May 20, 2013 – Vol.18 No.10
THE COMING DELUGE OF OIL.
by Bruce Mulliken, Green Energy News.
It came without warning: A flood of oil. Just a few years ago we were talking about peak oil, the slow, painful demise of crude. Now there's talk about a shock wave of new oil supply from North America that's about to slam into global markets.
We're in the early stages of a new oil boom here in North America. The tar sands of Canada started the rumble. Now it's set to be the shale oil from North Dakota, South Dakota and Montana that will make the U.S., in five years or less, the largest oil producer in world, even greater than Saudi Arabia. By 2018, according to the International Energy Agency (IEA), there'll be more oil produced than cars can burn.
The estimated potential reserves in the Bakken and underlying Three Forks formations range between 4.4 and 11.4 billion barrels of crude, according to a recent assessment from the U.S. Geological Survey. This latest review doubled the reserves from an estimate done in 2008. Further, the estimate only covers the United States, but the oil-bearing rock formation extends into southern Saskatchewan, Canada, so more oil is likely
In just a few years, the U.S. could be totally energy independent and even have enough oil left over to sell abroad, if laws allow and the infrastructure is available to move the oil from well to refinery and refinery to market. With this growth anticipated, more pressure will be on President Obama to approve the Keystone pipeline.
There's no question this will be good for the U.S. economy. Money earned on domestic turf can be easily recycled back through the economy increasing growth. Don't be surprised if budget deficits dry up and unemployment plummets.
Aside from keeping our money at home, the possibility of oil exports could help reduce another deficit: trade. New cash will be flowing into the U.S. instead of out. This too will help the economy.
You'd think that a gush of oil at home will drop prices at the pump. To some degree it might. But U.S. oil companies get their pricing clues from the global market. The rest of the world sets the price, not us. Global pricing wars could break out between international oil producers that seem much like the price wars at between gas stations in the 1960's.
The concern for US producers will be a glut of oil that drops the price too low. Squeezing oil out of shale is expensive business. If the global price drops below the high cost of producing shale oil, then drillers stop squeezing and go out of business.
Overall, though, happy days will be here again for the oil industry.
However, that won't be true for the climate.
New wealth in oil will make it extremely difficult for Washington to pursue new measures to cut greenhouse gases. Climate skeptics and their advocacy groups with their oily roots, will want more fossil fuels pumped than ever before to reap the profits now. The oil industry will put the pressure on Washington to drop renewable fuels mandates and remove fuel economy rules.
As gloomy as this sounds there is some hope, and it's considerable.
As a result of constant partisan bickering, along with the unwillingness of Washington to tackle national and let alone global concerns, the Federal government has lost control in leading the states in one national direction on issues, including climate change. The result is that state governments that have to cope with the day-to-day realities of climate change, including its high cost, are taking action without Washington's input.
At the corporate level there's hope too. Corporations have learned that green is good and there's enough customers out there to buy green products even if oil is in abundance. Case is point are the U.S. car companies: If GM and Ford, for instance, dropped their green cars, customers would quickly move back to imported brands. This would be disastrous for US Big Auto.
It's also fairly clear that many corporations fully understand implications of climate change in terms of cost. Horrific weather events that never happened before can cost business that can never be recovered. And for companies that look in the long term, it's just good business to continue to look to the younger generations as future customers who are most likely to fully understand and believe what's going on the world's atmosphere: It's changing and it's us.
Further, companies have made great strides in clean technologies with considerable investment. It hard to see them abandon them with such progress made.
Finally, there's consumers with a conscience, of which may be a majority. Many will want to do their bit on climate change perhaps by driving the most gas-efficient vehicle, even no gas at all. There may also be a partisan bent on oil where one side sees the other as oil connected and will have no part in buying their products.
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