Today's headlines give a blurred reading on energy. Some say solar and wind are taking over the world, while others dismiss renewables as pipe dreams of the environmental left. Since most of the media is the environmental left, the prevailing message is that hydrocarbons are in trouble.
Not so. Fossil fuels are not going away. Far from being elbowed aside, oil and natural gas are gaining ground and significantly so. They'll be with us for a long time.
Prices are up, triggering a resurgence in drilling. With oil trading above $60 per barrel and natural gas hovering around $3 per million BTUs, production is profitable again, particularly fracking, which can be restarted in shut-in wells at little cost. In fact many fracked wells have been continuously producing, even with depressed gas prices. Thanks to improvements in technology, costs are low enough to survive wide price swings.
Consumers are the beneficiaries. Jim Rogers, a local energy expert, says new combined-cycle gas-fired power plants can produce electricity at costs as low as $40 per megawatt-hour. Little wonder our utilities are turning to natural gas, even in sunshine-rich Florida, where solar needs hefty subsidies to compete.
And it's not happening just in Florida. A power grid that serves 13 eastern states has added 8.7 gigawatts of gas-fired capacity over the last three years and is poised to add another 12.5 gigawatts by 2020.
Helping spur that growth is the ability to adapt. Faced with delays for new pipelines, operators are instead enlarging existing ones, taking advantage of assets where the permitting battles have already been fought. Such enlarged pipelines are making their way from Canada to refineries in the U.S. Another innovation is construction of power plants near gas fields, obviating the need for any transport at all.
And the largesse isn't limited to generating electricity. The chemical industry is benefitting as well. To access cheap ethane and propane in shale gas, new chemical plants are popping up at the end of gas pipelines on the Gulf Coast. The result is lower costs for plastics, coatings and other staples of everyday life.
The surge isn't restricted to the U.S. China just became the world's biggest oil importer, and Russia is making a serious move into shale gas, opening new fields in the Arctic and Siberia. Russia is also poised to move on petroleum, with recoverable shale-oil reserves of over 75 billion barrels. And in the volatile Middle East, Israel is selling natural gas to Egypt, a benefit for both countries.
Credit technology for making this happen -- primarily fracking and horizontal drilling. The impact is historic. With shale oil leading the way, the U.S. is set to overtake Saudi Arabia in petroleum output this year, exceeding 10 million barrels per day. We are already the world's largest natural gas producer. This is a remarkable development few thought possible just a decade ago.
And it's good for the environment. Wholesale replacement of coal-fired power plants with those fueled by natural gas is dramatically cutting U.S. greenhouse emissions, reducing carbon dioxide generation to the lowest level since 2000.
So to my green friends I say, rejoice. Be happy the U.S. is at last controlling its energy destiny. Be happy we're no longer under the thumb of sheikhs in the Middle East. Be happy we'll never again be held hostage to foreign wars (or foreign dictators) for our petroleum supply. Hurricanes may create lines at the gas pumps, but Saudi Arabia or Venezuela or Russia will not. Be happy we have cheap, clean natural gas for generating our electricity and, for those of us with property up north, for heating our homes.
The time will come when renewables take over, when they are cost-superior in a free market. Science will get us there. Eventually.
In the meantime, hail to the frackers!