By Michael J. Economides
I have waited for a couple of months for 2012 to mature before I put this piece out. (Even with past successes in predictions the anemic economy and the US elections make for a difficult punditry on the future.)
The New Year opened with a sobering warning on energy policy and global demographics from Carlos Ghosn, the chief executive officer of the Renault-Nissan Alliance. Ghosn, a man who has a firm grasp on the big picture, told an industry gathering in Detroit that “several paradigm shifts” have the potential to severely disrupt the auto industry – and the planet.
He predicted that, by 2050, there may be as many as 2.5 billion vehicles on earth, compared with fewer than 1 billion now. China and India are expected to account for fully half the growth in energy demand through 2030, Ghosn said. The transportation sector, moreover, is overwhelmingly dependent on fuels derived from crude oil and will be for the foreseeable future.
Is the White House listening?
America’s chief economic competitors have pursued a two-pronged policy of strategically but frugally investing in renewable energy research while expending a massive effort in securing new sources of oil and natural gas anywhere in the world they can find these resources. They clearly understand that the future is still colored overwhelmingly by oil and gas. On the other hand, the ideologically blinkered Obama administration continues to behave as if it can magically banish the fossil fuel economy with more Solyndra-like subsidies to cronies, punitive taxes on U.S. energy producers, and politically motivated delay tactics.
For three years, the White House has declared war on fossil fuels, which is like saying it has declared war on the U.S. economy. The ideologues in the White House are marching in lockstep with their masters in the environmentalist movement. They are dangerously ignoring the “demand shock” that has characterized energy markets in recent years, and the warning from the International Energy Association (IEA) recently that, “In a world full of uncertainty, one thing is sure: rising incomes & population will push energy needs higher.”
By its deeds – not its flowery words and talking points – we saw last year how the White House failed to develop energy policy according to this new global reality. President Obama punted on the crucial and urgent need to greenlight the Keystone XL pipeline, which would bring 700,000 barrels per day of Canadian crude oil and would ignite $20 billion in related economic activity, knit the U.S. into the vast Canadian oil sands, and dramatically strengthen our energy security. This delay has occurred in spite of industry-leading safety measures planned by the pipeline operator that would raise benchmarks for operation, inspection and maintenance access.
But the White House succumbed to noisy scare tactics and promises of political retribution by environmental groups. It ignored that fact that our economy already depends on 2.3 million miles of regulated pipelines, some already operating in regions where Keystone would have been built. Now, the Chinese are investing billions in Canadian oil sands plays.
At the same time, the Obama administration and key Congressional leaders want to selectively raise taxes on domestic oil and natural gas firms by more than $40 billion. Oil and natural gas producers in this country already pay taxes at a higher rate than other U.S. industries, and operate at a disadvantage against much larger state-owned firms in the global energy market. Raising taxes on U.S. oil and natural gas firms is akin to handing subsidies to foreign producers, who compete in a bare knuckles international contest for new resources. Witness socialist Venezuela’s expropriation of $12 billion in ExxonMobil assets and its refusal to submit the dispute to World Bank arbitration.
What has been the Obama administration’s response to the worldwide boom now underway in shale gas? Typically, it has said positive things for public consumption while behind the scenes it is drafting new restrictions on development of this game-changing resource. Safe and time-tested directional drilling and hydraulic fracturing technologies are helping us unlock new reserves of clean-burning shale gas. In fact, there is potentially so much shale gas available that energy importing countries like Chile, Paraguay, Poland and the Ukraine, and especially major economic powers like the United States and China, could become self-sufficient in natural gas in the near future. But environmentalists have identified shale gas as their new bogeyman.
In the U.S., job seekers are moving into North Dakota – now known as the “Economic Miracle State” – in droves because of the oil boom underway there, again made possible by new drilling techniques. North Dakota is now producing enough oil to completely displace the imports of crude oil from Colombia.
But the White House, wedded to discredited ideologies and small thinking, continues to obstruct and delay while our nation’s energy needs are clear and urgent. That is a dangerous and reckless course for steering the world’s largest economy into a secure and prosperous future.
Michael Economides is Editor-in-Chief of the Energy Tribune
“For three years, the White House has declared war on fossil fuels”
I don’t see why you bothered to wait when you can do your political bs any day. Amidst this ongoing war we now have so much natural gas supply that it has dropped to $2.50 per mcf and drillers are cutting back dry gas drilling plans. Oil production in the U.S. has increased in each of the last three years. There are over 1,200 rigs working in the U.S. Where is this war?
The plain truth is that if you extrapolate out the Chindia oil consumption numbers and the net export numbers from the producing countries the whole world is in a world of hurt. I wonder how many rigs would be needed to reach and sustain 18 million bopd.