Tag Archives: shale revolution

The energy revolution [cont.]


“You and me we sweat and slave, but that old man energy just keeps rolling along”. Good news to sing about!

In one of that witches ’ brew that come out of the Congress and are called “compromise”, a bill seems to be working its way through the toils of the legislative process to end the four-decades-old ban on oil exports. In exchange, the Republicans and oil companies have agreed to put more money into the so-called green energy subsidies.

It’s not the best of solutions. But the possibility of shoving the growing gas and oil surpluses in the U.S. – a product of the Shale Revolution – on the world market argues well for the American economy. We hope it makes it.

The ban on exports – proving again when a law gets into place it is hard to dislodge even in the face of revolutionary changing conditions – dates back to the 70s. That’s when our growing imports were hit by the price-fixing Persian Gulf and others’ monopoly, the Organization of Petroleum Exporting Countries [OPEC]. But OPEC, despite recent huffing and puffing, has been dying on the vine, or rather swamped by the world energy glut.

The leading OPEC producers are now pumping violently, even though it is tearing the world energy price to shreds, in order to garner more market share. They obviously see the possibility of the Americans reentering the market, particularly in Western Europe. The Saudis, particularly, see their once catbird seat as the arbiter of world oil pricing dissolving in the American technology which has opened up enormous new possibilities in gas and oil in shale deposits worldwide once beyond the bit of the drills. [Don’t look now but that may also affect how the rest of the world views the Saudis’ sponsorship of reactionary Islamic religio-political movements.]

The U.S. production boom in Texas and the Dakotas and Montana, is cranking out more than one million barrels of crude a day. Current law does permit the export of half a million barrels a day from Alaska to Asian customers and exchanges with Canada. And as the largest consumer in the world, the U.S. even during an economic downturn is burning 19 million barrels a day according to the U.S. Energy Information Administration.

So far, at least, although the Saudis have oil that can be produced at a few cents a barrel, their gushers have not totally crippled the American shale producers. Good old American technological innovation continues to make leaps in shale productivity – and moderate world demand in a period of economic “malaise” – has so far saved a good part of the new industry.

Still, the glut causing low prices is keeping a lot of rigs from pumping full blast. Luckily for all concerned, the new crudes are mostly light, not the kind of heavy oil the huge Texas refineries were geared to handle from older U.S. fields and Caribbean imports but are welcomed by foreign refineries. The lifting of the export ban would produce an immediate spurt in jobs for the oil transportation systems and suppliers of their equipment needed for the new export capacity. The Aspen Institute says that means adding 630,000 new jobs and an additional $165 billion annually to the Gross Domestic Product for the next six years.

Hopefully, this deal is not going to get sidetracked as the Congress winds down for the holidays.

Not everyone is happy about the new developments, of course. Some investors in oil stocks are holding their heads. But we have always argued that cheap energy is the soul of American economic progress and development and that hasn’t changed, even if some of the players have. [Electricity producers are turning from coal to gas, or combinations of natural gas and coal gas – switches that probably are still in their infancy and too early to judge. But the gains in trimming emissions are already obvious.]

So bring on the oil – and gas [liquidifed natural gas] – exports!

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Dangerous Mideast Reality


The volatility of Middle East events notwithstanding, a new picture is emerging of alliances very different from those preceding the outbreak of the Arab Spring and the now five-year-old Syrian civil war.
That new reality is obscured by the Obama Administration, suspended in contradictory strategies of removing the American military option from the table while incrementally increasing U.S. special forces and bombing, adamantly calling for the ouster of Basher al Asaad in Damascus but negotiating for his participation in a “settlement”, and most of all, insisting on talking up an Israeli-Palestinian negotiation which has died.
There are growing signs that the relatively artificial national-states created by Britain and France in the Ottoman Empire breakup after World War II may be crashing.
Central to the new picture emerging is Saudi Arabia’s position. Western pressure and internal reformists are moving against the most egregious aspects of the regime, e.g., its long time allegiance to Wahhabism – an Islamic fundamentalism at the root of much of the current terrorism. Although the Saudis are flooding the world oil markets in an attempt to criiple their competitors, the Shale Revolution in the U.S. has deflated its once pivotal energy role. Saudi movement is occasioned by some internal reform elements, but more importantly the Obama Administration’s flirtation with Riyadh’s chief rival Iran. [Thet have just announced women will be permitted to vote, a revolution in a country which does not permit them to drive.] The Saudis themselves have been forced into direct talks with Tehran in an effort to short circuit Washington-Tehran deals. But at the same time, the Saudis are rallying Sunni allies in Syria against the growing influence – including direct military participation – of Iran. The nomination of a pro-Syrian president in Lebanon and the growing domination of the Iranian ally, the Shia Hezbollah, is a defeat for the Saudis.
Whether traditional family domination and loyalties can withstand this turmoil remains to be seen.
The Israeli-Arab conflict which has dominated Mideast politics may be dissolving in the face of the greater fear of an aggrandizing Iran. The recent announcement that Israel is opening a diplomatic mission in Abu Dhabi, although enmeshed in a number of subterfuges, is the most dramatic recent evidence of the growing new tacit alliances. Jerusalem and Cairo are in a tight security and military alliance against Hamas in Gaza, supported by Iran, and the remnants of the Moslem Brotherhood fighting a guerrilla movement against the al Ssisi regime. But virtual disintegration of the Palestinian Liberation Organization under aging Pres. Mohammed Abbas – under bitter attack from Hamas– means there is no negotiating party on the Palestinian side. The current wave of Palestinian violence –“lone wolf” episodes unorchestrated by any Palestinian organization if encouraged by Hamas – is being met stoically by an Israeli public. It has not slowed a growing French Jewish in-immigration occasioned by violent anti-Semitic episodes in France, Despite American and EU opposition [the latter in a trade offensive], Israel is consolidating its enclaves [”settlements”] in the West Bank and in East Jerusalem.
The Obama Administration’s response to these dramatic reversals in the region is an attempt to find a negotiated settlement to the Syrian Civil War. While Russia’s Pres. Vladimir Putin has nominally joined the effort, he has bid up his hand in the Syrian conflict in support of the al Basher regime which Washington still insists must go. How long Putin, with a collapsing economy facing Western sanctions over the Ukraine issue and a tumbling international oil price for its only export, can maintain the Syrian thrust remains to be seen. But the use of sea-born missiles this week was a dangerous escalation, not the least because some Russian missiles fired earlier from the Caspian earlier had fallen short in Iran
While references to World War III [by none other than Pope Francis himself] are exaggerated, the volatility of events suggests the possibility of miscalculations at any moment with even more escalating violence.
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Obama Losing his war on the American Economy


Whether the fourth quarter 5% growth of the U.S.gross development product [GDP] is a fluke, another wave of the troubled sea of the longest recovery in recent American history, it is evidence of the miraculous strength of the U.S. economy.
Some are predicting it means a return to 3% annual growth rates next year, still not what is required to reduce both cyclical and the new digital revolution induced structural unemployment, but back to “normal” trends..
The war the Obama Administration has been waging against business, private initiative, and historical American innovation hasn’t been able to stifle the basic American entrepreneurial spirit. Nowhere is that more apparent, of course, than in energy.
For the energy revolution which has come about as a result of the private sector pursuing new technologies to develop shale gas and oil, of course, are at the center of the miniboom. And, the chutzpah of the Obama Administration’s claiming credit for something it fought as vigorously as its amateur planners could – promoting higher energy costs to encourage their vaunted shift to new fuels — is even by the standards of this Administration, outrageous. It remains to be seen whether a new administration in 2017 might open government including offshore lands and reinforce the U.S.’ position already as the number one oil producer in the world and a potential major gas exporter.
Whether it is recreational drivers enjoying the new, lower gasoline prices, or the petrochemical industry moving back from overseas to use as throughput cost a price for gas a quarter of deliveries in East Asia, the domestic economy is getting a shot in the arm. Not even the threat of an unconstitutional Obama’s Environmental Protection Agency all-out attack on all American electrical production and manufacturing can stymie the trend.
The international impact of this remarkable and relatively sudden development is still playing out.
The world energy price, however much markets are segregated by political concerns, is still in the throes of being threshed out. But lower energy prices, even in the fickle oil market, are obviously with us for several years. That’s the result of the American shale revolution, but also – despite all the feuds and guerrilla in the Mideast – the coming on market of more and more production. Boycotts and sanctions have only increased the black-markets nipping and tucking through all the back alleys of the world economy to market more oil.
It’s hard to know where to begin with what we already see as the immediate results of the world energy goldmine:
Saudi Arabia, hoping to impede the American and foreign shale revolution with its higher costs, is pumping more oil than ever from its low-cost resources. It hopes not only to have an effect on a possible competitor as the U.S. moves to becoming, again, a gas [liquefied natural gas, LNG] and oil exporter, but to deal a blow to its Mideast rivals.
Venezuela’s two-bit caudillos are in trouble with their heavy oil. [They will have new competition as the Keystone XL Pipeline finally overcomes Obama’s opposition to deliver similar Canadian tar sands oil to the Houston where one of the few refineries which can handle Caracas’ goo exists]. Nor can the collapsing Venezuelan regime continue to feed subsidized energy to its leftwing anti-America playmates. It remains to be seen if Obama’s life preserver thrown to a Castro regime, the first victim of such a shutoff, can save that crumbling dictatorship which has brought infinite misery to its people.
Lower world oil prices may be able to restrain an aggressive Tehran. They may do what American sanctions and a less than dedicated Obama negotiation to block the mullahs’ drive for nuclear weapons has not done. Lower oil prices for its relatively high cost production is tearing the guts out of an economy already in trouble on a variety of scores.
The Chinese are also on a downward spiral as their two big economic props – massive infrastructure development and exports – are being undermined, the first by a crippling debt crisis and the second by a dawdling world economy and growing competition from other low wage producers. But new cheaper worldwide energy will help as they are unable to turn to their own shale resources [mismanagement and lack of technology] as they become larger importers.
Japan and South Korea’s stagnating economies, too, will profit from their lower energy import costs, especially Abemomics in Japan which has had to suffer cutbacks in its heavy reliability on nuclear power as a result of the 2011 earthquake and tsunami catastrophe.
There are going to be groans and yelps from the great international oil conglomerates, too, who have Veneuzle=been riding high in the stock markets on high prices and profits. That may discombobulate some of the financial crowd and some of their kept media, but cheaper worldwide energy is bound to move the world economy forward – and in the process cripple some of the worst corrupt regimes. Not a bad way to enter the New Year, all things considered.
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