other factors since 2007 which would tend to boost exports and reduce imports, including declines in the US real exchange rate during this time, and the effects of the recession on net imports, it is difficult to conclude that any evidence exists of a US manufacturing renaissance led by shale gas. This conclusion is similar to that reached in an IMF staff working paper which concluded that the benefits of cheaper gas are likely to be limited to the chemicals, primary metals, and paper and print sectors, and that, on average, a doubling of the US–G7 gas price gap was associated with only a 1.5% increasing in US manufacturing production (Celasun et al. 2014).

Figure 2. Gas and health care expenditures in the manufacturing sectors, 2010

Data: US Energy Information Administration, US Census Bureau.

Figure 3. US real trade balance by product type, millions of 2009 dollars

Data: US Energy Information Administration, US Census Bureau Foreign Trade Statistics.

Conclusions: A revolution, not a panacea

Our analysis suggests that commentators and policymakers need to better distinguish between the ways in which the US shale gas boom constitutes a ‘revolution’ and the ways in which it does not. The US unconventional energy boom has reversed the decline of domestic production, significantly lowered oil and gas imports, reduced gas costs for consumers, and created a political space for tougher regulations on coal-fired power plants. But it is not a panacea. Even if current estimates of production turn out to be accurate, the benefits to the US economy in the long run are relatively small, and the benefits to manufacturing competitiveness in most sectors are even smaller. In the longer term, US energy security and climate goals will still require a strong role for public policy frameworks. Improving energy efficiency and promoting low-carbon technologies will be just as important as before. For the EU, given its more limited known reserves of unconventional oil and gas, these conclusions are likely to be all the more relevant.

 

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Sun, 03/30/2014 - 21:23 | 4609123 DoChenRollingBearing
DoChenRollingBearing's picture

If Cummins Engine figures out the right technology (and they're working on it) to use NatGas rather than diesel fuel in truck, train and marine engines, than I think we have a nice little ace-in-the-hole not well recognized around here....

EDIT:

I mean, even PERU is ahead of us in using NatGas in their vehicle fleets (in Lima anyway).

Sun, 03/30/2014 - 21:25 | 4609134 Sabibaby
Sabibaby's picture

UPS and FedEx figured it out... 

Sun, 03/30/2014 - 21:35 | 4609155 DoChenRollingBearing
DoChenRollingBearing's picture

I did not know that.  + 1

Because profits matter...

In Lima, it is mostly small cars that are now running on NatGas, even two of OUR delivery vans do as well.

Sun, 03/30/2014 - 22:49 | 4609360 CrazyCooter
CrazyCooter's picture

For anyone that really wants to know, go troll the "tech-talk" series from the now defunct www.TheOilDrum.com site. Bottom line is that is the the production curve for fracked wells is, well, a fraction of conventional wells. These are money losers that only look good in a "epic liquidity" environment.

If we had half way normal interest rates, the shale gas/oil boom never would have happened.

Happy investment? Mal investment?

You decide.

The bust is going to be a mother fucker. You will see it on your electric bill given the bad bets on infrastructure being made with "shale gas forever" infrastructure investment psychology in mind ...

Regards,

Cooter

Sun, 03/30/2014 - 23:30 | 4609458 SmackDaddy
SmackDaddy's picture

thanks for the link cooter

Mon, 03/31/2014 - 10:45 | 4610528 greyghost
greyghost's picture

should two of the authors of this article work for a french enviromental organization that goes by the initials IDDRI, does that cloud their thinking? does not working in the oil field [business] hinder their understanding of these topics? reading down the list of contributors at the dead oil drum site a person can't help but notice the lack of true hands on experience in the oil and gas business? does trolling the internet for oil related articles make me an "expert" in the oil business and qualified to write "expert" commentary....I think not.

Sun, 03/30/2014 - 23:32 | 4609465 Rock On Roger
Rock On Roger's picture

I've operated methane fueled Cummins engines for over 25 years.

And Caterpillar, Waukesha, White-Superior, Arrow, GM, Ford, Chrysler, Kubota, Nissan and likely a few others I can't remember. I like Cats, 75,000 hours until a major overhaul for a 1200 hp Cat 3516.

These engines drive gas compressors which compress the gas for processing and transportation usually on the upstream side.

30 years ago I visited New Zealand. I recall a lot of automobile fuel stations included a natural gas fueling station. I'm not sure how much natural gas they use for transportation now.

Burn gaz bitchez.

Stack On

 

 

Sun, 03/30/2014 - 23:54 | 4609503 DoChenRollingBearing
DoChenRollingBearing's picture

It looks like the transition to gas is coming along faster than I thought.  I'll pay more attention.  

Rock And Stack On, R.O.R. (and Cooter!)

Mon, 03/31/2014 - 00:19 | 4609560 Rock On Roger
Rock On Roger's picture

Greetings Do Chen. I hope things are rolling smoothly for you.

I'm considering converting some of our fleet of pick-up trucks to methane fuel. Ford builds an NG engine, optional on F250s I think. The compressor for fueling is quite expensive though. There are 13 public NG fueling stations within a 200 mile radius of the area where we work.

So now that I've said this I'll have to dig into the costs of a conversion. Encana is operating natural gas fueled pickups.

Every organic thing produces methane, some when alive, some dead. We'll never run out of gas as long as there is life on this planet. There are billions of trillions cubic feet CH4 locked in gas hydrates in ocean floors all over earth. This is a reserve we haven't figured out how to produce yet.

Those damn bacteria fart alot.

Stack On

Mon, 03/31/2014 - 00:56 | 4609627 DoChenRollingBearing
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Peru has had an active effort to convert small cars (and micro-vans, like two of ours) to gas as well as liquids-from-gas (condensate, I forget the acronym).  Most of the taxis I have taken in the past use natural gas.

The consensus seems to be (I talk with taxi drivers, it's my nature) that the gas-fueled engines are MUCH cheaper to run (cost per mile, say), but there is another cost: that the engines wear out sooner (gas vs, the diesels).  Hey, I am not an expert (nor close), but Peru's big gasfields are being USED!  They are probably going to build a second gas pipeline over the Andes, this one further south.

***

Business so far in 2014 is a tiny bit better than 2013 (which was itself good).  For the moment, Peru is doing better than Brazil, which seems to be taking more of a beating from the China slow-down.  But, if China goes down hard, Peru will get whacked too.

***

I read some doomer item re the methane hydrates on the ocean floors.  I do not remember the details, but was another one of those Typical Scary Scenarios that many us (yo, guilty here) like to read if only to stay current.

If these hydrates are that immense (and apparently so), yeah, if we can figure out how to get at producing methane, it would be a big help.

At this point, DoChen has run way off the reservation of even his own implied knowledge..., and will get out while the getting is good.

***

Stacked a new item for me the other day: a US $5.00 gold piece, 1898-S, perhaps VF condition (it was not formally graded), cost me $375, so not WAY over spot.  Pretty lil thing...

Mon, 03/31/2014 - 01:05 | 4609642 CrashisOptimistic
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Methane hydrate talk is usually anti doomer.  Infinite energy stuff.

Mon, 03/31/2014 - 01:25 | 4609668 MEAN BUSINESS
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Canada withdrew from research in the arctic on calthrate/methane hydrates about a year ago. Japan left to work on it alone? The methane bomb refers to the tipping point where warming allows permafrost and arctic ice shelves to belch methane which increases warming which releases more methane and KABOOOM! see Guy MacPherson/ Nature Bats Last.

Top 5 best handles on ZH CrashisOptimistic!

Mon, 03/31/2014 - 01:24 | 4609669 Seer
Seer's picture

Yeah, baby!  Jusgt think of how much fuel can be saved by the new shipping routes! </sarc>

Mon, 03/31/2014 - 01:30 | 4609675 Rock On Roger
Rock On Roger's picture

Liquids from gas is stuff like propane C3H8, butane C4H10, pentane C5H12, as producers we call it condensate and it is very valuable here, it is used a as solvent to lower the viscosity of tar oil. It will stay liquid with a bit of pressure, think Bic lighter.

Aye, methane gas hydrates can melt, releasing methane into the atmosphere and getting Flakmeister all excited. Apparently methane is 23 times more powerful a greenhouse gas than carbon dioxide.

 

I googled your new coin, very pretty. Who is the dude on the face?

I started stacking one ounce bars after I realized that the coins I was stacking have the queen's face on them.

Thus, in my country, those coins belong to her, and I'm in non-compliance with the law if I was to lay that coin out on the train track to see how flat it would get. Can't deface the bitch. I'm sure if she wants them back then I'm SOOL.

Stack On

 

Mon, 03/31/2014 - 01:59 | 4609702 DoChenRollingBearing
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My numismatic knowledge is weak, like my knowledge of many things.  IIRC, it is called a "US Liberty $5.00 Gold Coin".  I think it is NOT a real person, but I am not sure, and I am tired so off to bed really soon.  That is likely "Google-able" to find that out (real person or not), or we can hope that "Rocky Racoon" steps in to straighten us all out...

Yow re the Queen (showing her age on the latest batch of Canadian coins we saw last June) owning coins w/ her face on 'em!  There are some weird laws around, I remember when I lived in Texas there were some strange old laws there.

Bearing's head spins trying to imagine what would happen to a 1 oz Maple getting squashed 400 times (100 car train), what with gold being so malleable that I can't even imagine what that sheet of gold would like after a CN train runs over it...

***

The condensates are also used as vehicle fuel too in Peru, but I know even less about that.  They are poor there, so if they can save a few $$$, they will.

Mon, 03/31/2014 - 02:41 | 4609747 Rock On Roger
Rock On Roger's picture

LOL, I'll get Emily from Nome to help me dredge my maple dust from the rail bed.

 

Stack On

Mon, 03/31/2014 - 05:21 | 4609855 Taint Boil
Taint Boil's picture

 

 

Yes, highly recommend The Oil Drum. So sad to see them go (site is still up though).

Mon, 03/31/2014 - 08:05 | 4609988 troubledasset
troubledasset's picture

In general I agree with you. However I don't think you can be positive about the effects of interest rates on ROR with the (albeit few) companies who are either a) operating within their cash flow or b) not unconventional pure plays.

Mon, 03/31/2014 - 01:30 | 4609674 Seer
Seer's picture

Until the demand for their services drops... (consumer is tapped out; likely that this industry has peaked, in which case they're going to be spending a lot of capital that won't be getting much in the way of a return [may, perhaps, offset price increase in conventional fuels, but, once again, I caution that conventional fuel prices are likely going to drop for a bit first before jumping back up in their final hurrah])

Sun, 03/30/2014 - 21:43 | 4609183 disabledvet
disabledvet's picture

Cummins is the best for diesel...but natural gas runs turbine engines...not that valve and cylinder shit.

that's GE and Capstone.
I like Capatone because they produce micro turbines....which when married to an all electric Tesla drive system gets in excess of 200mpg...and if you blow your engine you just print yourself a new one.

good luck doing that with a diesel or gasoline ICE.

also natural gas is hard to process...VERY expensive depending on its type (sweet or sour, just like oil.) supposedly there are rivers of sweet gas coming out of Pennsylvania right now.

Obviously this is valuable stuff...so they've spent top dollar on a processing plant in Ohio. if we had an energy policy we would be using coal to heat with btw.

certainly the last thing you want to do is use natural gas to generate electricity.

there is also OSK...which uses a Diesel engine to power super capacitors...no batteries required. they have built the "next level up" combat vehicle using Catepillar diesels to power their all electric drive systems. these are all wonderful com

Sun, 03/30/2014 - 21:53 | 4609212 disabledvet
disabledvet's picture

I must be getting down arrowed for not finishing my sentence. sorry. ummm. "Maxwell industries" is the name of the ultra capacitor company...you wan to buy that too.

there's a veritable potpourri of solar companies that look good here too. but I would still wait for the Russian "bear hug" first. I fear my first glance of "Full Retard" in DC will be "confirmed con gusto."

Sun, 03/30/2014 - 22:23 | 4609289 Ralph Spoilsport
Ralph Spoilsport's picture

Diesel engines have been running on NatGas for a while now but they have some issues. Washington DC has some NatGas buses. Old article but touches on some of the pros and cons.

http://www.washingtonpost.com/wp-dyn/articles/A35508-2005Apr7.html

Sun, 03/30/2014 - 22:54 | 4609375 CrazyCooter
CrazyCooter's picture

While I haven't spent the money, I will eventually plan to have a CNG option on an old ass truck I buy (it will be older than me!) because I am eschewing EFI for carburetors.

If I don't have to buy another vehicle for the rest of my life, it will be fine with me. In fact, that is the goal. I will make homemade chicken enchiladas (with Tabasco red rice and beans) for my mechanic when I go in for normal visits and his as can starve if the visit is, or after, and unplanned one.

Fuck the dealerships; they can kills my lily white ass.

Regards,

Cooter

Sun, 03/30/2014 - 23:30 | 4609457 disabledvet
disabledvet's picture

believe it or not you can outfit an old Ford Ranger pickup with lead acid batteries "and that's enough to get 'er done."

if these drive systems and batteries get cheap and small enough you can simply "marry" them to your existing vehicle platform and "presto!" all electric vehicle and drive system for 1500 bucks.

Mon, 03/31/2014 - 01:30 | 4609666 Seer
Seer's picture

"if these drive systems and batteries get cheap and small enough you can simply "marry" them to your existing vehicle platform and "presto!" all electric vehicle and drive system for 1500 bucks."

Batteries are NOT cheap and smaller ones (assuming it ever happens, and as it appears now, even with the urgency that's been out there) aren't likely to be any cheaper (read "affordable").

I suppose that if you need to haul around a bunch of batteries then a truck is a good choice...

Sun, 03/30/2014 - 23:30 | 4609459 heresy101
heresy101's picture

Actually, for electrictiy production Cummins hasn't be in the ballpark at all (doesn't meet Calif air pollution regulations).

Try Wartsila or Kawasaki 16 cylinder 7.5MW engines. Both are as efficient as many combined cycle engines and are so flexible that they can be run for "spin". They both run at 50% efficiency, but you are not going to put one in your Tesla because they are 36ft long.

As for Capstone, they are very likely to be taken over by a reciprocating engine (Honda), a fuel cell, or NRG Energy and their coming stirling engine. When I last looked, the Capstone had about a 11,000 heat rate (compared to Wartsila and Kawasaki's 8,000 heat rate). The turbines are running in the low 30's percent for efficiency!

Twenty-five years ago our utility was promoting NG for vehicles, but it never caught on. Today, UPS, Fedex, Fritolay and others are using NG and electric vehicles.

Mon, 03/31/2014 - 00:01 | 4609518 Ralph Spoilsport
Ralph Spoilsport's picture

Interesting. This the kind of detailed and informed comment that we need more of around here. Same goes for Rock on Roger's comment above.

Mon, 03/31/2014 - 00:59 | 4609633 Seer
Seer's picture

"Today, UPS, Fedex, Fritolay and others are using NG and electric vehicles."

And they're all struggling... not that NG and electric are the reason, rather, end-user demand is the reason- people are broke.  A huge problem, as is always the case, is obtaining sufficient production numbers to bring down cost-points.  One can look at these companies' fleets and see a big market, but that ASSUMES their business is strong.

The days for these energy sources are passed, there was a time in which it would have been optimal to have had them take over the markets (though they too would have fallen victim to eventual exhaustion through perpetual growth demands).

My biggest concern (and I voiced it several years back to a local PUD commissioner) is that we'll be shifting these energy sources away from what they're more needed to do: provide for heating/cooling and general home and factory operations.  Just as ethanol takes farmland and food from our mouths I see shifting NG and electricity away from more basic human needs.

Mon, 03/31/2014 - 00:25 | 4609574 kurt
kurt's picture

Keep talkin Butch.

Mon, 03/31/2014 - 02:28 | 4609724 Harbanger
Harbanger's picture

even PERU is ahead of us in using NatGas in their vehicle fleets (in Lima anyway).

Natural Gas is used as an alternative fuel source because it's cheap, it's not exactly a better fuel source. 1 gallon of LNG only has 64% of the energy of one gallon of gasoline.  Diesel has the highest energy output per gallon.  A vehicle using NG also has a much shorter run time per unit of fuel, so it's less efficient. 

http://www.afdc.energy.gov/fuels/fuel_comparison_chart.pdf

Mon, 03/31/2014 - 08:02 | 4609980 falak pema
falak pema's picture

Diesel fuel has the greatest fine particle (lung destroyer)  and carcinogenic impurity content (toluene/xylenes). 

Nat gas is much cleaner and has less carbon imprint. 

Mon, 03/31/2014 - 10:35 | 4610484 Flakmeister
Flakmeister's picture

Provided methane losses are kept at the level of a few percent, ~5%...

CH4 is a very powerful GHG...

Mon, 03/31/2014 - 11:51 | 4609767 franciscopendergrass
franciscopendergrass's picture

The fuckers are only using natural gas for the tax incentives.  The storage of and maintenance of engined using CNG and especially LNG are very expensive.   I talked to a supervisor of fleet services of a large municipality and he said that clean diesel is much cheaper on the storage and maintenance fronts and clean diesel is just as environmentally friendly as nat gas.  Can you imagine the cryogenic storage costs of LNG?  Who cares right?  legislating good intentions without any benefit whatsoever and passing the costs on to taxpayers is the hallmark of stupid ass politicians

Mon, 03/31/2014 - 13:27 | 4611130 Rusty Nayle
Rusty Nayle's picture

Not surprising, Lima is a congested shithole...but they have a lot of Japanese and Chinese cars that can run on both LNG and gasoline.

Sun, 03/30/2014 - 21:25 | 4609133 So Close
So Close's picture

I am getting tired of folks denying what we have here in the states in regards to this new energy play.   First of all the gas output number does not take into effect the fact that we stacked 85 percent of our gas drilling rigs when the price dropped.  Watch gas come back to a reasonable price and watch us dig it up.  Secondly... The article says nothing about the new field being produced in Texas.  Two words.  Wolfcamp Share.  BIGGEST FIELD IN THE WORLD.  That includes anwar in Saudi Arabia.   but what you gonna do?  Haters gonna hate.

Sun, 03/30/2014 - 21:48 | 4609199 disabledvet
disabledvet's picture

"and holocaust deniers will deny."

I do include "sent to Eastern Front to fight Russians" as inclusive in that btw.

Still...we did gat Arnold Schwarzaneggar.
He's Austrian though..."breeding over a longer time frame."
Plus more care and nurturing.
"Fresh mountain air, Mozart"...nothing but the best.

Sun, 03/30/2014 - 23:32 | 4609464 disabledvet
disabledvet's picture

trust me...if you were being sent to the Eastern Front in WWII you were being holocausted. "that's of the equal opportunity variant" I might add.

Sun, 03/30/2014 - 22:00 | 4609230 Renewable Life
Renewable Life's picture

But you just said it, price point is everything, and the era of cheap, abundant energy is over! I don't care how big the oil field is, shareholders, workers, distributors, patent holders, and the list goes on........want their big profits, big inflationary adjusted profits!!
Couple that with global demand being absolutely never ending, says economic output continues to suffer, UNTIL these stupid fucking central bankers, finally kill their "fantasy golden goose" and we get the only thing that will save us, a massive, deflationary reset of the global economy!!!

And with that reset, will come the destruction of most oil companies, their shareholders, their debt, and all that will be left when the dust settles, will be hard assets, patents, equipment, and the resource itself!!!

THEN WILL FIND OUT WHAT THE REAL PRICE OF ENERGY IS!!!

Until then, it's all bullshit, nonsense, propaganda!

Sun, 03/30/2014 - 23:04 | 4609406 Seeking Aphids
Seeking Aphids's picture

why  deflationary RL?  Commodities and energy have to be subject to inflation if global population and upward mobility remain a constant in most of the world (Europe/USA excepted)....

Mon, 03/31/2014 - 00:44 | 4609612 Seer
Seer's picture

Per my belief that the reverse/other side of the parabola of "economies of scale" is "economies of scale in reverse," I first see prices dropping a bit (to try and pull back in market share) and then they will go up (trying to recover/gain margins back) only to completely crash as less and less people are able to pay for fuel, causing a big drop in volume and crushing margins until the lights finally get turned off.

Mon, 03/31/2014 - 00:51 | 4609621 Seer
Seer's picture

None of this will even begin to hold off declines in conventional oil, let alone provide for "growth."

Pretty well laid out (with facts) here:

http://www.youtube.com/watch?v=dLCsMRr7hAg

Mon, 03/31/2014 - 07:09 | 4609918 Cloud9.5
Cloud9.5's picture

I hope you are right.  But what I have read indicates that the good stuff is in exponential decline while being replaced by wells that tend to have a three year run as opposed to the old Texas tea wells that pumped for forty years.  I tend to side with the German Army study on the subject that puts us in contraction by the end of the decade.

Sun, 03/30/2014 - 21:58 | 4609223 Newfie
Newfie's picture

Smoke and mirrors Bitchez

Sun, 03/30/2014 - 21:59 | 4609225 boozo
boozo's picture

There is no long-term rationality to 'Merkan decision making.

In the sort-term, Obomba's controllers will take credit for lower gas prices, ensuring a political advantage.

Mon, 03/31/2014 - 00:46 | 4609616 Seer
Seer's picture

In case you had not noticed, the empire is broke and dying.  And as happens to ALL empires, it eventually collapses.

Sun, 03/30/2014 - 22:16 | 4609277 Tinky
Tinky's picture

I'd like to point out that "shale" rhymes with "fail", and I didn't go to Yale.

Sun, 03/30/2014 - 22:22 | 4609291 J_jade
J_jade's picture

North Dakota is a disaster area thanks to the make a quick buck crowd.  This boom will not last.  It is proven that fracking fracks the envoriment and the wells do not last past a few years.  The boom will not last, Natural Gas, Oil, Propane, hydro power and the price you pay at the pump will never come down again, the era of cheap gas/energy is over, get over it.  Just wait till it all collapses and your paying 8-10 a gallon at the pump and 2 a Litre in Canada.   Don't even get me started on the Carbon Tax ponzi scheme that is driving up the cost of Hydro power in Canada.  Lining the pockets of Samsung and the Liberal Party in Ontario.  Ya im looking at you McGuinty and your lesbian lap dog Wynne.

Sun, 03/30/2014 - 22:40 | 4609344 SmackDaddy
SmackDaddy's picture

wait til youre paying $8-10 / gal for water.

Mon, 03/31/2014 - 01:33 | 4609681 Seer
Seer's picture

No shit!

Food, Shelter and Water.  "Transportation" is not one of the fundamentals (most people have feet): no, I'm NOT going to be happy to lose our comfy transportation systems (least happy to not have fuel for my tractor).

Mon, 03/31/2014 - 08:32 | 4610048 KickIce
KickIce's picture

Interesting times as the railroads n the Dakotas are reneging on grain contracts to go after the more lucrative oil shipments.  Several areas have negative basis for corn (.50 cents or greater); basic message is RRs don't give a rat's ass, and if you don't like take your business elsewhere.

 

Take this for what it's worth, in another thread a poster claimed he had talked to a major ag banker and was told very few clients are projecting profits in 2014. I don't recall the region the poster was from.

Sun, 03/30/2014 - 22:38 | 4609336 22winmag
22winmag's picture

Truly a "flash in the pan".

 

Things are about to get very primitive.

Sun, 03/30/2014 - 23:06 | 4609413 Spore
Spore's picture

All this fracking and drilling for what? Gas is still well over $3.50/g where I live. And a quart of oil at min is $3 bucks if your lucky. So how am I as a citizen benefiting from this? But hey lets build the keystone pipeline and make it easier to ship our natural resources overseas because that is where the pipeline ends, in a texas gulf port for export. I know taxes at the pump....and where is the tax money being spent? Who fuc$ing knows. Because I still see potholes messed up bridges and more. The people getting screwed again. 

Sun, 03/30/2014 - 23:21 | 4609443 Tulpa
Tulpa's picture

The XL pipeline would have its southern end at refineries, not export.  

Mon, 03/31/2014 - 11:01 | 4610491 Flakmeister
Flakmeister's picture

And the refined tar sands are for export....

Tax free Free trade zones, bitchez...

Mon, 03/31/2014 - 00:23 | 4609571 kurt
kurt's picture

Up arrow, you go Spore, welcome.

Mon, 03/31/2014 - 08:54 | 4610128 KickIce
KickIce's picture

I think the oil market is similar to the diamond market, supply is regulated in order to maintain a target price, in the case of oil about $100 per barrel.

Mon, 03/31/2014 - 09:15 | 4610206 post turtle saver
post turtle saver's picture

wahh wahh I am so screwed... more like spoiled...

http://inflationdata.com/inflation/images/charts/Oil/Gasoline_inflation_...

Sun, 03/30/2014 - 23:06 | 4609415 tahoe1780
tahoe1780's picture

Cummins is working with Axion Power  http://www.axionpower.com/ and e-Power engine systems http://seekingalpha.com/instablog/227454-john-petersen/1505011-epower-engine-systems-exploring-the-limits-of-hybrid-truck-efficiency to produce hybrid electric 18-wheelers.  Axion is also working with Norfolk Southern railroad to produce electric and hybrid-electric locomotives.  http://www.marketwatch.com/story/update-report-on-hybrid-norfolk-southern-switcher-locomotive-to-be-presented-at-7th-annual-asme-rail-conference-2013-10-10

Sun, 03/30/2014 - 23:37 | 4609472 disabledvet
disabledvet's picture

"the triple 9."

you have to factor in accidents with your battery tech. no small deal.

again...Maxwell technologies. if you can return the energy used for breaking to the supercapacitor...and on a railroad they would have to be HUGE...that would reduce you energy consumption massively.

Sun, 03/30/2014 - 23:07 | 4609417 Flakmeister
Flakmeister's picture

Nat Gas storage is at multiyear lows...

The shale gas mirage will be very obvious come August....

Sun, 03/30/2014 - 23:36 | 4609467 thatthingcanfly
thatthingcanfly's picture

Conclusion does not follow logically from the premise.

Mon, 03/31/2014 - 10:46 | 4610500 Flakmeister
Flakmeister's picture

Learn to read between the lines, then...

How about this...

The only NG shale play that is currently increasing production is the Marcellus, the rest have either peaked or plateaued...

Decline rates are such that to stay flat the US has to replace the equivalent of the entire production of Texas every year....

Sun, 03/30/2014 - 23:54 | 4609506 Rock On Roger
Rock On Roger's picture

I think you are correct Flakmeister, shale gas is a pump and dump.

Ukrainians aren't the only folks who'll be shivering winter 2015.

I'm hoping for a blisteringly hot summer for eastern North America, crank up those air conditioners.

Burn gaz bitchez.

Stack On

Mon, 03/31/2014 - 00:37 | 4609601 Seer
Seer's picture

Drill baby drill!

Strength through exhaustion!

Steven Kopits pretty much nails it here (hat tip to another ZH-er who posted this in another thread recently):

http://www.youtube.com/watch?v=dLCsMRr7hAg

Mon, 03/31/2014 - 01:36 | 4609684 Seer
Seer's picture

So, Down-arrower, do you NOT believe that extraction REDUCES resources?  Or, do you not believe what Kopits is saying?

Mon, 03/31/2014 - 01:52 | 4609696 Rock On Roger
Rock On Roger's picture

Kopits said his data source was EIA.

Thus his data is bullshit.

 

And I don't downarrow.

And anyone who believes that extraction doesn't equal depletion, or reduced resources, is a moron.

There is a finite limit, because earth is finite.

 

Stack On

Mon, 03/31/2014 - 02:54 | 4609760 Seer
Seer's picture

So, Kopits is wrong because he's referencing EIA data?

"And anyone who believes that extraction doesn't equal depletion, or reduced resources, is a moron.

There is a finite limit, because earth is finite."

It's just amazing how many people just don't get this.  Robots (who don't think they're robots)...

Mon, 04/07/2014 - 22:45 | 4634562 MeelionDollerBogus
Mon, 03/31/2014 - 02:57 | 4609762 Seer
Seer's picture

Let me clarify on Kopits...

I'm refering to his view vis a vis supply-side vs demand-side, that it pretty much signals looming shortages (which cannot/will not be overcome).

Mon, 03/31/2014 - 11:16 | 4610639 Ms No
Ms No's picture

There you go.... speaking the truth on NG again and are promptly rewarded with the down votes.

Sun, 03/30/2014 - 23:27 | 4609451 CrashisOptimistic
CrashisOptimistic's picture

Some guy on POB uncorks some out of left field stuff that winds up being true.

That's a good site.  Apparently 3 million pounds of proppant PER WELL to frack either gas or oil and it comes from China and Russia.  I guess we know one item that won't be sanctioned.

It takes 2 weeks to drill a well, then it takes another 3 months to frack it and get it producing.

Sun, 03/30/2014 - 23:40 | 4609480 thatthingcanfly
thatthingcanfly's picture

Don't know where that came from. I work for a company that supplies proppant (sand - raw and phenolic-coated) for the E&Ps and we ship it right out of Arkansas, Louisana, and Minnesota.

It doesn't take that long to frack a well, either. They bang these things out in days, not weeks.

The 3 MM lbs proppant per well figure is pretty accurate, though.

Sun, 03/30/2014 - 23:59 | 4609516 CrashisOptimistic
CrashisOptimistic's picture

The china stuff is ceramic. 

http://static4.businessinsider.com/image/4f5681fd69bedd0f60000048-1200/h...

That's a photo of bags and bags of it in ND.

Time to frack comes from the North Dakota govt site.  Here's the text and link:

https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2013-12-13.pdf

That's the Dec release.  The relevant text within is:

arghh font problem.  You can find it.  It notes time from spud to production is 114 days and lots of wells are "awaiting completion services".  The drilling takes no time.  The fracking takes a lot of time BUT, your input is meaningful in that a LOT of that fracking time is waiting for the truck trips to accumulate.  It takes about 1000 truck trips to do a well in ND.  And then another 1000 apparently to haul oil for the 1st year.

Mon, 03/31/2014 - 00:55 | 4609628 Rock On Roger
Rock On Roger's picture

Then the next year only 200 truck trips are needed to haul the oil.

The next year after only 100 truck trips.

Next year after that only 60 trips are needed.

Next year, oh gosh, the pump quit and we can't afford to replace it.

Shut 'er in.

Mon, 03/31/2014 - 01:09 | 4609646 CrashisOptimistic
CrashisOptimistic's picture

Pretty much that.

There's more complexity to it all.  Water comes up with the oil and you have to dispose of it, often down another well.  Nat gas comes up too and often that is just flared.  No time to get a pipe laid before the well dies.  Anyway we all know that story.  It gets shut in long before any equipment fails.  Trucks are pricey.

Sun, 03/30/2014 - 23:41 | 4609482 jerry_theking_lawler
jerry_theking_lawler's picture

some may come from China but Carbo Ceramics makes them here in the USofA.....had an opportunity to go to work for them 10+ years ago. dumb. coulda made some quick cash (and stock options) and gotten out and been done.

Sun, 03/30/2014 - 23:59 | 4609521 kurt
kurt's picture

Bah! This shit is just an excuse for a bunch of assholes to wear their Carhartts a few more years driving around in their Halliburton trucks while their bosses defraud the dying carcass of America of the last bits of intact wealth with the added benefit of poisoning the aquifers and destablilizing the "craton" and pumping waste into the earth. 

The assholes don't know that they are expendible tools with no place to go after America blows up. They certainly won't be welcome in south america where an amerindian will slit their throats while they sleep.

Mon, 03/31/2014 - 00:32 | 4609595 Seer
Seer's picture

+1000

Mon, 03/31/2014 - 00:29 | 4609587 MEAN BUSINESS
MEAN BUSINESS's picture

conclusion from the article: "In the longer term, US energy security and climate goals will still require a strong role for public policy frameworks."

a statement from the AR5 WG2 press conference 31MAR14 Yokohama, Dr. Jarraud, WMO : (when asked by The Economist) "there is no pause in warming". 

recorded webcast http://www.ipcc.ch/news_and_events/press_information.shtml

Mon, 03/31/2014 - 00:34 | 4609598 Seer
Seer's picture

"public policy framework" is going to be meaningless when the empire collapses.

Mon, 03/31/2014 - 00:55 | 4609629 MEAN BUSINESS
MEAN BUSINESS's picture

I did read that 1976 discussion about empire collapse you were linking, very interesting!

The press release, which occurred just hours ago, had a lot of discussion of agriculture you might be interested in. Mass extinction was also mentioned...

As far as collapse goes, my impression is that they're saying that adaptation and mitigation must be pursued aggressively (geez, like we've never heard that before!) or else the changes in climate systems with the difficulties they will visit upon ever changing human systems (like population growth) leads humanity into unknown territory... this could (IMO will) get ugly.

Collapse of Civilization

Mon, 03/31/2014 - 01:45 | 4609690 Seer
Seer's picture

Glubb's paper deals with 3,000 years of empire histories.  His conclusion is that the ideological framework of an empire is meaningless to its final fate of collapse.  It's all an issue of growth

Time will eventually run out for all of humankind when the next glacial period comes.  And while it's pretty much impossible to keep it from happening I do believe that there was one idea proposed that had merit in delaying the cycle: John D. Hammaker - Survival of Civilization (premised on the condition of topsoils).

Mon, 03/31/2014 - 02:20 | 4609723 MEAN BUSINESS
MEAN BUSINESS's picture

The cycle times of major ice ages (really serious changes in the weather!) will at some point bring an end to this manmade hothouse anomaly underway. Those cycles are on the order of 200,000 years (explained at 5:00 in James Burke's After The Warming made 25 years ago) when the Earth is farthest away from the Sun AND tilted. The hothouse Earth and this mass extinction event will be permanent as far as we're concerned : (

 

I watched ATW 25 years ago and it led to my farming career (hint, I like hamburgers and the farm is a good place to raise kids!). It will show you why I laughed when An Inconvenient Truth came out 15 years later, why I laugh at those who float the we-need-more-research, the-computer-models-are-flawed, it's-to-push-a-carbon-tax arguments I still see today. As was said at the press release, we can't plead ignorance any longer. 

Mon, 03/31/2014 - 02:51 | 4609757 Seer
Seer's picture

Hammaker's thesis is that topsoil erosion is the underlying driver that sets it all up for a reset.  It is this reason why I ignore all the global-warming and or global-cooling jawbonings: doesn't fucking matter; what matters is the mechanism.  And most certainly humans are negatively impacting soil retension, though, as Hammaker notes, it happens without humans: that it happens w/o humans doesn't mean that humans are not having negative impacts- the iissue is how much we're slicing off the clock...

There really is no solution, other than the long-running themes of divine intervension and rocket-ships off this planet (both present ample opportunities to defraud).

Mon, 03/31/2014 - 03:16 | 4609773 MEAN BUSINESS
MEAN BUSINESS's picture

Hence the message in the WG2 report: The 'solution' is to mitigate and adapt. It's not a panacea.

Mon, 03/31/2014 - 01:14 | 4609657 baldski
baldski's picture

Alcoa Aluminum and Reynolds Aluminum have been running large radial type diesel engines on natural gas for over 50 years at Port Lavaca, Texas and Chalmette, Louisiana respectively at their aluminum smelting operations.

Mon, 03/31/2014 - 07:45 | 4609954 falak pema
falak pema's picture

Shale the Pandora's box of fossil fuel addiction.

Making the Earths crust into Gruyere cheese-- imagine the unknown consequences-- with an energy in to out ratio that is low and a cost that sky rockets; even excluding global warming and eco damage consequences, which could be very high.

In addition, from a geopolitical angle the regions with high shale concentrations are not in first world but in EM (China, Russia and Argentina). 

It doesn't change the structural imbalance that is destroying the "Greenback forever" meme of Pax Americana.

Unless the US can bomb every nation into submission, I don't see this boom doing anything good for humanity except increasing the dystopian temperature rise of the planet and making us all closer to the age of the homo sapien Dinosaurs begging from extinction. 

Happy hunting of the T-Rexs of the new Oligarchy age.  

Mon, 03/31/2014 - 07:46 | 4609958 Laughing Stock
Laughing Stock's picture

 

 

Article sucked monkey balls

Rambled all over the fracking place (see what I did there?  Ha!)

Mon, 03/31/2014 - 08:10 | 4609997 viator
Mon, 03/31/2014 - 08:24 | 4610029 boooyaaaah
boooyaaaah's picture

How come the socialist planners can say pass the bill and then we can find out what's in it.

Then when a simple pipeline from Canada to our refineries on the Gulf need to be reviewed ad nauseum

 

 

 

I say drill baby drill (private money) and see what happens.

Mon, 03/31/2014 - 10:50 | 4610544 Flakmeister
Flakmeister's picture

So now we know where Mitt Romney's energy advisor ended up...

The US has been drilled more than a $5 hooker at Las Vegas convention....

Mon, 03/31/2014 - 09:33 | 4610275 esum
esum's picture

bla bla bla peak oil, peak gas...bla bla bla until the next tecnological breakthrough..  I DID A STUDY IN 10 SECONDS.... CHEAPER GAS AND EXPORTING IT MEANS A VIBRANT ECONOMY... and GLOBAL POLITICAL CLOUT WITHOUT THE USE OF THE MILITARY... if we had the capability to export gas we could cut putin off at the knees economically once and for all and we could have china by the energy balls too. but we have libtard morons controlling the EPA and DOE and Interior dept who dont care...and are a roadblock to progress. Capitalism solves problems.... Socialism creates them...

Mon, 03/31/2014 - 10:42 | 4610511 Flakmeister
Flakmeister's picture

And if a frog had wings he wouldn't bump his ass everytime he jumped....

Mon, 03/31/2014 - 11:25 | 4610685 Ms No
Ms No's picture

This issue provides a complete barometer for whether people have a clue what's going on or not.  Not just with commodities but the political and business environment in general.  I am completely astonished by some of the comments on here.  I think in the end you cannot save people, all you can do is make money and smile while you do.  I am sure many people here tried to save friends and family from the housing collapse by giving warning also... how often does anyone listen?  This is like shooting fish in a barrel.

Mon, 03/31/2014 - 13:19 | 4611080 UrbanBard
UrbanBard's picture

If not for Shale oil and gas, the US economy would be in much worse shape. The  consequences of the Obama administration's actions (high debt, taxes and regulations combined with expansive social programs during a recession) are to shut down the US economy.

America is in a Stagflation from pursuing the same governmental policies as Jimmy Carter. Government statistics lie: food and fuel prices rose 14% in the last year while the economy remained bad. Our foreign policy is a mess and Obama needs a war to deflect blame.

What happens when the world no longer accepts the US Dollar as a reserve currency? We will have an immediate increase of four to five hundred percent in the price of foreign fuels. Self sufficiency in shale oil and gas will lessen the impact to the US economy. The results will be very hard but not catastrophic.

It is misplaced to worry about why there will be little growth in the economy. It ignores the economic sabotage which Obama's administration has caused. It dismisses the major damage which the FED and the Obama administration will shortly unleash.

Mon, 03/31/2014 - 14:14 | 4611327 KingTut
KingTut's picture

You have to be a delusional to think hydro-fracking shale deposits is going to produce enough oil and gas to change the basic energy equation of the US or the world.  It will certainly buy us time, but we are inexorably consuming ever larger amounts of oil & gas. And while humans are clever and adaptive, and we will create better technolgies for extracting and using fossil fuels,  a time is coming when it will simply be too expensive for oil to compete with other sources.  NG will last longer because it is essentially free at the moment (energy from gasoline is 6.1 times more expensive than from NG, using this morning's prices).

On the other hand, there is a dawning awareness that NG, not hydrogen, is the fuel of the future.  SO why would the US go to the enormous expense of building LNG terminals, when we can far more cheaply convert our trucking fleet to NG.  Trucks use the same refueling stations over and over, which could easily add NG fuel to their diesel offerings. That would go a long way to making our economy cleaner more efficient and less dependent on heavy oils from Venezuela, and Canadian tar sands.

NG is mostly Methane, which is the simplest hydrocarbon.  It is made up of 1 carbon atom and 4 hydrogen atoms, so it is really as much a hydrogen fuel as a carbon fuel.  Mother nature doesn't produce free hydrogen, but she does produce huge amounts of bio-methane, which means it's her approved bio-fuel.  Pure hydrogen is a terrible fuel because it is too reactive and has neglible energy density.  For example, a liter of liquid methane (LNG) has MORE hydrogen in it than a liter of liquid hydrogen, and it has many times more energy.  And hydrogen corrodes pipes, valves, pumps and engines unless they are made out of expensive materials.  

So as we begin to feel true shortages of oil, and eventually NG, we need to synthesize methane from a mixture of solar, wind, coal, nuclear, methane clathrates, bio-mass and whatever fossil hydrocarbons are left.  It all goes into the existing NG infra-struture and is stored for localized power generation, heating, cooking and vehicular fuels.  Of course, we'll still use electriity, but compliment the electrical grid with a parallel fuel grid based on one universal fuel: methane.

In addition, it can be used to synthesize all the chemcials we use in industrial process, diesel fuels, jet fuels, feritizers and various feed stocks to the chemical industry.  This transition will take 100 years, but will result in a flexible, affordable and sustainable energy supply.  Any CO2 issues are controlled by capturing recycling CO2, using zero-footprint carbon (bio or atmosphereic) to do the synthesis.  We would be using a lot of CO2 to synthesize the methane, which would create a large viable market for CO2.

So shifting towards NG is not just an economic issue for today, it is the long term solution to an affordable energy infrastructure.

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