Is America About to Experience It’s Greatest Boom Ever? A Wildly Optimistic Prediction Based on Things Happening Beneath the Public Radar.
While everyone including the media has been concentrating on the woes of a depressed economy and a bitter and divisive election campaign, a glimmer of positive hope for things to come has been growing for several years. It’s not obvious yet except in places like North Dakota, Texas, and a few other areas. It’s growing potential remains unrecognized in most of the nation. Actually, the coming boom is two different but related booms. Both based on the production of fossil fuels, The two resources are enormously plentiful in the US in deposits previously unavailable for economic production.
The first one, natural gas, has already reached glut amounts with production far exceeding demand. The rapidly expanding supply has resulted in record low prices that are now just a bit more than a third of European prices, and just a fifth of prices in Japan. This price difference has brought about a furious effort to produce LNG (Liquified Naturel Gas) tankers to supply American LNG to both Europe and Japan. The opportunity for profits for American gas companies is tremendous. This alone would be a huge positive change in our trade balance of payments and could quickly make us energy independent of imports.
Here is an excerpt from my book, Energy, Convenient Solutions, that describes the beginnings of the natural gas boom economy as far back as 2006.
(1) A Special Case, LNG or Liquid Natural Gas
T. Boone Pickens is promoting a plan for massive conversion of diesel trucks to LNG, Liquid natural gas. His plan would make large amounts of LNG available to power heavy trucks. California set forth a ballot initiative that would free up $5 billion for deployment of a million LNG vehicles on state roads. In 2006, the ports of Long Beach and Los Angeles adopted a plan to reduce drastically pollution from more than 16,800 Class-8 tractor trailers, the only trucks strong enough to transport the heavy containers in and out of the ports. They chose LNG for many reasons including safety and cost. Even with the expense of replacing diesel engines with LNG engines the ports look to save around $350 million each year. The ports have announced the approval of a new $1.6 billion Clean Truck Superfund. Wal-Mart, which operates one of the largest truck fleets in America, is testing four trucks to measure the possible money saved by the switch. I am certain other truck users are carefully watching the results.
Pickens is positioning himself to profit from this with several investments. He has a 40% ownership in Clean Energy Fuels Corp. that provides natural gas for vehicle fleets by designing, financing, building, and operating LNG fueling stations. He also has a 12% interest in a small Canadian company that has designed what could be the most advanced, efficient engine on the planet to replace diesels in new and existing trucks. It is powered by LNG.
Pickens is the type of entrpreneurial investor who will probably solve our energy crisis while generating many good jobs and enriching himself and countless others in the process. His efforts will also result in a great deal of tax revenue for several governments. Many other entrepreneurs and planners are investing in research, development and manufacture of advanced energy systems that will help us solve our energy crisis. Unfortunately the combination of promised new corporate taxes and the economic downturn of 2008 has already caused many valuable projects to be scrapped. Pickens and others have downsized or completely abandoned creative new investments in many things including much needed energy and alternative fuel projects. A more encouraging tax policy could reverse this especially if government would just stay out of the way.
Since the time that was written, the conversion of heavy diesel trucks to LNG has expanded as fast as manufacturers of heavy LNG engines could supply engines. With annual savings in fuel costs between $60,000 and $80,000 per year, conversion to LNG has moved from a luxury with air pollution advantages to an absolute necessity for financial survival. Heavy truck fleets from companies like UPS, Wal-Mart, and trucking companies serving air sensitive areas like LA are no longer testing LNG truck engines, they are converting to them as fast as possible to remain competitive. This quiet, but rapidly growing revolution in the trucking industry is proceeding virtually unnoticed by the public. The new LNG truck engines are not only less fuel costly, but they burn much cleaner, put far less CO2 into the atmosphere, and are much cheaper to maintain than the old diesel engines.
Another important factor: Natural gas power plants are much cleaner than either coal or petroleum fired plants and are now a lot cheaper to operate. In 2000 Gas fired power plants made about 20% of our electricity. Gas power plants completed and proposed since then will boost that percentage above 30% within the next ten years, the fastest expansion of any type of power plant including nuclear.
Commercial Gas fired power plants are not the only power generating system to benefit from cheap natural gas. Recently, many gas fired micro turbines were put to use supplying power for emergency services, hospitals, police and others in the aftermath of Hurricane Sandy. Capstone Turbine of California is the largest manufacturer of MicroTurbines in the world. They make various sizes of MicroTurbines: 30kW, 65kW, and 200kW. Products based on the 200kW turbine are also available in 600kW, 800kW, and 1MW configurations. In addition to power systems, Capstone MicroTurbines are used extensively to power busses in China. Capstione’s continuing sales to China are one of the few bright spots in our trade with China.
Natural gas is the number one fuel for home heating and is now increasingly supplanting fuel oil in many areas. It is also by far the most popular fuel for cooking. Industrial plants are increasingly relying on natural gas, with many plants drilling their own wells in places like Ohio and Texas.
One of the reason for the rapidly increasing supply of cheap natural gas is the relatively new process of fracking where deep underground shale is shattered releasing the massive amounts of natural gas locked in shale formations. Until this new process was developed, this gas was not economically available. Like any new process, fracking continues to improve in both cost, efficiency, and safety. It has made available vast fields of natural gas previously locked in shale. There is enough gas available in known fields to supply our need economically for many decades to come. Once the LNG tankers are plying the seas, the natural gas boom will be in full swing. That, however, is merely the first boom to hit America.
The same shale that holds vast amounts of natural gas also holds an estimated 1.5–2.6 trillion barrels of petroleum. That’s almost half of the world’s known deposits. In contrast, the worlds conventional oil reserves are estimated to be 1.317 trillion barrels as of January 1, 2007. The search for new conventional oil deposits has been going on for more than a hundred years and new fields are getting harder to find and more difficult to extract. In contrast, the search for oil shale has been going on for a relatively short period and could be underestimated by a factor of three or more. That means the US could have as much as 4.5–7.8 trillion barrels of petroleum locked in shale.
This graph shows not only the rapidly expanding production in North Dakota, but a similar trend in Texas because of improved methods of extracting oil from old fields. The growth in North Dakota is from a single shale deposit, the Bakken, and there are several other as yet untapped shale deposits that could be just as large. Unless something (like the administration) stops it, the increased production of petroleum will follow the already huge growth in natural gas and a boom in energy will result as the US becomes an energy exporter rather than an importer. ow big the boom will be and how long it lasts will be at least partly dependent on the actions of our government. Will the administration support the boom or destroy it? That is the question. To this point their efforts have not been supportive, but the boom continues to grow in spite of their efforts.
Like natural gas, petroleum in shale is yielding to fracking and other new extraction techniques. Experts have estimated that new extraction techniques in shale and even in fields depleted of oil available to conventional extraction, could drop the cost of US produced petroleum at the well head below $5 per barrel. Even with world oil prices at half of their present level, oil from shale is becoming profitable. As of November 1, 2012, world crude prices were $87 per barrel for WTI crude (West Texas Intermediate) and $108 per barrel for Brent crude (North Sea Standard). Rapid expansion of production from the Bakken shale formation in North Dakota has already created an oil boom there. As more investment in infrastructure for extracting crude from shale goes into place, the boom will expand. The Bakken is huge, but it is only one of a number of oil shale deposits in the US, and new fields continue to be discovered. All that is needed is the investment in new drilling and fracking infrastructure, and the transportation system to move the oil to refineries. It is actually possible that the US could move from an oil importing nation to an oil exporting nation within just a few years. This coupled with LNG would generate an unprecedented boom creating many high paying jobs and expanding manufacturing as energy costs go way down. The biggest factor, the billions now going to oil producing nations would be replaced by billions coming in from nations purchasing oil from the US.
There are a few caveats that are quite obvious. The continuing anti energy, anti business policies of the Obama administration could easily stop the booms before they get very far. Increases in taxes could dry up new investment needed in oil production infrastructure and in the transportation of LNG. A plethora of new federal regulations could slow or stop the booms before they develop. Behind all of this is the socialist, anti capitalist agenda of liberal Democrats who, if they were honest would change their name to the Socialist or Communist Party. I see the Republican House of Representatives as the only bulwark against the U.S. becoming a socialist dictatorship. There may still be a concerted effort by the administration, aided by the Senate and the media to have the government take over the entire energy industry, especially the oil and gas industries. They certainly will not let capitalist organizations lead the US into a new boom economy and get the credit for it. Whatever happens, the administration and liberal Democrats will take credit for the boom and their sycophant media will dutifully report this as a fact. If the boom is big enough, Obama will use it to run for a third term in 2016. Count on it.
You can rest assured the anti fossil fuel, global warming crowd will do everything they can to prevent or stop these fossil fuel booms. Unless, of course, their Pied Piper is overwhelmingly given credit for the boom. Such being the case, they will be very quiet about global warming. They will probably tout the reduction in release of CO2 as trucking companies and power companies switch to natural gas from coal and petroleum fuels. They will be caught in the dilemma of whether to continue with their anti fossil fuel agenda and go against Obama’s claimed economic success, or reverse their agenda and tout the conversion from diesel to LNG as it will cut in half the discharge of CO2 into the atmosphere by heavy trucks. Then there’s a similar reduction in CO2 emissions as coal and oil fired power plants convert to cheaper natural gas. It will be interesting to see which way their efforts go. It is even possible some will go one way while others go the opposite.
