By: Jude Clemente – Forbes – No one ever went broke underestimating the intelligence of the American public,” H. L. Mencken – While everybody obsesses over the price of oil, the price of natural gas is becoming just as important.
Thanks to America’s “shale revolution” over the past 14 years, gas now supplies 33% of U.S. energy and 40% of its electricity.
We’ve been very lucky in this country when it comes to the world’s centerpiece resource to fight climate change: natural gas.
It all started back in 2008, when our “fracking” boom took flight, a perfected union of constantly evolving horizontal drilling and hydraulic fracturing technologies.
Our production has boomed ~70% to 95 Bcf/d.
From 2000-2008, U.S. gas prices averaged over $6.00/MMBTu; since then, gas prices have averaged $3.30.
Due to above-ground failures, however, there has been a global energy crisis since late-Summer.
As our gas-importing competitors in Europe and Asia have routinely confronted prices in the $25-50 range, we did hit over $6 back in October but are now back to around $4 to $4.75 range, even during the high demand winter season (ignore the short squeeze on Thursday as Feb22 contract expired).
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The U.S. will stay a gas-producing machine because we have so much of it, and gas is becoming increasingly integral.
In addition, we just became the world’s largest LNG (liquefied natural gas) seller, and there are so many more export terminals coming.
Countries around the world want our low-cost gas to: 1) get away from Vladimir Putin’s grip on supply, 2) abate energy deprivation and abject poverty that rich Westerners cannot comprehend, 3) back up naturally intermittent wind and solar power, and 4) clean hazy city skies and cut emissions from coal (gas emits 50% less CO2 than coal and has far fewer criteria air pollutants).
Our best experts are clear: in October, the U.S. Department of Energy modeled that U.S. gas production will soar nearly 30% by 2050 to 43.0 trillion cubic feet, and our consumption will rise 15% to 35.4 trillion cubic feet.
The idea that wind, solar, and electric cars are the panacea to fight climate change is as dangerous as it is impractical – their “scale-up” required is beyond Herculean.
Such extreme utopianism will actually block the Energy Transition and turn the voting public against these vital but limited technologies.
For example, we’re already experiencing the highly expensive energy that such Energy Unrealism brings.
We need a suite of options: our climate goal is “decarbonization” not “as much as wind, solar, and electric cars as possible at all costs.”
And to be sure, our most important battle in the climate change war is getting our high-consuming onboard.
This is our Stalingrad moment.
As we just saw in Kazakhstan, and what was seen in Paris just a few years ago (perhaps the most climate-conscious city in the world), the voting public will simply NOT accept high-cost and less reliable energy as a climate solution.
Priming for November’s mid-terms, the Republicans are pouncing on President Biden’s energy policies that are soaring prices (e.g., begging OPEC to increase oil production while simultaneously passing policies that block output here at home).
It’s a delicate dance: we want a fair and low price for natural gas where both producer, transporter, and consumer can benefit.
Too low? We crush our gas-producing machine here at home.
Too high? We devastate American families and businesses, going down the same delusional and dead-end energy path that Europe has installed – all to the great amusement of Vladimir Putin and his Gas Exporting Countries Forum readying to capitalize on such Hari-Kari in the West.
Gas is easily our most essential source of electricity, so lower-cost gas means lower electricity prices.
Stated in a 2020 report from Unison Energy:
- “Natural gas is the marginal production on the grid and therefore sets the hourly price,” Unison Energy, 2020
Across all regions of the U.S., Unison Energy showed a direct relationship between gas and electricity prices, around a 0.9 correlation on a scale where zero is no correlation and 1.0 is a perfect correlation (Figure).
Want an electrification boom in the U.S. to fight climate change?
High-cost gas means high-cost electricity and we’d have no chance to make that happen.
Already facing a variety of obstacles, electric cars will get nowhere if we have high electricity prices.
The obvious connection between natural gas and electricity prices mandate that we seek low-gas prices, which is the exact opposite of what the anti-pipeline, anti-gas business does. DATA SOURCE: UNISON ENERGY
In truth, the anti-pipeline, anti-gas business blocks more wind and solar development because gas is the backup source for their natural intermittency, giving them a realistic commercial chance to compete in our high-consuming economy.
Wind and solar are more “unavailable” than they are “available” because the default conditions in most areas are that the wind isn’t blowing and the sun isn’t shining.
This is why wind and solar have capacity factors below 40%, so conflating “generation” and “capacity” is often a ploy to get you to think that they’re doing more of the heavy lifting than they actually are.
Dreams don’t make the natural and expensive intermittency problem go away for wind and solar, combined-cycle natural gas plants do.
Still a niche market, batteries might never be cheap enough to help as much as some are now just assuming.
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Their costs are already starting to skyrocket so early in the Energy Transition (e.g., “Lithium Prices Soar, Turbocharged By Electric-Vehicle Demand and Scant Supply.”
Illustrating the shaky “batteries will just displace gas” position, PG&E in California is set to install nine huge, state-of-the-art battery storage projects….and they will provide just four hours of storage.
And it’s not “wind and solar energy” it’s “wind and solar power,” and power is only 20-25% of the world’s energy demand – meaning that these renewables have no market faculty to displace the majority of ways in which humans consume energy.
As Germany is now painfully finding out in being forced to build gas pipelines to Vladimir Putin, the “greenest” states are gas-based markets (e.g., California, Massachusetts, New York).
But, the anti-pipeline, anti-gas business gets even more dangerous.
Eye-popping gas prices in fantastical Europe, for instance, are soaring the cost of fertilizer, even forcing many plants to shut down.
This, horrifically, means skyrocketing food prices.
Just more trickle-down devastation from those demanding unrealistic energy policies “to fight climate change.”
And we simply must say it, high-cost energy truly does mean death, especially for low-income Americans that can’t absorb such a regressive tax, as we saw last February in Texas.
Ratepayer groups, civil rights advocates, and restaurant associations are all demanding practical energy policies that recognize the irreplaceability of more natural gas – or we will face the same crisis that will continue to plague Europe.
Gas is easily our most diverse and versatile energy resource.
No sector holds above a 35% share of our gas usage, whereas wind, solar, and coal are overwhelming only in the power sector, while oil dominates in transportation.
Gas is the basis for an ongoing U.S. manufacturing boom that will could bring hundreds of billions of dollars in projects and tens of thousands of more high-paying jobs, if only we can avoid bad policy and keep the gas flowing.
Increasingly so, gas is being recognized as our most reliable and affordable clean energy option: all of a sudden, new low-sulfur requirements in the bunkering fuel industry has installed LNG as the new go-to fuel for shipping.
Many in San Francisco, New York City, and Washington, DC might not get it today – I’m convinced they will as reality sets in – but for most in the world, gas is not a bridge fuel but a destination fuel.
The Energy Transition means different things to different countries.
For the still-developing world (i.e., 6.8 billion humans), it means evolving from biomass (wood, dung, charcoal) to natural gas.
But even fully-developed, low-incremental energy needs Europe is going through this “gas is required” reality check.
Gas is set to be classified as “green” and “climate-friendly,” changing the taxonomy and giving gas even more of a leg up on renewables.
Europe’s wind power plummeted in the Fall and that meant more gas.
Even worse for climate change, it meant a reversion back to coal: “Europe forced to rely on expensive, dirty coal to keep lights on.”
In the U.S., high-cost gas in 2021 meant the best year for coal since 2014 – apparently, it’s been Joe Biden that has brought back coal, not Donald Trump.
And now, the Russia-West standoff over Ukraine could have Europeans freezing this February.
Energy Unrealism does just that, sheer physics and high-costs ensure that it falls flat on its face.
Finally, the ESG movement is already putting us in a very precarious position, namely as Capex (upstream E&P) investments to find and produce more oil have been falling fast even as demand ramps up.
In the name of “fighting climate change,” ESG is tightening markets and raising the cost for oil and gas, which is increasing their breakeven prices and could structurally install a much higher cost energy system.
There are some obvious gigantic holes in the ESG push against oil and gas, but the short-sightedness seems to have it terribly backwards.
Europe is now realizing the disaster of blocking domestic production while demand is still rising.
Low energy prices are absolutely essential for economic growth in the U.S. especially, because they free up money for the consumer spending that accounts for 70-75% of our Gross Domestic Product.
Indeed, greenflation is real: both wind and solar power systems are facing rapidly rising prices from overdemand on clearly limited supply chains.
High energy costs are causing the worst inflation since 1982 because they surge prices across the entire supply chain of any product that we consume.
The anti-pipeline, anti-gas business stands on the wrong side of history at the worst possible time.
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