Frac, Baby, Frac . . .

Drilling rig
Creative Commons License photo credit: eMaringolo

As I’ve blogged before, technology has played an important role in keeping Wealth Alchemist at bay.  I recently came across this study–The Shale Gas Shock (pdf)–that thoroughly vets the pros and cons of this new hydraulic fracturing technology being used to squeeze natural gas out of shale rock.

Put simply, this technology essentially dispells any notion that the “peak production” of fossil fuels is just over the horizon.  And it’s no surprise that independent, wildcatters, not large, state-owned oil companies, are the ones responsible for this remarkable new technology.  As long as the US continues to protect private property rights and the pursuit of profit (no guarantees there), then technology will continue to push back the Wealth Alchemists.

The study, while 36 pages, is remarkable easy to scan through and I encourage everyone to do so . . . it’s worth the trip.  From the study’s introduction:

Shale gas is proving to be an abundant new source of energy in the United States. Because it is globally ubiquitous and can probably be produced both cheaply and close to major markets, it promises to stabilise and lower gas prices relative to oil prices. This could happen even if, in investment terms, a speculative bubble may have formed in the rush to drill for shale gas in North America. Abundant and low-cost shale gas probably will – where politics allows – cause gas to take or defend market share from coal, nuclear and renewables in the electricity generating market, and from oil in the transport market, over coming decades. It will also keep the price of nitrogen fertiliser low and hence keep food prices down, other things being equal.

None the less, shale gas faces a formidable host of enemies in the coal, nuclear, renewable and environmental industries – all keen, it seems, to strangle it at birth, especially in Europe. It undoubtedly carries environmental risks, which may be exploited to generate sufficient public concern to prevent its expansion in much of western Europe and parts of North America, even though the evidence suggests that these hazards are much smaller than in competing industries.

Elsewhere, though, increased production of shale gas looks inevitable. A surge in gas production and use may prove to be both the cheapest and most effective way to hasten the decarbonisation of the world economy, given the cost and land requirements of most renewables.

The Folks at Accuweather Agree with My Assessment on Natural Gas

Watch this video “Current La Nina Means Significant Economic Implications” (link will take you to video).  In a nutshell, colder weather requires more energy to heat that warm weather requires to cool.  However, as Joe Bastardi explains in the video, the world is going into a long-term cooling cycle as the oceans of the world go into their cold period.  The fuel of choice to warm our homes, according to the video, is natural gas.

Natural Gas Powered Cars?

I’ve become a big fan of natural gas, even replacing my old oil burning furnace with a natural gas furnace.  My rationale for doing so was that big, domestic natural gas fields were coming on-line thanks to the new hydraulic fracturing technology.  That would mean: a) domestic energy security and b) lower prices.  The lower prices haven’t quite played out yet, but I blame that on the Fed-induced energy bubble . . . but I digress.

At any rate, it seems that natural gas may also be in the running not just for heating our homes, but also for fueling our cars.  Tom Evslin has a post at Vermont Tiger called Fueling the Future: Oil, Gas or Electricity where he discusses the pros and cons of the major competing fuels.  It’s a very interesting analysis so do read the whole thing, but here is his conclusion:

So do we build the infrastructure for electric cars or CNG [compressed natural gas] cars? Or are we going to continue with gas and diesel? Interestingly, the low price of natural gas favors both electricity and CNG as fuels since the cost of electricity is very dependent on the price of natural gas. It’s not economically crazy to burn natural gas to generate electricity and then use that electricity to power cars, even when transmission losses are taken into effect.