Sunday, January 06, 2013

Gwynne Dyer Also Gets Gassy

Wow, a week past just jam packed with reality.

TruthDig came out with an explanation of how America has slipped into a fracked gas bubble in which bundled gas leases were substituted for bundled sub-prime mortgages and flogged by the usual suspects at wildly inflated prices.

And Gwynne Dyer also took a hard look at fracked gas and concluded it's all sizzle and no steak:

Production of shale gas has soared in the United States (still the home to most shale plays) in the past 10 years, but it is only compensating for the decline in conventional gas production in the same period. Moreover, while the operators’ calculations assume a 40-year productive lifetime for the average shale gas well, the real number is turning out to be around five to seven years

That means that in the older shale plays they have to drill like crazy just to maintain current production—and since drilling is very expensive, they aren’t making a profit. As Exxon CEO Rex Tillerson told a private meeting four months ago: “We’re making no money. It’s all in the red.”

They are hoping to make a profit, of course, once the gas price recovers from the ridiculous level of $2 per million BTU that it fell to in 2009, when a great many people believed this really was a miracle. Four dollars per million BTU would do it for most operators, and even the highest-cost ones would be making a profit at $7. But it’s clear that shale gas is no miracle that will provide ultra-cheap fossil fuel for the next 100 years.

In that case, the prediction that the United States will be the world’s biggest oil producer by 2017 is nonsense.  Even on an ultra-optimistic estimate of how much “unconventional oil” it can eventually get out of the shale formations, it will still be importing a large proportion of its oil in 2035.

And the whole Middle Eastern business is a red herring, because the United States does not depend heavily on Middle Eastern oil. Most U.S. oil imports come from the Western hemisphere (Canada, Mexico, Venezuela) or from Africa (Nigeria, Algeria, Angola). Only 15 percent of its oil comes from Saudi Arabia, Iraq, and Kuwait, and virtually none from anywhere else in the Gulf. Whatever America’s various wars in the region may have been about, they were not about “security of oil supply”.

Which leaves the business about shale gas and oil pushing the world’s greenhouse gas emissions over the top. They can’t do that, because we are already over the top. We need only continue on our present course, without any growth in “unconventional” oil and gas production, and we will be irrevocably committed to 2 degrees C of warming within 10 years. Within 25 years we will be committed to +4 degrees C.

So why are we fed a daily diet of misinformation about energy in general, and shale gas in particular? Because a lot of people have something to sell.

What, then, are we to make of this?   Did Harper panic in flogging Athabasca assets to China because, dimwit that he so persistently is, he misread America's energy bonanza?   Did Harper, in effect, swallow the hype?   That message was circulating throughout Canada's corporate media.   China was our market of last resort.  We absolutely needed China to save the Tar Sands.   Ottawa must order the serfs to kow tow to Beijing.   China must have their pipeline to Kitimat.

That was then, this is now and now it appears that the United States will be staying at Alberta's bitumen trough, especially when the reality of its fracking binge sets in and that bubble becomes the latest to collapse.

So, as Gwynne Dyer says, "why are we fed a daily diet of misinformation about energy in general?   Because a lot of people (in Edmonton and Calgary and Ottawa) have something to sell."


thwap said...

That's how he was criticized from the left as well.

It's not as if either option makes him less of an idiot.

The Mound of Sound said...

I take it, Thwap, your pejorative is aimed at Harper, not Dyer. I certainly agree with you on Harper. Whatever doubts I harboured about his competence were shattered first with the imprudent GST cuts and then when, despite being a graduate economist, he failed to see the crash of 2008 coming several miles off. That's when it became inescapable that ours was a guy mired in ideology and faith-based beliefs for which he ditched reason and logic.