The Age of Fossil Energy is Far From Over

Last week, the London Sunday Times had an article about a potential discovery of methane hydrates that could more than double the world’s energy reserves. Methane hydrates are methane gas that is frozen by the high pressure and low temperatures of the deep sea.  While the existence of methane hydrates is not new the potential quantities that may exist around the world is.  This discovery, if they confirmed, could contain more energy than the combined known reserves of coal, oil and gas reserves.  Such abundance, including the abundance of shale gas around the world, can provide an entirely new perspective on the hydrocarbon age.

Statoil, Norway’s leading gas producer, has conducted a study that suggests that methane hydrates should be considered a significant resource that could power the world for centuries.  Statoil’s conclusions are consistent with work being carried out in Japan where test wells are being drilled.  The Japanese company conducting the drilling claims that the first methane gas will be produced this year and the potential reserves could meet Japan’s energy needs for centuries.

Two weeks ago, Nature magazine reported that scientists from the Department of Energy will test a new technique for extracting methane from Alaska’s frozen tundra.  A DOE scientist pointed out, however, that commercialization is not yet at hand.  Given our abundance of natural gas, there is no urgency in rushing to adopt any technology for making methane hydrates commercial.  The Japanese on the other hand are totally dependent on imports so commercialization is a much higher priority and Japan’s efforts will help to inform ours.

How soon methane hydrates will be commercially viable is anybody’s guess.  We have seen other promising technologies–liquifaction, clean coal, fusion, cellulosic ethanol,etc–take decades to develop and still not be competitive.  But, technology can emerge quickly and change the economics of energy development.  The shale gas boom is a prime example.

There are always lessons to be learned from energy development and no doubt the growing interest in methane hydrates will provide more that a few.  Some lessons, however, are not fuel specific.  For example, for over a century there have been predictions that the end of the oil age was at hand.  But, reserves keep growing not shrinking.  Market forces, not government, have driven technology.  And,the market will bring to market the low cost, abundant fuel sources we will need to have strong economic growth.  And, what looks technically practical may not be commercially viable–electric vehicles or fuel cell powered vehicles for example.

The over riding lesson is that energy is a factor of production and governments should encourage the development of all sources of energy and let them compete in the market place.  Attempts to favor and promote one type of energy at the expense of others are doomed.  European countries that rushed to promote solar and wind energy with mandates and subsidies have discovered once again that such policies are counter productive. Rather than pick and promote “winners”, governments should promote knowledge creation and innovation.  Policies that do that provide a better, if apparently a more uncertain, route to the future.