Personally I think we should realize our hydroelectric potential in the eastern USA and look at the gas as a cash crop.
Posted on 08/27/2012 4:21:30 AM PDT by SeekAndFind
Recent headlines provoked by two positive but modest developments — a slight early-summer decline in gasoline prices and a laudable increase in domestic oil production — have trumpeted that these developments mean we are on the verge of achieving “energy independence.”
Whoa.
Oil monopolizes about 95 percent of the world’s transportation, and OPEC — eight nations in the Middle East and four others — controls nearly 80 percent of the world’s conventional oil reserves. We cannot change anything fundamental if we continue to permit oil and OPEC, a monopoly with a cartel nested inside it, to maintain their dominance of the transportation-fuel market and if we relegate ourselves merely to working within the framework of that dominance to increase our share of the oil market. It’s true that by doing so we can improve our balance of payments and add some domestic oil-related jobs. Good. But this won’t fill the basic need: to break oil’s monopoly and OPEC’s cartel.
Why is that essential? Because oil is not just a commodity. It is a crucial strategic commodity, as salt was for many centuries when it was the only means of preserving food (to borrow Anne Korin’s excellent analogy). So long as transportation is almost exclusively dependent on oil, we are in thrall to OPEC and its decisions on how much to pump and what to charge us. OPEC has made the basic decision to maintain oil prices at a level where we borrow about a billion dollars a day — equivalent to a tax of some $4,000 a year on every American family. OPEC has this power to, essentially, tax us (without any more representation than George III provided our ancestors), because the Saudis and some others in OPEC can lift oil for less than five dollars a barrel, whereas for the U.S. and most other non-OPEC nations the cost is tens of dollars a barrel.
Saudi Arabia, the swing producer — the nation with large oil reserves that it can tap or not, as it wishes — has indicated that, to meet its domestic-welfare commitments, it needs oil’s price to be more than $90 per barrel. What it means is that, if the price of oil were lower, the Saudi government would need to go to the trouble of putting together an economy in which it couldn’t afford to keep a staggering half of its men unemployed and on the dole.
This low cost of lifting oil, especially in Saudi Arabia, and OPEC’s control of over three-quarters of the world’s reserves of conventional oil is why improved fuel economy for our vehicles, although a good idea, is not the solution to our central problem. Seeing us economize, OPEC can just cut production to keep prices up. We could never reclaim anything like the oil-market dominance we held in the Fifties and Sixties. OPEC would manipulate the market to plunge the U.S. deeper and deeper into debt and force us to spend the maximum it can wring out of us.
OPEC chooses to sell only about 31 million barrels of oil a day, almost exactly what it sold 40 years ago when both oil demand and the size of the world’s economy were about half what they are today. Like John D. Rockefeller at the beginning of the 20th century, OPEC withholds oil from the market to keep the price up. It holds nearly 80 percent of the reserves of conventional oil, but only about a third of what is sold daily on the world market is sold by OPEC. We cannot escape the consequences of OPEC’s price-fixing by buying more oil from, say, non-OPEC Canada and less from Saudi Arabia. There is essentially one worldwide oil market. Other countries will just buy more from Saudi Arabia and less from Canada.
But suppose we become what many, inaccurately, call “energy independent” — that is, we produce about as much oil as we use. Wouldn’t that solve our problem?
No.
The U.K. was, by this distorted definition, essentially energy independent in 2008, and yet there oil hit the same peak, over $145 a barrel, that it hit everywhere else. The high price of diesel fuel in the U.K. led truckers there to strike.
A good idea would be the creation of a North American Energy Alliance. In the event of major hostilities that halted international shipping, the U.S., Canada, and Mexico could still share resources among themselves. Our two major neighbors are allies and good friends, and we should work with them when we can — for example, by permitting construction of the Keystone pipeline in an environmentally sound fashion — from Canada to the Gulf of Mexico.
We should not plan to secede from the world’s oil market. The problem is OPEC’s control of prices, not the fact of trade itself. As long as oil overwhelmingly dominates transportation and OPEC controls oil’s price, we cannot end OPEC’s control of oil prices simply by seceding from the world oil market. We do not become “energy independent” just by being able to produce as much as we use, as Britain learned in 2008.
“Independent” means “free from control by others” — not autarky, that is, shunning imports. We should neither move toward secession nor assume that our oil problems are solved merely because we produce more oil and improve our balance of payments. Instead we should follow Teddy Roosevelt’s example in dealing with Rockefeller’s Standard Oil monopoly and make OPEC’s cartel face competition. The only realistic way to accomplish this is to enable vehicles, in short order and with relatively little investment in new infrastructure, to operate on alternatives to petroleum products.
What are those alternatives?
Biofuels? Probably, to some degree. At present, the best candidates are mainly those made from algae. Biomass gasification to produce synfuels also shows some promise. Ethanol may have a role as well, as long as it can compete, unsubsidized, with gasoline.
Electricity? It has promise, but it won’t move 18-wheelers, and it will take years before all-electric cars and plug-in hybrids are a large-enough share of the vehicles on the road to substantially reduce the market for oil.
Other renewables? We are fans of an evolution toward wind and solar for electricity generation and will be more so as batteries or other electricity-storage systems grow more affordable. But what gets lost in the shouting on the cable-news talk shows is that since less than 1 percent of our electricity is generated by oil, the president’s call for renewable electricity generation to reduce oil consumption is more than 99 percent off base. Two-thirds of the oil we consume is used to move our 250 million cars and light trucks and 8 million heavy-duty vehicles. We can’t solve our oil problem without making it possible for people, realistically and soon, to choose a different transportation fuel.
The laboring oar in any practical, affordable, and near-term competition with oil will have to be pulled by a plan to enable drivers to choose between gasoline and fuels derived from natural gas.
Natural gas has become a game-changer because of horizontal drilling and hydrofracturing (fracking), which now make available huge reserves in shale-gas deposits. The effect of this combination on energy prices is stunning. There are about the same number of BTU’s in a million cubic feet of natural gas as in six barrels of oil. So some years ago, when oil and natural-gas prices tracked one another, if natural gas’s price (in mmcf) was at $8, oil would have been at about $48 — a ratio of 6 (barrels of oil) to 1 (mmcf of gas). But because of horizontal drilling, fracking, and OPEC’s thirst for U.S. dollars, natural gas at one point this year was under $2 per mmcf, while oil was well over $100 per barrel — a ratio of more than 50 to 1.
Fracking and horizontal drilling have caused the price of natural gas to plummet, and OPEC’s machinations have caused oil’s price to reach new heights, so the days of a 6-to-1 price ratio of oil to gas are largely gone. We are now in a world where the ratios are 30 to 1, 50 to 1, or even higher. This completely changes the energy picture.
Certainly drilling, including fracking, must be done in an environmentally sensible manner, but this is entirely feasible. The two of us grew up in Oklahoma, a few miles and a few years apart, hunting, fishing, and camping on land that had been fracked (although at that point fracking had not yet been combined with horizontal drilling). Except when you came across a small valve (a “Christmas tree,” named after its size and silhouette) surrounded by a small cyclone fence, you had no idea of what had taken place thousands of feet below you. Indeed, of the some 4 million oil and gas wells drilled in human history, about 3 million of them were drilled in Oklahoma and Texas. And hundreds of thousands of those, beginning in the 1940s, were fracked. The environmental issues that have understandably been raised about fracking are manageable if both sides are committed to reason.
Cheap natural gas, which is key to ending our vehicles’ oil addiction affordably and promptly, can destroy oil’s monopoly and OPEC’s cartel.
We need to move expeditiously to convert a large share of our buses, delivery vans, and other fleet vehicles to run on compressed natural gas (CNG); and trucks, to run on liqueified natural gas (LNG). The conversions will pay for themselves within a year or two because of the now-huge price advantage that natural gas has over oil. The market is already moving this way.
Moreover, innovative companies are rapidly devising methods for using natural gas as a feedstock for liquid fuels as well as for industrial chemicals. Stay tuned — these will not be limited to the old version of the highly capital-intensive Fischer-Tropsch process invented in Germany in the 1920s. Silicon Valley, Houston, Oklahoma City, and other venues are home to concentrations of very smart folks turning their attention to the goal of driving on liquid fuels made from natural gas. They are already beginning to change the energy game fundamentally.
Finally, the two of us agree that the U.S. should have an open fuels standard, a requirement that vehicles be able to use multiple fuels, not solely fuels derived from petroleum. An open fuels standard would inject fuel competition into the transportation sector. The two of us disagree only on one point: whether, as an alternative to gasoline for powering the family car, natural gas itself or methanol (“wood alcohol”) made from natural gas is likely to move faster into the market.
One of us (Pickens) emphasizes transitioning the nation’s heavy-duty and fleet-vehicle market to compressed and liquefied natural gas, a move that could create more than 400,000 new jobs and cut OPEC dependence by 70 percent. The other (Woolsey) stresses the low, one-time cost (under $100 per car), according to recent studies by MIT and General Motors, of making it possible to use methanol and gasoline in the same vehicle. But the point is not for policymakers, or the two of us, or indeed anyone to resolve these disagreements at the level of policy. The point is to do something OPEC won’t — let the market, the people, decide. Do as the Brazilians do and the Chinese are beginning to do — let drivers pull into a filling station and make their own choice about what to fill up with.
Do we really want to stay on our current path of being less willing than the government of Communist China to permit competition in the transportation sector of the economy?
Moreover, freedom to drive vehicles that run on fuels other than gasoline entail important health benefits. Driving on either natural gas or methanol removes the need to add benzene, which is carcinogenic, or other dangerous chemicals to our fuel tanks for the purpose of boosting octane. Published work by Boyden Gray and Andrew Varcoe shows how the use of benzene, like the use of lead in an earlier era, leads to huge medical costs — tens of thousands of shortened lives and well over $100 billion annually.
Our dependence on OPEC oil and the consequent strain on our national security and the undermining of our economic vitality add up to a problem that does, though, have a solution, if we just stay at it. Let’s choose some leaders who understand the issue and can lead the transition to natural gas as a clean, lower-cost, domestic replacement for today’s diesel, gasoline, and other fuels made from OPEC-controlled oil. And let’s arrange the transition so that the people decide how much natural gas replaces oil.
Let’s make a national commitment to this and bring forward the day when we can all cheerfully tell OPEC that if they don’t like it they can go play in their oil ponds.
— T. Boone Pickens is a longtime oil-and-gas-industry executive. R. James Woolsey is a former director of Central Intelligence, a venture partner with Lux Capital, and chairman of the Foundation for the Defense of Democracies and of the Opportunities Development Group’s Advisory Board.
I personally think natural gas is a better electricity producer.
They have. Only out-of-date, naive fools continue to promote the "explosion" risk of CNG tanks.
First, CNG is not as combustible as gasoline (1200F vs 600F)
Exposure to CNG is not dangerous, even if inhaled.....unlike gasoline.
CNG is lighter than air, which means it rises and dissipates quickly, unlike gasoline which puddles.
The design of the cylinders is subject to a number of "severe abuse" tests such as heat and pressure extremes, gunfire, collisions and fire. The systems are also fitted with valves and other safety devices to prevent leakage and eliminate the risk of an explosion - actually making them safer than the legal requirements stipulate.
Finally, a small rupture in a pressurized tank prevents ignition. It is the same reason why LPG tanks from your grille do not explode when pierced and exposed to fire....until the pressure is so low that it burns off the remaining product.
Most truck companies already have proven, safe CNG vehicles in their lineup.
Get up to date information and stop dwelling in the past wives tales of CNG.
So your solution is to go back to the 70’s and start there? Or maybe it is to just throw your hands up and ride along in your crappy 70’s American car as well? The reason it went the way of the do-do bird in the 70’s and 80’s is because oil was relatively cheap then and there was no will to fund the R&D to refine the concept because Congress had eliminated most and eventually all R&D tax breaks for private investors to use as justification of minimal gains.
Fuel cells are also created to be the inner bladder for pressure vessels as well but most don’t know about them. The intent is to keep anything inside contained while the container it resides in is allowed to change shape even in blunt force altercations. Added to that is the use of propane fueled lift trucks in lots of industrial and distribution settings so it is not like nobody has been pushing this technology forward since the 70’s.
So, do we also ban the delivery of LP or propane because someone might hit the truck while texting, farding or painting their fingernails?
All that is required is the need for anything and the brightest minds in our country will find a way to deliver. Keep the government out of it and instead releases the entrepreneurial power of R&D tax breaks and it will be solved very quickly if it has not been done already for a totally separate industry. Doesn’t that also sound like something that Pickens would invest in?
Unless things have changed since my motor-home owning days about 15 years ago, just filling up the tank can blow you to kingdom come by overfilling the tank. Either NG has got to become idiot proof, or gas stations are gonna have to go back to using (competent) attendants to fill your vehicle.
Greenies won’t support it. It’s still a ‘fossil fuel’ that produces greenhouse gases.
The vehicles are much slower with a range half that of current vehicles.
Like electrics, they are for special uses (which could be greatly expanded) and wealthy hobbyists.
They use natural gas in Canada for their cars. Seems ok.
Natural gas is even less popular in Canada than the USA.
"We're spending over $8 billion dollars this year on
energy projects that move America forward"
The second line is in red, as if to enhance the socialist undertones, and it's alignment with the Obama campaign. Most of the Web pages I view seem to have an Obama ad on them, usually inviting me to dinner with Barack. This seems of a piece. My web browser must be infested with an Obama cookie.
There’s also room for the coal and nat gas to oil conversion. A pliot plant has been in operation and a commercial scale plant is being considered.The Fischer Tropf process I think it is called. Take the fuels we have in abundance, combine into a form we need.
Plus, there is shale all over the world including China. They will exploit whether or not we do.
It is MUCH easier to cost-justify the more expensive dual-fuel engine on a commercial vehicle that consumes hundreds of gallons per month.
A Cowinkadink? I think not....
IMHO it is an Ipso-Facto endorsment of Team Romney/Ryan who would enable this, without having to endorse them. specifically....
No, my solution is to use it as one of MANY feedstocks for hydrogen fuel cell cars. Going with hydrogen means you will never, ever be tied to one production industry or source type for your fuel - hydrogen can be made from source as diverse as applying electricity to water (as part of desalination), catalyzing it out of natural gas, chemically producing it from sewage waste, and the list goes on and on.
If we convert to pure natural gas, we’ll be right back where we are now at some point in the future. The liberal talking point about “Big Oil” will become “Big Gas” and prices ‘at the pump’ will skyrocket any time there’s a pipeline problem or a storage facility problem, etc., just like it does today. Worse, it will skyrocket any time generation demands go up.
Relying on a single-source fuel when a multi-source fuel is available is pretty dumb.
“Let me know when they develop the impact-proof fuel system first.” - SR
Does your current gas tank scare you too?
They are here, a firm in Canada uses Aluminum rapped in Carbon Fiber, and unless I am mistaken 3M was partnering with someone to work on light weight tanks.
My "auto gnome" noticed that and found that very significant, when 3M gets involved it is the big time...
That and Clean Energy's 150 filling stations @ Pilot Truck stops signifys the infrastructure is not only coming it is almost here...
Natural gas is one of the best fuels for heating.
We used propane exclusively on our farm for 40+ years. It was cheap, it is not now. There was a time we used it in our farm trucks. Both worked fine. The cost differential of propane compared to diesel caused us to quit. Natural gas is similar to propane, but propane has a higher BTU content and can be liquified at much lower pressures than natural gas.
Engines running on propane develop no sludge. They are so clean burning that they last almost forever. We still have a couple of propane tractors that are now long in the tooth.
I am not sure LNG is practical for auto use because of the pressures involved.
Using CNG is not a bad idea for many forms of transportation.
Of course as long as Obozo is in power, nothing but high gas prices are on the horizon. He is the enabler of the Saudi part of the cartel. And supports all our Commie enemies.
Obozo MUST GO!
All home heating can convert to NG or LPG.
That frees up one he!! of a lot oil for trucks until they covert to something else.
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