The term energy dependence gets used a lot. Usually, it is used in a negative sense, referring to our growing dependence on foreign sources of oil. Then there is the oft-stated goal of energy independence. Frequently, this is used in the context of renewable supplies of energy such as hydro, wind or solar. Unfortunately, none of those three sources has the scalability to actually power the country. Hydro is limited by geography and wind and solar are intermittent suppliers of energy, so these sources — though useful — are not likely to give us energy independence. There is one source of energy that is very clean, very potent and now very abundant and that is — natural gas.
This chart from Investors Business Daily gives a sense of the trajectory of natural gas production here in the U.S.
Click to enlarge
Source: Investors Business Daily
Blogger and economics professor Mark Perry (University of Michigan - Flint) spells out the extraordinary abundance of new natural gas discoveries in America [emphasis added]:
Tech-Driven Natgas Boom Shifts Energy Balance of Power to U.S. (Investors Business Daily, Feb. 19, 2010, Mark J. Perry)
A new technique being used to drill through a type of rock known as shale has led to a surge in domestic natural gas production over the last three years and enabled the United States to overtake Russia recently as the world’s No. 1 producer of natural gas.
As a result, we are seeing a remarkable turnabout in energy geopolitics: as U.S. natural gas reserves have soared thanks to advanced drilling methods, Russia’s goal of establishing a world gas cartel patterned on OPEC has collapsed.
…Thanks to a breakthrough in drilling technology, involving the use of three-dimensional seismic imaging and hydraulic fracturing of shale rock, huge amounts of natural gas are being produced in New York, Pennsylvania, Texas, Louisiana and other states. Instead of declining, domestic natural gas production is booming to record-high levels (see chart).
If estimates hold up, energy experts say the shale gas that underlies large parts of the United States will be able meet our country’s needs for the next 100 years…
…But these exciting energy developments may not last if natural gas companies are burdened by excessive regulation and heavy taxes.
…The White House also wants to add $37 billion in taxes on U.S. oil and natural gas companies, rehashing a proposal to Congress that failed the first time around. History shows that once drilling costs jump due to higher taxes, investment starts to dry up.
Turbulent economic times call for a smart energy policy. By maintaining a focus on encouraging domestic natural gas production, we can make the U.S. more energy independent, minimize the environmental impact of producing energy and foster economic and job growth.
Or we can saddle the oil and gas companies with higher taxes and regulations and wait for investors to support shale-gas production overseas.
Which seems to make more sense?
Natural gas is a very clean-burning fuel that can work effectively in many applications including power plants, home heating, cooking as well as powering cars, trucks and heavy equipment. If anyone is serious about a so-called brighter, cleaner and more independent future, natural gas should be a huge priority.
And, natural gas is proving to be not only abundant, but also inexpensive, as we saw in our post on commodity pricing. The huge increase in supply is keeping prices down as we see in this chart from the folks at Bespoke Investment Group:
Source: Bespoke Investment Group
Even though there is plenty of doom and gloom on parade these days and many folks are predicting that scarcity of energy is upon us, this remarkable new technology is unleashing a vast supply of natural gas, just when we need it.
Hat tip: Check out Mark Perry’s blog, Carpe Diem.
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