Things will only get better

Oh yeah, baby.

With so much talk these days of America’s decline, it may sound strange to ponder the prospects for an American economic boom a decade or so from now. But that’s the thrust of two new studies, David Ignatius of The Washington Post writes.

America is entering a new era of energy security: My expert here is Robin West, a friend who is chairman of PFC Energy, a Washington-based advisory group. He argues in a series of recent reports to clients that because of the rapid expansion of oil and gas production from shale, America is likely to become by 2020 the world’s No. 1 producer of oil, gas and biofuels – eclipsing even the energy superpowers, Russia and Saudi Arabia. 

West explains that the natural-gas boom will mean a dramatic change in energy imports and, thus, the security of U.S. energy supplies. He forecasts that combined imports of oil and natural gas will fall from about 52 percent of total demand in 2010 to 22 percent by 2020. The totals are even more impressive if supplies from Canada are included. 

“This is the energy equivalent of the Berlin Wall coming down,” contends West. “Just as the trauma of the Cold War ended in Berlin, so the trauma of the 1973 oil embargo is ending now.” The geopolitical implications of this change are striking: “We will no longer rely on the Middle East, or compete with such nations as China or India for resources.”

There you go, boys and girls. This is as big is the end of the Cold War threat of nuclear war, for those of us who lived most of our lives under that cloud. Go out and buy yourself an SUV.

All that oil, and no place to go

“With only 2% of the world’s oil reserves, we can’t just drill our way to lower gas prices,” President Obama has said. “Not when we consume 20% of the world’s oil.”

How true is that? Not very.

The figure Obama uses — proved oil reserves — vastly undercounts how much oil the U.S. actually contains, Investor's Business Daily explains. In fact, far from being oil-poor, the country is awash in vast quantities — enough to meet all the country's oil needs for hundreds of years.

The U.S. has 22.3 billion barrels of proved reserves, a little less than 2% of the entire world's proved reserves, according to the Energy Information Administration. But as the EIA explains, proved reserves "are a small subset of recoverable resources," because they only count oil that companies are currently drilling for in existing fields.

All told, the U.S. has access to 400 billion barrels of crude that could be recovered using existing drilling technologies, according to a 2006 Energy Department report. When you include oil shale, the U.S. has 1.4 trillion barrels of technically recoverable oil, according to the Institute for Energy Research, enough to meet all U.S. oil needs for about the next 200 years, without any imports.

To be sure, energy companies couldn't profitably recover all this oil — even at today's prices — and what they could wouldn't make it to market for years. But from the industry's perspective, the real problem with domestic oil is that the government has roped off most of these supplies.

"This is not a geological problem — it's a political problem," said Dan Kish, senior vice president for policy at the Institute for Energy Research. "We've embargoed our own supplies."

Why the economy hurts so bad

We know there was a housing bubble that burst and a financial panic, but something else was involved in the Great Recession we're still trying to recover from.

And that was the price of gasoline, Derek Thompson writes in The Atlantic.

In 2009, economist James Hamilton published a paper that retroactively forecast what an oil shock, like the one we experienced in 2007-08, would do to GDP. And guess what? His model accurately predicated much of the collapse in GDP that resulted from the Great Recession -- as if there had been no housing bubble or financial crisis! The oil spike was that bad.

Still, there was a housing bubble. And there was a financial crisis. How do we account for them and still hold onto the gas story? Here's a one-paragraph theory of the Great Recession that begins with gasoline. Cheap gas ruled in the 1990s. This encouraged families to settle down farther from the cities where they worked. In the 2000s, super-low interest rates, declining lending standards, and an appetite for mortgages on Wall Street (among other factors) further encouraged sprawl and residential development in the 'burbs. As the price of gas went up, families stopped buying homes 30 minutes from the city. For folks shacking up in the exurbs, higher gas bills ate into mortgage money. For companies, higher energy bills shocked productivity. Classic oil-shock + housing development arrested + financial crisis = Great Recession.

That's why President Obama's energy policy/religion matters so much. Here's what the White House itself has to say about energy. This is the White House's energy page.

The President has taken unprecedented action to build the foundation for a clean energy economy, tackle the issue of climate change, and protect our environment.

"As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs - but only if we accelerate that transition. Only if we seize the moment." -- President Barack Obama

Nothing there about filling your tank to get to the grocery store. What do we know about Obamaman's energy policy? Roadblocks everywhere to brining online more oil and gas. Corruption and mismanagement in wishful thinking boondoggles like Solyndra.

If you approve of all this, go plug your car into a windmill.

So ride your bike to a green rally

Canada's prime minister and some of his cabinet -- including his minister of natural resources -- have traveled to China this week. There's no mistaking the message to the United States: your president said no to the Keystone pipeline that would bring Canadian oil into the United States. So we're going to talk to China about buying it.

Joe Nocera comments:

Environmental concerns notwithstanding, America will be using oil — and lots of it — for the foreseeable future. It is the fundamental means by which we transport ourselves, whether by air, car or truck. Where do we get that oil? Mostly from countries that don’t like us, like Venezuela, which has the world’s second-largest oil reserves.

And here is Canada, a staunch American ally that has historically sold us virtually all of its crude exports. Over the past two decades, energy companies have invested tens of billions of dollars in the tar sands, so much so that Canada now ranks No. 3 in estimated oil reserves. Along with the natural gas that can now be extracted thanks to hydraulic fracturing — which, of course, all right-thinking environmentalists also oppose — the oil from the Canadian tar sands ought to be viewed as a great gift that has been handed to North America. These two relatively new sources of fossil fuels offer America its first real chance in decades to become, if not energy self-sufficient, at least energy secure, no longer beholden to OPEC. Yet these gifts have been transformed, like everything else, into political footballs.

There's your stark choice, boys and girls.

Put some cake in your gas tank

Get used to it.

Filled up the Subaru this morning. Regular was $4.07 a gallon. Nationally gasoline prices rose 33 cents a gallon on average the past two weeks, reaching $3.51 for a gallon of regular, with prices over $4 in California and elsewhere.

Your president responded by visiting a wind turbine plant owned by a Spanish company. Oh good: I'll strap one of those things on my Subaru. "I remember," he said, "what's like pumping gas."

What he doesn't remember is how to drill for more oil. His minions are fighting a judge's order to get drilling started again in the Gulf of Mexico. In February, a judge held the Department of Interior in contempt, citing its “dismissive conduct” in blocking offshore drilling during last year’s spill.

Undeterred by its bureaucrats, Cuba is going to drill five new wells in the Gulf this year.

Obama's advice to Americans: get used to it. Oh, and he said to one questioner about his car, “You might want to think about a trade-in.”

Here's some science on that:

A one-year decrease in a car's lifetime leads to a reduction in overall carbon emissions only if the new replacement car is at least 12.7%more fuel-efficient than the old one, say researchers led by Shigemi Kagawa of Kyushu University in Japan. That's an increase from, say, about 12.1 kilometers per liter (28.4 miles per gallon) to 13.6kpl (32mpg).

What he's saying is that it's all your fault for driving the car you bought. If you've got the money, go buy yourself a new one. Who has the money?

Paychecks are falling further and further behind. In the past three months, consumer prices have been rising at a 5.7 percent annual rate while average weekly wages have barely budged, increasing at an annual rate of only 1.3 percent.

I say, let your car burn cake.

Where's the oil?

Still in the ground.

Amid the turmoil in the Mideast, petroleum futures reached $103.41 per barrel this week, their highest price since September 2008. Unleaded gasoline averages $3.24 per gallon — up 55 cents, year-on-year. 

Columnist Deroy Murdock comments:

Amid all of this, the Obama administration treats America’s domestic-petroleum supply like the Smithsonian’s Hope Diamond: something to be observed and admired, but not touched.

“The Bureau of Land Management has created a lot of uncertainty related to onshore leases,” says the American Petroleum Institute’s Erik Milito. “They have added redundant steps in the land-use-study process. They are adding layers that delay opportunities for oil and gas development on federal land.” 

The picture at sea is no better. 

“The administration has at least 40 exploration plans and 40 development plans that have not been acted upon,” Milito adds. “We understand that dozens of oil-spill-response plans require action as well. This is in addition to the environmental assessments that must now be completed for the exploration plans. They cannot approve permits to allow drilling to commence until they address those items.” 

“In addition, this may be the first year since 1964 where we will not have a lease sale in the Gulf of Mexico,” Milito continues. “A recently announced supplemental environmental-impact report for the Gulf may not be ready until 2012. Holding these lease sales is critical to our economic and energy security because they provide the opportunity for long-term investments in American jobs and energy sources.”

Short-term delays can cause long-term stasis. A Wood Mackenzie study commissioned by the API found that a one-year delay in granting permits could render “sub-economic” 13 out of 25 deepwater oil and gas fields. Those 13 fields represent 2.7 billion barrels in potential oil reserves (which would satisfy about five months of U.S. demand) and 540,000 barrels of daily output. Such a loss would slash Gulf of Mexico production by 27 percent.

Next time you're filling the minivan, be thankful for ideology. 

Will this change the Mideast energy map?

Israel has depended on gas from Egypt, coal from South Africa and some gas from its own nearly depleted wells. However, huge natural gas reservoirs in its territorial waters of the Mediterranean Sea have recently been discovered.

The gas finds of Tamar, with an estimated 8.7 trillion cubic feet, and Leviathan, with 16 trillion cubic feet, belong to the massive Levant Basin Province field that might contain a total of 122 trillion cubic feet, according to a United States Geological Survey. Together, the two Israeli sites are twice as big as the British fields in the North Sea, with an estimated value of $300 billion, enough gas for perhaps 50-70 years of domestic use. If technology proceeds without mishap, Tamar will be yielding its resource by 2012, Leviathan by 2015.

The squabbling began immediately.

The Tamar and Leviathan gas discovery has instigated a wide variety of reactions from observers. Hezbollah is snarling that Israel wants to rob oil from Lebanese territorial waters. Greece and Cyprus have hosted high-level discussions on the topic with Israeli leaders. Noam Chomsky has opined that 2008's Operation Cast Lead was Israel's ploy to seize gas and oil fields off the Gaza coast. International pundits are offering reams of advice with at least one, Gal Luft of the Institute for the Analysis of Global Security, defining Tamar and Leviathan as a "world class game-changer."

Hank Pellissier at the World Future Society lays out several scenarios for this find, including sabotage, domestic use only, a pipeline to Greece and exporting liquefied gas to Asia.

The law of unintended consequences

I hadn't realized this, but apparently the incandescent light bulb will be illegal in 2014. They will be replaced by CFLs, compact fluorescent lamps, those curly things that look like soft ice cream cones.

We recently had an energy audit, heavily subsidized by your taxes. Two people spent two hours going through our house and, among other things, replacing incandescent bulbs with CFLs. One in the garage burned out in two weeks. Others take a while to warm up and reach their full brightness. But, fine.

Now comes word that the last U.S. plant that manufactures the old incandescents in closing. It's a GE factory in Winchester, Virginia. Despite all the hoopla about "green jobs," these thingies will be made in China, because they need more hand labor. It would cost 10 percent more to make them here.

As the Washington Post reports, this trend to overseas manufacturing continues unabated.

Under the pressures of globalization, the number of manufacturing jobs in the United States has been shrinking for decades, from 19.5 million in 1979 to 11.6 million this year, a decline of 40 percent.

At textile mills in North Carolina, at auto parts plants in Ohio, at other assorted manufacturing plants around the country, the closures have pushed workers out, often leaving them to face an onslaught of personal defeats: lower wages, community college retraining and unemployment checks. 

This is bad for these people, but it isn't necessarily bad for the economy. It is an unintended consequence of regulation. And here's another: these CFLs contain mercury.

Now the EPA, which endorses the use of CFLs, also tries to make this mercury seem a non-threat -- it's in rocks and coal, you know. But to my mind the EPA gives the game away with  this warning should you break one of these puppies:

Before Cleanup: Air Out the Room

• Have people and pets leave the room, and don't let anyone walk through the breakage area on their way out.
• Open a window and leave the room for 15 minutes or more.
• Shut off the central forced-air heating/air conditioning system, if you have one.

Cleanup Steps for Hard Surfaces

• Carefully scoop up glass pieces and powder using stiff paper or cardboard and place them in a glass jar with metal lid (such as a canning jar) or in a sealed plastic bag.
• Use sticky tape, such as duct tape, to pick up any remaining small glass fragments and powder.
• Wipe the area clean with damp paper towels or disposable wet wipes. Place towels in the glass jar or plastic bag.
• Do not use a vacuum or broom to clean up the broken bulb on hard surfaces.

Meantime, we all assume an additional cost for using these things. According to Wikipedia:

The retail price includes an amount to pay for recycling, and manufacturers and importers have an obligation to collect and recycle CFLs. Safe disposal requires storing the bulbs unbroken until they can be processed. In the US, The Home Depot is the first retailer to make CFL recycling options widely available. The EPA recommends that, in the absence of local guidelines, fluorescent bulbs be double-bagged in plastic before disposal.

You just can't make one change in the economy. Too many other things you can't imagine will also change.

Is this the magical energy solution?

I've never heard of thorium, a naturally occurring, slightly radioactive metal. It is estimated to be about three to four times more abundant than uranium in the Earth's crust. It is abundant and cheap.

Nobel laureate Carlo Rubbia at CERN (European Organization for Nuclear Research), The Telegraph reports, says a tonne of the silvery metal – named after the Norse god of thunder, who also gave us Thor’s day or Thursday - produces as much energy as 200 tonnes of uranium, or 3,500,000 tonnes of coal. A mere fistful would light London for a week.

"It’s the Big One," said Kirk Sorensen, a former NASA rocket engineer and now chief nuclear technologist at Teledyne Brown Engineering. "Once you start looking more closely, it blows your mind away. You can run civilisation on thorium for hundreds of thousands of years, and it’s essentially free. You don’t have to deal with uranium cartels."

Thorium eats its own hazardous waste. It can even scavenge the plutonium left by uranium reactors, acting as an eco-cleaner. And there's lots of it lying around: The U.S. and Australia are full of the stuff. So are the granite rocks of Cornwall.

So why haven't we tried to use it yet, relying instead on uranium? Turns out that the U.S. need to build an atomic bomb made uranium the choice. Now the impediment is vested interests in uranium: too much infrastructure in place.

Thorium-fluoride reactors can operate at atmospheric temperature. The plants would be much smaller and less expensive. You wouldn’t need those huge containment domes because there’s no pressurized water in the reactor.

There's hope.

The Norwegian group Aker Solutions has bought Dr Rubbia’s patent for the thorium fuel-cycle, and is working on his design for a proton accelerator at its UK operation. Victoria Ashley, the project manager, said it could lead to a network of pint-sized 600MW reactors that are lodged underground, can supply small grids, and do not require a safety citadel.