Thursday, February 16, 2012

Energy Shortages Are Not Real


These are current estimates of worldwide shale natural gas resources excluding gray areas. [source]

Similarly, there are known and probable deposits of shale oil around the world. [source]

This is add pretty much in addition to conventional sources of natural gas and oil.  That's not to say there are not naysayers because of high current costs [costs tend to diminish as techniques improve], but some of those same naysayers warn about energy shortages, high prices, and "gold currency" payments for Middle East/OPEC oil because of political instability in those regions.  Roughly translated, that's 
"We shouldn't be counting on shale oil because costs of extraction are too high, but we shouldn't count on Middle East/OPEC oil because of political instability that will lead to high oil prices." 
Nah.  You can pretty much ignore that self-servicing gold-bug claptrap.  Flat screen TVs used to run $5,000 or more for 42" models... and now you can get them for 1/10 that.  I'll repeat: costs tend to diminish as techniques improve.

But then there is the political aspect of drilling for this natural gas and oil.  Most of the objection is based on fear... fear of pollution, fear of contamination, fear of earthquakes, fear of global warming.  That despite the fact that Canadian and North Dakota extraction has been growing vigorously and responsibly.  That despite the occurrences of some very minor earth tremors associated with extraction which have not caused damage... and are not unique to shale extraction.
The vast reserves of gas concealed in shale have long been known about, but until recently there was no economic means to extract them. Over the past five years, however, the situation has changed dramatically, thanks to a method of hydraulically fracturing rock along its seams — or ‘fracking’ for short. While Britain and Europe have been throwing hundreds of billions in subsidies at renewable energy, the US shale gas industry has expanded to account for one quarter of all the country’s gas production — all without subsidies. In doing so it has caught many environmentalists completely unawares. The energy-scarce world of their dreams has been put off for a couple of centuries at least; instead we are staring at a future of potential energy abundance. 
Fracking is not a pretty process: it involves drilling a large well and then pumping large quantities of water and sand down it in order to fracture the appropriate strata of rock. Once the rock is fractured, gas can seep into the well and be forced to the surface. But it isn’t anything like as hazardous as environmentalists — in a repeat of the fantasy and exaggeration which characterised the campaign against GM foods a decade ago — like to claim. 
Another fear is that fracking causes earth tremors. True, a couple of very minor tremors — of the sort that occur in Britain hundreds of times a year — do appear to have been caused by test-drilling near Blackpool, the epicentre of an embryonic British fracking industry which is now temporarily stalled as a result. But then coal-mining also causes minor earth tremors. It is a problem to be managed, not to be used as a reason to close down an entire industry. Mike Stephenson, head of energy science at the British Geological Survey, said that ‘most geologists think this is a pretty safe activity’ because ‘the risk is pretty low and we have the scientific tools to tell if there is a problem’. [source]
Still, there are politicians who believe it is more desirable to have very expensive energy based on shortages and unproven alternatives to natural gas and oil.  These shortages provide the underlying reason for re-distributive government's existence: create a shortage and then claim only government can fix the problem... with rationing, Rube Goldberg alternatives, government payouts for those who can't afford fuel for heating or transportation, and increased regulation from energy production to energy usage.

Sound familiar?  

About that pipeline... that will now supply Canadian oil to China....

2012 IS HERE


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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- O. Henry
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)