Keystone Pipeline and Our Accidental Energy Independence

This morning’s NY Times features and editorial by Thomas L. Friedman titled “No to Keystone.  Yes to Crazy.”  In it, Friedman asks, “Who wants the U.S. to facilitate the dirtiest extraction of the dirtiest crude from tar sands in Canada’s far North?”  It’s a rhetorical question, of course, because Friedman thinks that Obama will soon allow the Pipeline to move forward and for that, he contends, environmentalist need to at least get something good in return.  They need to “go crazy” until they do.  “I’m talking chain-themselves-to-the-White-House-fence-stop-traffic-at-the-Capitol kind of crazy.”

Friedman says: “It’s great that shale gas is replacing coal as a source of electricity since it generates less than half the carbon dioxide.”  (It is also important to control methane from being leaked from hydraulic fracturing since that can also release C02.)   And he refers to oil economist Philip K. Verleger, Jr.’s Winter 2013 essay for Journal of International Economy:  “The End of the Oil Crises”   This sounded interesting so I looked it up.  But by accident, (This is a pun.  Read on to know why.) I found and read Verleger’s “Tale of U.S.” in the Spring, 2012 edition of the same publication.  Just as well.  The two articles are very similar.

Here’s how “Tale of US” begins.

“In little more than a decade, the United States will find itself as an energy exporter and this amazing outcome will have happened by accident. [Aha!]  The United States will then have low-cost energy supplies for decades. If oil prices remain high, America will benefit from the difference. Today, South Korea pays around $14 per million Btus for natural gas; the United States will pay less than $4. The situation is, and will be, the same in China and Europe. They will pay more, and the comparative advantage will make it possible for the United States to remain the global economic leader. I have been studying energy issues for forty years and the data are difficult to believe. But facts are facts. U.S. energy independence, as controversial as it sounds, will lay the groundwork for the New American Century. Specifically, the United States will be energy-independent by 2023, the fiftieth anniversary of President Richard M. Nixon announcing his “Project Independence.” By energy independence, I mean the United States will export more energy than it imports. In 2023, America will be exporting natural gas, petroleum products, coal, and possibly crude oil if the federal government lifts prohibitions on the latter. The United States will also be importing some oil. On balance, though, America will be a net exporter. The United States will reap enormous economic benefits in achieving energy independence by not following the approach proposed by President Nixon and his advisers. That plan can be described as the high-cost dirty path to energy independence. Nixon advocated an aggressive boost in offshore resource development, pursuit of the extraordinarily expensive fastbreeder reactor, increased coal use, and expanded shale oil development in Colorado using the very expensive techniques now at work on Canada’s tar sands. Implementing Nixon’s strategy would have saddled the United States with high-cost energy supplies and very high emissions of harmful global warming gases.  The path actually taken is very different. It might be called the low-cost clean path to energy independence.

The United States came upon this course by accident.”

The article goes on to discuss how fracking was perfected just as the energy industry was ready to turn their backs on the U.S. as a source of production and how deregulation and financial markets helped to create added incentives to pursue home-grown energy development.  There is also a nice graph showing that it costs roughly half (and for some states significantly less) to fill up with Compressed Natural Gas for CNG vehicles than it does to fill up with oil-based gas for traditional vehicles.   It also discusses CAFE standards, regulation, and renewable energies which, while in some cases beneficial, never were as successful as the “accidental” growth of the shale gas and oil boom in the U.S.

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About cberl

Chris Berl is President and CEO of Berl's Commercial Supply and Managing Director of Both companies specialize in the sales of drinking fountains, commercial restroom accessories such as hand dryers and other commercial building fixtures. Chris is also a Director at Hoyt Royalty which is a family run enterprise managing mineral rights in the Marcellus Shale region of Pennsylvania.