Taking another short break - no post this week

The aftermath of my father's death has been terribly busy and once again made it impossible to focus on writing a piece for this week. Most of what needed to be taken care of is now done, and so I fully expect to post again on Sunday, April 2.

Taking a mournful break - no post this week

My father's death and upcoming funeral have made it impossible to focus on writing in the last week. He was an exceptional human being, and he will be sorely missed. I expect to post again on Sunday, March 26.

Saudi Arabia and the war on shale oil that never ended

Last week when Saudi Arabia let it leak that the kingdom has no intention of leading OPEC toward another cut in production to accommodate the growing volumes of oil from American shale deposits, it was another sign that the Saudi war on shale actually never ended.

To properly understand this announcement, we need to return to last fall. Most people believed then that the cuts agreed to by OPEC under Saudi leadership marked the end of Saudi Arabia's war on shale oil in America. At the time I cautioned against such a conclusion, and said I was doubtful that there would actually be any decline in world oil production because the Saudis didn't really want a decline.

And, guess what? The OPEC cuts have yet to be fully implemented and have been offset by rising production elsewhere. And, the Saudis are now complaining that the Russians who, though not part of OPEC, agreed to cuts to support prices, are not keeping their end of the bargain. The Saudis are practicing a marvelous bit of misdirection to keep any blame away from themselves. With the Saudis, it's always necessary to look at the entire game board in order to understand their moves.

Our search for economic growth invites fraud

In his book The End of Normal economist James Galbraith makes a compelling case that our search for a return to the fast rate of economic growth experienced in the United States from 1945 to 1970 has led to fraud--fraud enabled by government actions that sought to "free the economy" from the shackles of "overregulation" and update the regulatory framework to meet "new challenges" such as globalization.

It turns out these sometimes well-intentioned moves signaled to the unscrupulous that Uncle Sam would be looking the other way when they duped customers, defrauded suppliers and swindled investors. In his book, Galbraith tells us how this happened.

First, we must understand that economic growth during the aforementioned period was exceptional and not the norm. Hence, the title of Galbraith's book and his main focus. During this period the economics profession embraced the idea that such growth was normal, and policymakers, politicians and most American citizens came to believe that it was.

The reasons for this exceptional growth were more the result of good luck than anything else:

The Dutch love affair with natural gas: A cautionary tale for the United States?

The story sounds familiar. For decades oil and natural gas drilling have been proceeding and creating prosperity for those involved. At some point significant earthquakes occur in areas where they were formerly very rare or nonexistent. Those quakes are linked to oil and gas drilling and production. The industry denies the link.

The quakes continue, get worse and finally get strong enough to do damage.

To those living in the United States, this reads like stories coming out of the fracking boom in states that include Oklahoma, Texas, Ohio, Kansas and Arkansas. To those living in Europe, it's the story coming out of The Netherlands, home to the Groningen Gas Field, one of the largest natural gas finds ever.

The Groningen field has been both a blessing and a curse for the Dutch. Since its discovery in 1959 the Dutch have reaped huge financial benefits from having their own secure and abundant source of natural gas. Beyond that, the country has until recently been a major exporter of natural gas to its European neighbors.

Taking a short break - no post this week

I'm taking a short break and expect to post again on Sunday, February 26.

Does the Australian LNG export experience foreshadow soaring U.S. natural gas prices?

Two times last winter Australians living in the country's eastern region paid more than twice as much for natural gas as did Japanese customers taking delivery of liquefied natural gas (LNG) from the same region. (Australia has three separate natural gas pipeline networks which create three domestic natural gas markets, Eastern, Northern and Western.)

The price spikes had eastern natural gas users, particularly business users, hopping mad about what they perceive as foolish energy policy. That policy, they say, gives away Australian energy resources at bargain prices to foreign countries while making domestic industries that are reliant on those resources less competitive because of high energy costs. In addition, the new volatility in gas prices makes planning difficult and expansion financially risky.

The dust-up in Australia has some people thinking that the same thing could happen in the United States, something I pointed out in 2013. In the United States the Federal Energy Regulatory Commission has approved natural gas export terminals with a capacity of 17 billion cubic feet (bcf) per day. That represents 19 percent of current U.S. natural gas production. If all terminals for which applications are pending or expected are included, the number goes up to 42 bcf per day or about 47 percent of current production. Only one U.S. export facility is currently in operation in the lower 48 states. Another facility in Alaska has been exporting LNG to Asia since 1969.

Risk, double-edged swords and imagining the worst

A friend of mine recently said that intellectual honesty often requires imagining the worst. Of course, in the study of climate change and natural resources one needs only to read the analyses of scientists to imagine the worst.

Imagining the worst is not necessarily the same as believing the worst is inevitable or even likely. It can be merely a standard part of both scenario and emergency planning. Of course, imagining the worst can also be a double-edged sword with a sinister edge, sometimes eliciting Richard Hofstadter's paranoid style of politics.

When we imagine the worst concerning our political opponents or our enemies (sadly often placed into the same category), this is merely a reflex designed to justify our own hatreds and also a tool for broadly smearing those with whom we disagree. Clearly, this is not the same as seeking out solid evidence and using logic to construct a worst-case scenario.

In scenario planning the whole point is to consider seriously a range of possible outcomes and formulate plans for dealing with those outcomes. For example, the U.S. Energy Information Administration (EIA) reference case for world oil production (defined as crude oil and lease condensate) shows it rising from about 76 million barrels per day (mbpd) in 2012 to 99.5 mbpd in 2040. The low production case is 92 mbpd and the high production case is almost 103 mbpd.

Trump's wall and the imaginary lines we draw

There was quick reaction to President Donald Trump's announcement last week that he plans to follow through on his campaign pledge to build a wall on the U.S.-Mexican border. Conservative and liberal commentators alike were channeling their inner Robert Frost, referencing his poem "Mending Walls" that starts "Something there is that doesn't love a wall" and contains the well-known proverb, "Good fences make good neighbors."

It is worth remembering that this border is an imaginary line we draw ourselves. It's true that the Rio Grande separates Texas and Mexico. But much of the rest of the border is dirt. The only way to see the border is to draw a line.

Animals don't really respect borders the way we'd like them to. The jaguars, gray wolves and ocelots which depend on ranges that cross the U.S.-Mexican border don't see it. Humans can detect the human signs of a border. But they tend to think about how to get across it rather than how to stay on one side. Even East Berliners in the days of the famously lethal Berlin Wall found ways to get across to West Berlin. They went up, around, under and through it again and again.

Which species are we sure we can survive without?

As a new administration takes over in Washington, both houses of Congress and the presidency will be in the hands of one party. As it turns out, that party, the Republicans, want to curtail the protections of the Endangered Species Act (ESA). Many Republicans complain that the act hinders ranching, logging, oil and gas exploration and water projects.

The key question they are not asking is this: Which species are we sure we can survive without? More on that later.

The act has in practice been used "for control of the land," says one congressman, and not for the rehabilitation of species. His statement stems from a misunderstanding about what it takes to revive an endangered species, namely habitat. That means the land, air, water and other species (plant and/or animal) which any particular species depends on in order to survive.

First, it's important to understand how humans and, in fact, all organisms obtain the resources they need. There are basically two strategies, takeover and drawdown. Takeover simply refers to taking over the habitat of other species to extract resources.