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FRAC Goes the Oil Market

by coldwarrior ( 80 Comments › )
Filed under Economy, Energy, Open thread at October 15th, 2014 - 8:00 am

I started my day like every day…Kettlebell and Nordictrack and CNBC at 0530. The heads are finally getting at what the Frac boom mans to the oil market. Combine the frac with very low economic growth expectations and you get several things:

A Nervous Saudi (PLEASE read the entire article at this link):

A Saudi billionaire investor has sounded the alarm over the potential impact of falling oil prices on the Gulf kingdom’s economy.

In an open letter to Saudi ministers posted via Twitter, Prince Alwaleed bin Talal al-Saud expressed his “astonishment” at comments made by Ali al-Naimi, the oil minister, who reportedly played down the impact of oil prices falling below $100 a barrel. Prices have since fallen below $88 a barrel, or a quarter since June.

Prince Alwaleed, noting the kingdom’s 2014 budget was 90 per cent dependent on oil revenues, said belittling the impact of lower prices was a “catastrophe that cannot go unmentioned”…

The prince expressed similar concerns last year over the rise of shale oil, which, with weakening Asian demand, has contributed to the rapid slide in oil prices – despite geopolitical uncertainties in Iraq, a major producer.

His public broadside against the veteran oil minister came as analysts said the Gulf members of Opec, the oil producers’ cartel, led by Saudi Arabia, seem prepared to drive down oil prices to retain market share and fend off the threat of rising US production, despite the risks to their hydrocarbon-dependent economies…

Gulf oil producers, most of which have large cash reserves, seem to be betting that the short-term pain of declining oil revenues from lower prices will close off competing supplies and revive the lowest global oil demand since 2009.

Oil prices are reaching levels that, if sustained, threaten the ability of some Gulf states to meet domestic spending commitments, forcing a drawdown on reserves or debt issuance.

Saudi Arabia needed an oil price of $89 a barrel in 2013 to balance the budget, up from a “fiscal break-even” of $78 a barrel in 2012, according to the International Monetary Fund.

Chart

But Riyadh’s regional political rivals, such as Iran and Iraq, as well as other Opec members such as Venezuela, have much higher fiscal break-evens.

That bolded paragraph is the new reality, the ME is being driven from relevance.

 

And you get market fallout:

Crude oil futures settled down 4.6 percent at $81.84 a barrel, the biggest percentage drop since November 2012 and the lowest settlement since June 28, 2012.

Brent crude for November slid earlier and lurched lower toward the end of the day, dropping by more than $4 a barrel to dip below $85 a barrel for the first time since 2010. It was the biggest one-day drop in prices since 2011. The benchmark settled at $85.04, $3.85 lower on the day.

Oil dived more than $4 a barrel on Tuesday, its biggest drop in more than two years as mounting evidence of slackening demand and unrelenting U.S. shale output left traders struggling to peg a floor for crude’s four-month rout.

The abrupt acceleration of an over 26 percent slide in prices since June was triggered by three news items that epitomized the market’s turn: a downgrade in global oil consumption forecasts; projections for another big boost in shale oil; and reluctance by OPEC members to cut output.

Read MoreCheap oil is here to stay, at least for a few months

Oil is struggling to find a floor after Saudi Arabia made clear that it was focused on maintaining market share, not supporting prices with unilateral production cuts.

Other members appear to be taking a similar tack. A source familiar with oil policy in Iran, normally one of the first in OPEC to call for production cuts, followed Kuwait in saying there was no need to rein in supplies.

Read MoreOil slide wipes out stock market gains

“I think it’s just continued the rationalization that all signs continue to suggest that OPEC is not going to do much,” said Dominick Chirichella, senior partner at the Energy Management Institute, New York.

Getty Images

The slide began early in the day after the International Energy Agency, the West’s energy watchdog, cut its estimates for global oil demand growth by 250,000 barrels per day for this year and by 90,000 bpd for 2015. It said demand for OPEC oil would be 200,000 bpd lower for both years.

Read MoreOil demand to ‘rise tentatively’ in 2015: IEA

The diminishing outlook for consumption is colliding with an unrelenting rise in U.S. shale oil, leading to a glut of crude that has knocked Brent lower since June.

Losses deepened in mid-afternoon after the U.S. Energy Information Administration projected that fast growing shale basins would increase output by some 106,000 bpd in November from a month earlier.

 

The down side? This can be deflationary and the Fed does not have much room to move on interest rates. This could cause QE again here as Europe heads for another recession. Low $ oil shuts off the Shale wells in America at,I think $80 a barrel. Weak expected demand and the march toward American Energy independence is going to be an interesting ride.

Supply, Demand, Dollar Values and FRAC!

by coldwarrior ( 72 Comments › )
Filed under Economy, Energy, Open thread at October 9th, 2014 - 8:00 am

An interesting article:

 

HERE

The Shale Revolution Is Changing How We Think About Oil And The Dollar

 

goldman sachs commodoties and dollarGoldman Sachs

Historically, there’s been a pretty consistent correlation between oil prices and the US dollar.

When the dollar strengthened, oil prices would fall — and vice versa.

For the longest time, this relationship has been explained by the huge flow of US oil imports.

However, a new report by Goldman Sachs’s Jeffrey Currie says that rationale has broken down in the wake of the American shale revolution.

“In 2008 … the US was importing on a net basis nearly 12 million [barrels per day] of oil and products,” Currie writes. “Owing to shale technology, today that number is now less than 5 million b/d. And subtracting out Canada and Mexico, the number drops to 2.4 million b/d. In other words, net imports are over 60% lower than in 2008.”

This has “significantly reduced the correlation between commodities and the US dollar,” he writes.

Back in the day…

In the past, Currie writes, investors believed that the “primary mechanism for the correlation” between oil prices and the dollar was the large US petroleum current account deficit.

“From the early 2000′s to the global financial crisis, increasing oil imports saw a widening US current account deficit, which put depreciation pressure on the dollar (appreciation pressure on oil producers currencies), which in turn put further widening pressure on the current account deficit (for any given volume of imports), causing additional dollar weakness,” Currie writes.

By 2008, oil reached $147 per barrel and the US dollar was at its weakest point versus the Euro at 1.6. At the time, the US was importing on a net basis approximately 12 million barrels per day of oil and products.

And then there was the shale revolution…

santorum north dakota shaleREUTERS/Harrison McClaryA piece of North Dakota shale.

Today, the number of imports has dropped to around 5 million. If you take out Canada and Mexico, that number falls further to 2.4 million — a stark difference from 2008′s 12 million.

Overall, oil imports are down more than 60% since 2008.

Imports have dropped because the US is now using hydraulic fracturing to extract oil from its massive shale basins, creating more supply.

And it’s during this same 2008 – 2014 time period that there’s been a huge reduction in correlation between oil prices and the US dollar, according to Currie.

“Along with the post-crisis financial market normalization, [the drop in oil imports] has dramatically reduced the correlation between oil and the USD, to around 0% (i.e. uncorrelated) today from historical highs near 60% in 2008/2009,” Currie writes.

Thus, according to this analysis, although oil prices have recently dropped as the dollar has surged, one trend doesn’t explain the other.

 

Dhimmi Carter Birthday Wishes

by Macker ( 139 Comments › )
Filed under Anti-semitism, Democratic Party, Energy, Hamas, History, Inflation, Iran, Koran, Misery Index at October 2nd, 2014 - 6:00 pm

Happy Belated 90th Birthday to the WORST US President…of the 20th Century! Yes, James Earl Carter, Jr. is still kickin’…and it’s time for those of us on the Right Side to leave any type of Birthday Greeting to a forerunner of who we have now.
Think of all the things he’s responsible for: The Misery Index, stagflation, high unemployment, military emasculation, the Iranian Hostage Crisis…and that’s just for starters.
Have at it!

Follow The Money

by coldwarrior ( 53 Comments › )
Filed under Economy, Energy, Marxism, Open thread, Progressives, Technology at September 23rd, 2014 - 8:00 am

Follow the money…always a good place to start:

 

What really drives anti-fracking zealots?

Author

By Paul DriessenSeptember 22, 2014 | Comments| Print friendly |

Recent news stories underscore the tremendous benefits brought by America’s fracking revolution.

  • The shale oil production boom could boost US crude production to 9.5 million barrels of oil per day (bopd) next year, reducing America’s crude oil imports to 21% of domestic demand, the lowest level since 1968. Output from fracked wells represents 43% of all US oil production and 67% of natural gas production; “frack oil” could hit 10 million bopd by 2016, the Energy Information Administration says.
  • The global economy saves $4.9 billion per day in oil spending because of the shale oil boom. Without it there would be a 3 million barrel per day shortfall and prices would likely be 55% higher: $150/barrel.
  • Constantly improving hydraulic fracturing technologies continue to increase production. For example, Cabot Oil & Gas refracked a 2013 Pennsylvania well, increasing its output to 30.3 million cubic feet of gas per day; that’s four times the output from the best well drilled in 2003. Fracking is even being used in decades-old onshore and offshore wells, to keep them producing for many more years.
  • Rust Belt cities and industries—from manufacturing, real estate and law to hotels, restaurants and many others—are rebounding because of drilling,fracking and production in nearby shale areas. In Ohio unemployment fell to 5.7% in July from 10.6% four years ago; oil output increased 26% just from the previous quarter, while gas production rose 31%—generating billions in state and local revenues.
  • The US oil and natural gas boom means jobs and business for almost 30,000 companies within the industry’s vast and complex supply chain. Indeed, the petroleum industry accounts for nearly 10 million jobs and almost 8% of all domestic economic activity, including states far from actual drilling activities.
  • The American Fuel & Petrochemical Manufacturers launched a new website to help veterans and other men and women find high-paying jobs in the booming oilfield, fuel and petrochemical industries.

Anti-fracking zealots: Follow the money—and the ideology

There are numerous other benefits, while the alleged risks are exaggerated or even fabricated. So what drives anti-fracking zealots who seem to materializeen masse whenever a new project is announced?

Follow the money—and the ideology. Big Green is big business. The US environmental activist industry alone is a $13.4-billion-a-year operation. It pours that money into determined campaigns to eliminate fossil fuels, gain ever greater control over our lives, reduce our living standards, and end free-enterprise capitalism. It drives its agenda with clever but phony crises: catastrophic climate change, unsustainable development, imminent resource depletion, poisonous frack chemicals and dozens of others.

Fracking obliterates its claim that we are about to run out of oil and gas—and so must slash our living standards, spend billions on crony-corporatist “renewable energy” schemes, and put radical green bureaucrats and activists in charge of our lives, livelihoods, living standards and remaining liberties. They are incensed that fracking guarantees a hydrocarbon renaissance and predominance for decades to come. They won’t even acknowledge that “frackgas” helps reduce (plant-fertilizing) carbon dioxide emissions.

Even √ºber wealthy celebrities get involved. Exaggerations and fabrications, confrontations and often callous disregard of other people’s needs are their stock in trade. In torrents of angry outrage and demands for totally one-sided precaution, they denounce any suggestion that fracking is safe or beneficial.

Whatever alternative technologies they support comply with their “precautionary principle.” Whatever they oppose violates it. They trumpet alleged risks of using fracking and hydrocarbon technologies, but ignore even the most obvious benefits of using them… and most obvious risks of not using them.

Anti-fracking zealots tend to be well-off, and largely clueless about the true sources of modern living standards. They assume electricity comes from wall sockets, food from grocery stores, iPhones from Apple Stores. You can count on one hand the farm, utility or factory workers they know personally.

They are dismissive about people who are jobless because of their war on affordable energy—and about poor rural New York families that are barely hanging onto their farms, unable to tap the Marcellus Shale riches beneath their land, because of an Albany and Manhattan-instigated moratorium.

They are equally uncaring about the world’s impoverished billions, whose hope for better lives depends on the reliable, affordable electricity that drilling and fracking can help bring. Worldwide, 1.4 billion people still do not have access to electricity including 300 million in India and 550 million in Africa. Millions die from lung and intestinal diseases that would largely disappear if they had electricity.

What the frack is wrong with this picture? This is not the same environmental movement that Ron Arnold, Patrick Moore and I belonged to decades ago. Big Green has become too rich, too powerful, too driven by perverse, inhumane notions of ethics, social responsibility and compassion. Their claims aboutethanol and wind power being environment-friendly are just as out of touch with reality.

Incessant claims that fracking contaminates groundwater and drinking water?

But what about their incessant claims that fracking contaminates groundwater and drinking water? Even EPA has not been able to cite a single “proven case where the fracking process itself has affected water.” A September 2013 report in the Proceedings of the National Academy of Sciences further confirms this. After carefully examining water wells in heavily fracked areas of Pennsylvania and Texas, researchers concluded that rare cases of methane (natural gas) contamination were not due to fracking.

Instead they resulted from improper cement and pipe installation near the surface, thousands of feet above the frack zone. The problem is covered by existing regulations and is preventable and relatively easy to correct. Petroleum industry and state officials are already collaborating to further strengthen the regulations where necessary, enforce them more vigorously, and improve well completion practices.

Moreover, some of the contamination resulted from water wells being drilled through rock formations that hold naturally occurring methane. Indeed, there have been very few cases of any contamination, out of more than one million wells hydraulically fractured since the first “frack job” was done in 1947, and out of 20,000 wells fracked in Pennsylvania since the Keystone State’s boom began in 2008.

Of course, none of this is likely to assuage anti-fracking factions or end their fictions. They are driven by motives that have nothing to do with protecting people’s health or environmental quality. In fact, what they advocate would further impair human health and environmental quality.

The great Irish statesman Edmund Burke could have been talking about these “fracktivists” when he said: “Because half a dozen grasshoppers make the field ring with their importunate chink, whilst thousands of great cattle… chew the cud and are silent, pray do not imagine that they are the only inhabitants of the field… or that they are other than little, shriveled, meager, though loud and troublesome, insects of the hour.”

Unfortunately, these definitely loud and troublesome insects have also grown powerful, meddlesome and effective. So fracking supporters must continue to battle the anti-energy ideologues—by becoming better community organizers and persuaders themselves, to counter the anti-fossil fuel lies and insanity, and the destructive policies, rules and moratoria imposed by ill-advised or ideological politicians and regulators.

We fracking supporters are clearly on the side of humanity, morality, true sustainability and real environmental progress. We also know that—no matter how hard eco-activists despise it and rail against it—they cannot put the fracking genie back in the bottle.

America and the world have awakened to its potential—and to the critical need for this technology. Let us applaud this incredible progress, and champion it throughout Europe, Asia, Africa and worldwide.

From this morning’s drudge:

GARBAGE MARCH FOR CLIMATE…

VIDEO: Dicaprio loses his hearing when asked about his yachts…

GOOGLE severs ties with conservative group over ‘climate change’ stance…

VIDEO: RFK Jr. refuses to give up cellphone, automobile to save planet…

Skeptics ‘should be in Hague’…

BASTARDI: ‘Nature, not man, rules climate system’…

Saturday Lecture Series: Ponzi Oil?

by coldwarrior ( 39 Comments › )
Filed under Academia, Energy, Environmentalism, Open thread, saturday lecture series, Science at September 20th, 2014 - 8:00 am

Good morning all! Today we are at the Blogmocracy Petroleum Institute and lumber yard. The lecture today is about Ponzi Scemes/Peak Oil/Gas and Fracking.

In a rapid change of tack, the left, the Luddites, are now screaming that the natural gas and fracking method of extracting is  a Ponzi Scheme. Interesting that they can’t see Social Security as such. This week we found out that any contamination of well water  is the result of cracked well pipe and not form fracking. Oh, and Fracking does not cause earthquakes either.

 

 The integrity of oil and gas wells

Public concerns about oil and natural gas extraction these days inevitably turn to hydraulic fracturing, where millions of gallons of water, sand, and chemicals are pumped underground at high pressures to crack open rocks. Hydraulic fracturing often occurs a mile or more down, far from the water we drink or the air we breathe. The focus for safety and environmental stewardship should often be somewhere else—nearer the surface—emphasizing risks from spills, wastewater disposal, and the integrity of oil and natural gas wells passing through drinking-water aquifers (1⇓⇓–4). In PNAS, Ingraffea et al. (5) examine one of these factors, well integrity, across the Marcellus region of Pennsylvania, using inspection records from the state Department of Environmental Protection (DEP).

In a technical sense, “well integrity” refers to the zonal isolation of liquids and gases from the target formation or from intermediate layers through which the well passes. In a practical sense, it means that a well doesn’t leak. Drilling companies emphasize well integrity because a faulty well is expensive to repair and, in the rarest of cases, costs lives, as in the Deepwater Horizon disaster in the Gulf of Mexico. Drillers use steel casing (pipes), cement between nested casings and between the outside casing and rock wall, and mechanical devices to keep fluids inside the well.

Faulty casing and cementing cause most well integrity problems. Steel casing can leak at the connections or corrode from acids. Cement can deteriorate with time too, but leaks also happen when cement shrinks, develops cracks or channels, or is lost into the surrounding rock when applied. If integrity fails, gases and liquids can leak out of the casing or, just as importantly, move into, up, and out of the well through faulty cement between the casing and the rock wall.

 

So how can the Luddites continue…easy, call it a Ponzi Scheme! Who are the science deniers now?

 

Is the Shale Revolution a ‘Ponzi Scheme’ or the End of Peak Oil?

“Ponzi scheme” or the end of Peak Oil?

 

Shale boomGWPFA lot of folks are fervently forecasting that shale gas and oil production is a bubble about to pop, possibly producing an economic collapse similar to the one in 2008. Earlier this week, the left-leaning Center for Research on Globalization in Montreal dismissed the shale revolution as a “Ponzi scheme” and “this decade’s version of the Dotcom bubble.” In a column last year for The Guardian, Nafeez Ahmed of the Institute for Policy Research and Development cited studies predicting that U.S. shale gas production will likely peak in 2015 and oil production in 2017. In a July 2013 report for the Club of Rome—the same folks who brought us 1972′s doom-mongering classic, The Limits to Growth—the University of Florence chemist Ugo Bardi declared that the “idea that a ‘gas revolution’ that will bring for us an age of abundance is rapidly fading” because “the data show that the gas bubble may be already bursting.” A month later, Richard Heinberg of the Post Carbon Institute said, “It turns out there are only a few ‘plays’ or geological formations in the US from which shale gas is being produced; in virtually all of them, except the Marcellus (in Pennsylvania and West Virginia), production rates are already either in plateau or decline.”

So was President Barack Obama wrong in 2012, when he claimed, “We have a supply of natural gas that can last America nearly 100 years”? Perhaps not.

The renaissance of oil and gas production in the United States has largely been the result of applying the technique of hydraulic fracturing (fracking), which releases vast quantities of hydrocarbons trapped in tight shale formations. The bubble theorists make much of the fact that production tends to drop more rapidly in fracked wells than in conventional ones, forcing the frackers to drill more holes just to keep up. They overlook the fact that drillers are working ever faster and cheaper and that newer wells tend to be more productive than earlier wells. How do we know this? Because the number of drill rigs has not increased in most shale fields, yet production continues to go up.

So what about Heinberg’s claim that “production rates are already either in plateau or decline”? He’s just wrong. The September drilling productivity report from the federal Energy Information Administration (EIA) notes that since 2013, that gas production is up in every one of the “plays” cited by Heinberg. Production in the Bakken region of North Dakota grew 8 percent; the Eagle Ford, Permian, and Haynesville regions in Texas increased 15, 7, and 97 percent, respectively; the Niobrara region in Wyoming and Colorado rose by 29 percent; and the Utica and Marcellus regions in Ohio, Pennsylvania, and West Virginia surged 142 and 47 percent. “We’ve been tracking this for 10 years, and recovery rates have gone up dramatically,” says EIA forecaster Philip Budzik.

Meanwhile, the EIA’s Annual Energy Outlook 2014 shows the potential U.S. oil and gas resource bases are increasing, not decreasing. Bubble forecasters insist those estimates are way off-base. They point to the EIA’s recent big flub when it came to estimating how much petroleum might be pumped from the Monterey shale formations in California. The agency initially prognosticated that as much as 13.7 billion barrels of oil might be produced, but it cut its estimate by 96 percent, to 600 million barrels, once it recognized the extraction challenges posed by the complicated geology of southern California. Whoops!

That’s bad, but in the scope of estimates it’s a blip, not a fatal error.

Back in 2000, the EIA Outlook report estimated that the U.S.’s technically recoverable petroleum resources were 124 billion barrels; it put natural gas resources at 1,111 trillion cubic feet (tcf). (“Technically recoverable” basically means that the resource can be extracted using current technology if the price is right.) Proved oil and natural gas reserves amounted to 22 billion barrels and 176 tcf, respectively. (“Proved” generally means the amount of resources that can be recovered from the deposit with a reasonable level of certainty.) When it came to shale and other tight rock formations, the 2000 report estimated that only 2 billion barrels of oil and 50 tcf of natural gas were technically recoverable. “Basically, in 2000 no one was even thinking that you could produce this stuff,” says Budzik.

How time and technological progress make fools of all prognosticators! The 2014 EIA Outlook estimates that the U.S.’s technically recoverable oil resources are 238 billion barrels and natural gas resources are 2,266 tcf. Proved U.S. petroleum reserves have increased from their 2009 nadir of 19 billion barrels to over 30 billion barrels, and proved natural gas reserves are at 334 tcf now. In other words, estimates of technically recoverable U.S. resources of both oil and gas have nearly doubled in the past 15 years. Proved oil reserves have increased 50 percent, while proved gas reserves have also nearly doubled. Technically recoverable resources from shale and other tight rocks is now estimated to be 59 billion barrels of crude and 903 tcf of gas—a 30-fold and 18-fold increase, respectively, over the 2000 assessments.

Take the figure of 2,266 tcf of natural gas. Last year, Americans burned through 26 tcf of natural gas. At that rate, the estimated resource would last 87 years. Not the 100 years claimed by the president, but close enough for government work.

While EIA reserve and resource estimates have been trending steeply upward over the past decade and half, the agency tries to take into account uncertainties by sketching out scenarios to 2040 in which domestic oil and gas supplies are either 50 percent higher or lower than its reference case. Production of shale gas and oil is the key difference in the scenarios. In the high supply case, technically recoverable crude and gas plus proved reserves amount to 431 billion barrels and 3,683 tcf. Consequently, domestic oil production rises to 13 million barrels per day before 2035 and imports decline to near zero. Tight oil production peaks at 8.5 million barrels per day in 2035 compared to the reference case peak of 4.8 million barrels in 2021. Cumulative tight oil production reaches 75 billion barrels, up from 44 billion in the reference case.

In the low supply scenario, crude oil totals 210 barrels and gas totals 1,814 tcf; oil production reaches 9.1 million barrels per day in 2017 and then slowly falls to 6.6 million barrels per day in 2040. Tight oil production peaks in 2016 at 4.3 million barrels per day with a cumulative production of 34 billion barrels. Interestingly, the difference in price in the high and low supply scenarios is only $20 per barrel—$125 versus $145 (using 2012 dollars) in 2040.

The shale bubble proponents essentially are betting on the EIA low production scenario. They will be proven right if shale oil production does peak in the next year or two. We shall soon see. “The history of the industry is that we are always running out,” says Budzik. “So long as we have a well functioning economic system that allows the price mechanism to adjust and encourages innovation we will see the resource base grow rather than diminish.” Rising prices at the beginning of the 21st century did, in fact, promote more exploration and faster technological progress, resulting in the shale revolution the U.S. is currently enjoying. If this dynamic is not unduly hampered, it’s a good bet that the prophets of bubble-bursting doom are wrong yet again.

Food in Your Gas Tank…Let’s Burn Our Food!

by coldwarrior ( 150 Comments › )
Filed under Economy, Energy, Open thread at May 7th, 2014 - 1:00 pm

Heads Up! Global Warming is now called ‘Climate Disruption’, got it? OK, let’s proceed.

 

Here is a link-filled article for reference about the absurd idea of Ethanol subsidies.

The Ethanol Disaster

America’s renewables policy is bad for consumers, the environment, and the global poor.

Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)Last November, when the Environment Protection Agency (EPA) proposed moderating years of escalating mandates by reducing the amount of ethanol that must be mixed into gasoline, a top ethanol lobbyist seemed perplexed. “We’re all just sort of scratching our heads here today and wondering why this administration is telling us to burn less of a clean-burning American fuel,” Bob Dineen, head of the Renewable Fuels Association, told The New York Times.

Here are a few possible reasons why: America’s ethanol requirement destroys the environment, damages car engines, increases gas prices, and contributes to the starvation of the global poor. It’s an unmitigated disaster on nearly every level.

Start with the environment. After all, when the renewable fuel standard (RFS), which since 2005 has set forth a minimum annual volume of renewable fuels nationwide, was first set, one of the primary arguments for mandating ethanol use was that it was a greener, more environmentally friendly source of fuel that released fewer greenhouse gasses into the atmosphere.

This turns out to be complete hogwash. Researchers have known for years that, when the entire production process is taken into account, most supposedly green biofuels actually emit more greenhouse gasses than traditional fuels.

Some proponents of the ethanol mandate have argued that the requirement was nonetheless necessary in order to spur demand for and development of more advanced, environmentally friendly biofuel like cellulosic ethanol, which is converted into fuel from corn-farm leftovers. But there are two serious problems with cellosic ethanol. The first is that cellulosic ethanol turns out to be rather difficult to produce; despite EPA projections that the market would produce at least 5 million gallons in 2010 and 6.6 million in 2011, the United States produced exactly zero gallons both years—and just 20,069 gallons in 2012.

The second is that cellulosic ethanol is also bad for the environment. At least in the short-term, the corn-residue biofuels release about 7 percent more greenhouse gases than traditional fuels, according to a federally funded, peer-reviewed study that appeared in the journal Nature Climate Change last month.

The environmental evidence against ethanol seems to mount almost daily: Another study published last week in Nature Geoscience found that in São Paulo, Brazil, the more ethanol that drivers used, the more local ozone levels increased. The study is particularly important because it relies on real-world measurements rather than on models, many of which predicted that increased ethanol use would cause ozone levels to decline.

To make things worse, ethanol requirements are bad for cars and drivers. Automakers say that gasoline blended with ethanol can damage vehicles by corroding fuel lines and injectors. An ethanol glut caused by a misalignment of regulatory quotas and demand has helped drive up prices at the pump. And the product is actually worse: ethanol blends are less energy dense than regular gasoline, which means that cars relying on it significantly worse mileage per gallon.

American drivers have it bad, but the global poor have it far worse. Ethanol requirements at home have helped drive up the price of food worldwide by diverting corn production to energy, which dramatically reducing the available calorie supply. A 25-gallon tank full of pure ethanol requires about 450 pounds of corn—roughly the amount of calories required to feed someone for a year. Some 40 percent of U.S. corn crops go to ethanol production, which in effect means we’re burning food for automobile fuel rather than eating it. Studies by economists at the World Bank have found that a one percent increase in world food prices correlates with a half-percent decrease in calorie consumption amongst the world’s poor. When world food prices spiked between 2007 and 2008, between 20 and 40 percent of the effect was attributable to increased global reliance on biofuels. The effect on world hunger is simply devastating.

Ethanol lobbyists are still pretending the renewable fuels mandate is a success, and Senators from corn-friendly states in the Midwest are still urging the agency not to proceed with the proposed reduction to the mandate. But at this point, ethanol requirements have few serious defenders except the people who profit from its production and the politicians who rely on those people for votes and campaign contributions.

Judging by the cut it proposed last November, even the EPA seems to be wavering. A final regulation has yet to be submitted, but the proposal would reduce the amount of renewable fuels the agency requires this year from 18.15 billion gallons to 15.2 billion gallons. That’s if the EPA sticks to its original plan. The agency is under heavy pressure to moderate its proposed cuts, or avoid them entirely.

Those cuts, if approved, would represent a productive step forward. But they wouldn’t be enough. Congress should vote to repeal the renewable fuel standard entirely. The federal government shouldn’t be telling people to burn less ethanol; it shouldn’t be telling anyone to burn any of it at all.

Russian Gas and American Production

by coldwarrior ( 156 Comments › )
Filed under America, Chechnya, Economy, Energy, Open thread, Politics, Russia at April 8th, 2014 - 9:00 am

This is an interesting take on the possibility of American Gas exports ‘hurting Russia’.

 

Why Russia Isn’t Afraid of U.S. Gas Exports

Wikicommons

During his recent speech in Brussels, U.S. President Barack Obama said the U.S. could soon become a major supplier of gas to Europe and allow countries that are currently “hostage” to gas imports from Russia to have an alternative supply source at a cheaper price. We heard the same sentiment from the chairman of the U.S. House Foreign Affairs Committee, Ed Royce, during his March 26 address at a committee hearing on ”The Geopolitical Potential of the U.S. Energy Boom.” While Obama placed his comments in the context of energy supply security, Royce was much more explicit about the real objective of an energy dump into Europe. “America’s newly developing energy supplies could make a difference,” he said. “They could sap Putin’s strength, while bolstering Ukraine’s and that of other European countries.”

We have heard similar comments from many politicians in Europe as well as the U.S., and from executives in companies operating in the shale gas industry. We also heard similar comments from many others promoting the idea that the U.S. Energy Department might release oil from the Strategic Oil Reserve to increase global supply and depress the world price of crude. The basic line has been to send cheap U.S. gas or oil to Europe to kill off demand for Russian exports and to debilitate the Russian economy. Some have also emphasized the benefits, as they see it, to the European economy from cheaper energy and to the U.S. economy because of higher export volumes. But the key objective, the argument goes, is causing collateral damage to the Russian economy.

You can see where they are coming from. The widely held perception among those who only superficially look at the structure of Russia’s budget and economy is that it is a hydrocarbon-­dependent country and even a slight twitch in the price of export oil or gas would destabilize the country. That certainly was the case in the late 1980s, in the late 1990s and again in late 2008. But much has changed even since 2008. and the continuing legacy of various wars across North Africa and in the Middle East means there is little threat to the price of crude oil. Brent crude has been more or less stable just under $110 per barrel for more than three years, and looming problems in Venezuela and reports of increasing violence in Nigeria offer little medium-term comfort for oil bears.

But it is Russia’s gas position that has attracted most attention since the Crimea referendum. And it is against the backdrop of political emotionalism that basic fact-checking has been ignored. Here are some important facts. Gas production has certainly grown very rapidly in the U.S. since the middle of the last decade. According to BP’s most recent Statistical Review of World Energy, the U.S. has increased annual gas production from 550 billion cubic meters in 2007 to more than 750 bcm last year, overtaking Russian production of about 600 bcm. But according to the BP report, the U.S. currently consumes almost all of the gas it produces. It exports almost no gas.

To be sure, if the U.S. can sustain the rapid pace of production growth seen since 2007, it will eventually become a large exporter of gas via LNG tankers. But this will be possible only if it adds a significant amount of export infrastructure, namely LNG loading terminals. The first of these, at Sabine Pass in Louisiana, is not due online until late next year or early 2016, while some others are bogged down in environmental disputes and are not expected until 2019 or 2020. But even then, U.S. gas producers, which have been booking export contracts far in advance, are all planning to send their LNG volumes to Asia. The price of gas is much higher in Asia than Gazprom charges its European customers. It is difficult to see why a U.S. LNG tanker would sail to Europe just to make a political point rather than to the far more profitable markets in Asia.

In addition, the price of gas sold domestically in the U.S. is extremely inexpensive compared to world prices. This is regularly cited by economists — and lauded by politicians — as an important factor behind the revival in the U.S. economy. It is no surprise that U.S. gas executives are pushing for approvals for more export facilities. The Russia angle is purely convenient for a profit-orientated industry keen to sell to the highest bidder and to break free from the depressed local market. One wonders what the attitude of lawmakers will be when the price of domestic gas eventually starts to rise because of competition from the export market.

That is not to say that Russia can be in any way complacent about economic vulnerability to energy exports. By the time LNG volumes are sailing in large volumes into European ports, overall demand will be much higher, and Russia will be a major player in the global LNG business. Novatek’s Yamal-based LNG terminal is expected online by 2017, and more than 70 percent of the planned production is already sold to Asian customers. The plant will double in capacity between 2015 and 2020. By 2018, the LNG plant currently under construction in Sakhalin, which is jointly owned by ExxonMobil, Rosneft, ONGC of India and Japanese investors, will also be online. Russia’s first LNG plant came online in March 2009 as part of the Gazprom-Shell Sakhalin-2 project, and another bigger Gazprom foray into LNG production cannot be far off. By the start of the next decade, Russia is likely to be a much larger exporter of LNG than the U.S. Exports from both countries will sail to Asia rather than to Europe

What about Europe’s ability to produce more of its own gas? Europe is much more sensitive to environment risk than is the U.S. Germany has decided to cut nuclear power, and most countries are dragging their feet when it comes to alternative energy projects, such as wind farms, because of the aesthetic and other environment damage. It is therefore naive to assume that Europe will embrace the shale gas revolution in the same way as the U.S. has. The first television images of homeowners in Britain, France or Germany setting light to gas coming out of their water faucets, a very familiar sight in many parts of the U.S., will send the environmentalists to court for injunctions faster than politicians will deny they ever supported the project.

Russia’s current share of the European gas market share is about 30 percent. For Gazprom to maintain that market share as overall gas demand rises on the continent, it must complete the South Stream pipeline across the Black Sea despite objections from Brussels. Customer countries, such as Bulgaria, are in favor of South Stream because it bypasses the troublesome transit route through Ukraine. For the same reason, Germany wanted the twin-pipe Nord Steam connection which delivers 55 bcm of Russian gas directly into its industrial heartland.

U.S. and European Union officials are, of course, quite correct to emphasize long-term energy security. The long-term alternatives — that is, from Iran, Central Asia or Africa — hardly offer more assurance. And we already know that price differential between Europe and Asia means that U.S. LNG tankers will not be in any hurry to supply the market when they eventually do set sail.

Chris Weafer is senior partner with Macro Advisory, a consultancy advising macro hedge funds and foreign companies looking at investment opportunities in Russia.

Gas Versus Wind to Make Electricity

by coldwarrior ( 138 Comments › )
Filed under Economy, Energy, Environmentalism, Open thread, Politics at April 7th, 2014 - 1:38 pm

Here is a pretty good article that gets into the nuts and bolts and costs of generating power with gas or wind.

 

 

Shale Gas Boom Leaves Wind Companies Seeking More Subsidy

 

 

 

Photographer: Eddie Seal/Bloomberg

Wind turbine blades wait to be shipped out by rail at the Port of Corpus Christi in… Read More

 

Wind power in the U.S. is on a respirator.

 

The $14 billion industry, the world’s second-largest buyer of wind turbines, is reeling from a double blow — cheap natural gas unleashed by the hydraulic fracturing revolution and the death last year of federal subsidies that made wind the most competitive of all renewable energy sources in the U.S.

 

Without restoration of subsidies, worth $23 per megawatt hour to turbine owners, the industry may not recover, and the U.S. may lose ground in its race to reduce dependence on the fossil fuels driving global warming, say wind-power advocates.

 

They place the subsidy argument in the context of fairness, pointing out that wind’s chief fossil-fuel rival, the gas industry, is aided by the ability to form master limited partnerships that allow pipeline operators to avoid paying income tax. This helps drive down the cost of natural gas.

 

“If gas prices weren’t so cheap, then wind might be able to compete on its own,” said South Dakota’s Republican Governor Dennis Daugaard.

 

Consider that gas averaged $8.90 a million British thermal units in 2008 and plunged to $3.73 last year, making the fuel a cheaper source of electricity for utilities. Congress allowed the wind Production Tax Credit to expire last year, and wind farm construction plunged 92 percent.

Photographer: Eddie Seal/Bloomberg

Cattle graze near wind turbines that are part of Babcock & Brown Infrastructure Group’s… Read More

 

‘Cheap Gas’

 

The shift in fortunes for the two fuels arrives at the moment when wind was beginning to rival gas on price alone, according to data compiled by Bloomberg. That means the industry’s future will be shaped by the debate over what counts as support from the government and when, or if, Congress moves to rethink the credit.

 

“Cheap gas has definitely made it harder to compete,” said David Crane, chief executive officer of NRG Energy Inc., which builds both gas and renewable power plants. He said that with the subsidy, companies were able to propose wind projects “below the price of gas.”

 

Both wind and gas cost about $84 a megawatt hour to install worldwide, excluding subsidies, according to Bloomberg New Energy Finance. That’s 3 percent higher than a coal-fired power plant costs and about half that of nuclear reactors.

 

The research group hosts a conference today in New York, where officials from the U.S. government’s energy research agency and Jeff Immelt, chief executive officer of General Electric Co., will debate the future shape of energy markets. GE is the biggest U.S. turbine supplier.

 

Lapsed Credits

 

Governor Daugaard joined Senator Ron Wyden, a Democrat from Oregon and chairman of the Senate Finance Committee, in pushing to extend the Production Tax Credit, which expired in December and is part of a package of 50 lapsed tax breaks the committee agreed on April 4 to extend.

 

The credit appeals to Democrats and Republicans alike in places that have strong wind resources such as South Dakota and Texas, as well as those with turbine and blade factories, like Kansas and Colorado. Still, the Republican-led House of Representatives may not support efforts to extend the tax credits before the November election, according to the American Wind Energy Association.

 

“It awaits a vehicle that can pass both the House and Senate,” Peter Kelley, a spokesman for the Washington-based industry group, said on a March 31 conference call.

 

More MLPs

 

America’s Natural Gas Alliance, which represents independent gas producers in Washington, has no position on the tax credits for wind, said Dan Whitten, a spokesman. The group also welcomes proposals to expand master limited partnerships to additional energy sources such as wind.

 

Nowhere is the economic debate about wind versus gas more finely balanced than in the U.S. While North America ranks behind China in terms of total installations, the price of gas and structure of support for the industries has made it among the most competitive markets in the world.

 

The best wind farms in the breeziest areas such as south Texas can be built for $60 a megawatt-hour, below the $65 price of a high-efficiency gas turbine, according to New Energy Finance.

 

Behind those headline figures are hundreds of variables that determine whether a utility picks wind or gas. The best wind farms may operate 45 percent of the time, while ordinary ones work less than a third of the day. The tax credit often is the decisive factor in determining whether to build a wind farm.

 

No Parity

 

“Without the Production Tax Credit, we don’t expect wind to be at cost parity with gas” in most places in the U.S., said Stephen Munro, an analyst at New Energy Finance.

 

Power technologies don’t compete on price alone. Most states require utilities to supply an increasing amount of their electricity from renewables.

 

And most utility executives have scars from swings in fossil fuel costs. A deep freeze in New England increased the cash price for gas near Boston tenfold to more than $76 per MMBtu in January.

 

“The polar vortex showed us the problem with relying too much on gas,” Tom Kuhn, president of the Edison Electric Institute, said in an interview.

 

Munro of New Energy Finance said, “wind has none of gas’s price drama. It’s visible for 20-year or 25-year contracts. Financial hedges on gas prices typically go out no more than five years.”

 

Energy ‘Frenemies’

 

Gas-fired generators have the advantage of the ability to scale up or down their output hour by hour. That gives utilities flexibility to integrate more variable supplies from wind and solar farms into the electric grid. It makes the two fuels symbiotic “frenemies with benefits,” supporting each other’s development, said Dexter Gauntlett, an analyst at Navigant Consulting in Vancouver, Washington.

 

Three variables — the individual renewable needs of each state, the on-again-off-again tax credits awarded by Congress and the price of natural gas relative to wind — have made forecasting turbine installations difficult.

 

“The dynamic between these three drivers has been a roller coaster over the past five years,” Gauntlett said.

 

With the outlook for the tax credit uncertain, utilities are refocusing on the price of the fuels. Hydraulic fracturing technology, otherwise known as fracking, makes gas wells profitable at $4.50 per MMBtu, according to Samantha Dart, an analyst at Goldman Sachs Group Inc.

 

That should keep gas prices within a range of $4 to $6 for at least a few years, she said in a note to clients on Feb. 3.

 

“Power-purchase agreements in the U.S. are under severe pricing pressure because of the shale gas boom,” said Jurgen Zeschky, CEO of Nordex SE, a German wind-turbine maker. “That’s putting pressure on prices for wind power and makes investments very difficult.”

America’s New Energy Boom

by coldwarrior ( 9 Comments › )
Filed under Economy, Energy, Politics, Special Report at January 8th, 2014 - 10:56 am

I’ve been saying that America  on the cusp of a huge energy boom that will be a game changer in the world, we are also on the cusp of revitalized manufacturing. The right political leaders could end our economic malaise by getting out of the way. I am quite bullish on America’s financial on general future. that makes me a minority here!

 

Try this article on for size:

Unforeseen U.S. Oil Boom Upends Markets as Drilling Spreads

 

Photographer: Matthew Staver/Bloomberg

A worker transfers 240 barrels of oil into a tank at an Enbridge Inc. facility outside… Read More

The U.S. oil boom has put European refineries out of business and undercut West African crude suppliers. Now domestic drillers threaten to roil Asian markets and challenge producers in the Middle East and South America.

Fifteen European refineries have closed in the past five years, with a 16th due to shut this year, the International Energy Agency said, as the U.S. went from depending on fuel from Europe to being a major exporter to the region. Nigeria, which used to send the equivalent of a dozen supertankers of crude a month to the U.S., now ships fewer than three, according to the U.S. Energy Information Administration. And cheap oil from the Rocky Mountains, where output has grown 31 percent since 2011, will soon allow West Coast companies to cut back on imports of pricier grades from Saudi Arabia and Venezuela that they process for customers in Asia, the world’s fastest-growing market.

“I don’t really think anyone saw this coming,” said Steve Sawyer, an analyst with FACTS Global Energy in London. “The U.S. shale boom happened much faster than people thought. We’re in the middle of a new game. There’s nothing in the past that predicts what the future will be.”

Advances in extracting oil from shale rock drove a 39 percent jump in U.S. production since 2011, the steepest rise in history, and will boost output to a 28-year high this year, according to the EIA. While drilling in shale is more expensive than other methods and poses environmental challenges, the prospect of a growing supply is encouraging analysts to predict a more energy-independent nation.

Photographer: Ty Wright/Bloomberg

Rig hands thread together drilling pipe at a hydraulic fracturing site owned by EQT… Read More

Crude Exports

With U.S. exports of gasoline and other refined products hitting a record last month and the country on pace to become the world’s largest oil producer by 2015, five years faster than the IEA’s earlier predictions, industry advocates such as Senator Lisa Murkowski of Alaska are calling for an end to 39-year-old restrictions on U.S. crude exports.

In a measure of just how quickly the oil market has changed, President Barack Obama unveiled in March 2011 a goal considered so outrageous that correspondent Christopher Mims wrote on the environmental news website Grist that it could be accomplished only by “an economic crash bigger than any ever seen in U.S. history, or perhaps an alien race forcing all of us to take to our bicycles.” Obama said that by 2025 the U.S. would cut crude imports by one-third.

It didn’t take 14 years. It took less than three.

 

PLEASE READ THE REST

EMP: Power industry is literally playing games instead of taking action to harden infrastructure

by 1389AD ( 117 Comments › )
Filed under Astronomy, Energy, Technology at October 30th, 2013 - 5:00 pm
Staging elaborate simulation games is beside the point. We already know how to harden our infrastructure at a cost that we can easily afford. The technical know-how exists. What’s missing is the political will to get it done.

 

Real American Blackout: Will GridEx II Protect Against It or Ensure It Happens?

Published on Oct 28, 2013 by securefreedom

http://www.stopEMP.org

On October 27th, 2013, National Geographic aired a docu-drama entitled “American Blackout.” It simulated what would happen to our country, its economy and its people if a cyber attack shut down the nation’s electric power distribution system known as “the grid.”

As the movie makes clear, in just 10 days, hundreds of thousands lost their lives, vast destruction of property occurred and societal breakdown was underway.

Is such an horrific scenario a real possibility? Could the grid, in fact, be taken down in other ways that would deny the nation electrical power for far longer than 10 days? If so, what would be the consequences?

Even if no rogue nuclear power or cyber hackers successfully attack our grid, another solar event will sooner or later occur that will take down our power grids. Every nation must take steps to harden itself against solar EMP.

Earth just barely missed another solar Carrington event (EMP catastrophe) in July, 2013

Iran, the sun, and the EMP threat

Securing America from Electromagnetic Pulse (EMP): Technical and Policy Challenges

Published on Oct 25, 2013 by securefreedom

Moderator — Frank J. Gaffney Jr., CSP

Speakers:

Brigadier General (ret.) Ken Chrosniak, Member of EMPact America, a firefighter with Carlisle Fire Rescue, VP of Cumberland Goodwill Ambulance (EMS) Company, and member of the FBI vetted InfraGard EMP Special Interest Group. Ken is an instructor at the Army War College’s Center for Strategic Leadership Development.

Rep. Trent Franks (R-AZ), Chair, Congressional Electromagnetic Pulse Caucus; Member, Intelligence, Emerging Threats, and Capabilities Subcommittee; Member, Strategic Forces Subcommittee.

Major General (ret.) Robert Newman, Former Adjutant General of Virginia; Deputy Assistant to the Governor, Virginia; Vice Director of Operations & Logistics at US Joint Forces Command ; Deputy Director of Homeland Security at National Guard Bureau.

The backbone of the United States and its 21st Century society is our electric grid. Without it, every critical infrastructure — including food, water, medicine, telecommunications, finance and transportation — would be inoperable, with catastrophic consequences for many millions of Americans whose lives would be imperiled by the loss of such services.

Unfortunately, the U.S. bulk power system is presently vulnerable to widespread damage and possible destruction from a variety of sources. Arguably, the most serious of these is electromagoetic pulse (EMP), whether induced by natural phenomena (i.e., solar flaring and the resultant space weather) or enemy actions (e.g., localized attacks on the grid’s critical nodes- roughly 1,000 transformers- involving radio frequency weapons or strategic attacks utilizing exoatmospheric detonations of nuclear weapons). Either could have the effect of blacking out large parts of the United States for protracted periods of time.

This panel will consider the emerging consensus that such threats are real and must be remediated; examine how best to make the present and future grids resilient against these and related dangers (including cyber-warfare); and address the necessary federal-and state-level legislative and executive branch actions required to effect such changes.