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  1. #1 Ten Reasons To Be Concerned About U.S. Energy Independence 
    Ancient Fire Breather Retread's Avatar
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    Matthew Hulbert Contributor

    U.S. energy independence must be about to happen. The International Energy Agency just devoted its World Energy Outlook 2012 to telling us so. America will become the largest producer of oil and other liquid fuels on Earth by 2020; it will be entirely self-sufficient by 2030; and a net exporter by 2035. Boom. Epic stuff.

    It would be churlish to deny that U.S. energy growth will provide major economic gains to America — of course it will. Here’s a few hundred pages explaining exactly what they are. But this isn’t going to be a free lunch for America.

    We’ll leave aside the fact that IEA forecasts have a strong track record of being universally wrong, or that a month ago they were pinning all their supply side hopes on Iraq coming good to ‘balance’ international oil markets. Minor stuff; but having just flown over the Bosphorus en route to Ankara via Istanbul, believe me, the world looks very different depending on where you’re sat. Here are 10 reasons for the U.S. to be cautious on energy supply growth, irrespective of however the IEA forecasts play out:

    1) America Will Never Be The New Saudi Swing

    2) Global Pricing Pressures Will Always Influence US Pumps

    3) Transitional Friction Will Be Profound

    4) U.S. Policy Suffers Structural Paradox

    5) All Points On The Compass Look East

    6) America Might Lose Friends Closer To Home As Well

    7) America Will Struggle To Keep Pace

    8 ) But Fear Not, America Can End Up A Chinese Lake

    9) Blunt Conclusion: China Gains Most From Cheap U.S. Oil

    10) Blunt Footnote: Climate Mitigation Gone, Climate Adaptation The New Game
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    LTC Member Odysseus's Avatar
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    Quote Originally Posted by Retread View Post
    Matthew Hulbert Contributor

    U.S. energy independence must be about to happen. The International Energy Agency just devoted its World Energy Outlook 2012 to telling us so. America will become the largest producer of oil and other liquid fuels on Earth by 2020; it will be entirely self-sufficient by 2030; and a net exporter by 2035. Boom. Epic stuff.

    It would be churlish to deny that U.S. energy growth will provide major economic gains to America — of course it will. Here’s a few hundred pages explaining exactly what they are. But this isn’t going to be a free lunch for America.

    We’ll leave aside the fact that IEA forecasts have a strong track record of being universally wrong, or that a month ago they were pinning all their supply side hopes on Iraq coming good to ‘balance’ international oil markets. Minor stuff; but having just flown over the Bosphorus en route to Ankara via Istanbul, believe me, the world looks very different depending on where you’re sat. Here are 10 reasons for the U.S. to be cautious on energy supply growth, irrespective of however the IEA forecasts play out:
    If the IEA forecasts play out, there's no downside about energy supply growth. The vast majority of the points that the author makes are either irrelevant, or fictitious. Case in point:

    1) America Will Never Be The New Saudi Swing
    Saudi Swing? By that, does he mean that we won't be able to up production enough to effect OPEC? That's absurd. If we become energy independent, then we take the single largest consumer market out of the OPEC equation, and if we become an exporter, that's even more money out of their pockets (do man-dresses have pockets?). This is a non-issue.

    2) Global Pricing Pressures Will Always Influence US Pumps
    And vice-versa. US expansion of production will drive down prices globally, which will have impacts on the failed states whose only export is oil. Without oil, Saudi Arabia, Iran, Venezuela and the rest of the bad guys won't have the money to bankroll terrorists, nukes or any of the other mischief that they indulge in.

    3) Transitional Friction Will Be Profound
    This is think-tankese for "It's too hard, man."

    4) U.S. Policy Suffers Structural Paradox
    This is using current bad policy as a justification for not fixing it. The collapse of the gulf states into totalitarian Islamist hellholes may happen en masse, or may not, but if it does happen, isn't it better to ensure that they have less disposable income to spend on jihad?

    5) All Points On The Compass Look East
    Only if your compass is broken. China's hold on our pursestrings becomes much more tenuous if our economic growth eliminates much of our debt. And the other Asian powers do not want to be dominated by China. American oil exports to Japan and Korea would make them more, rather than less, dependent on us, and would counter rising Chinese influence in the region. It would also mean a greater commitment to naval forces that would keep critical sea lanes open for trade.

    6) America Might Lose Friends Closer To Home As Well
    Yeah, just look at the love that we get from Venezuela, Cuba, Bolivia and Mexico. Canada will continue to export oil, and while we may compete with them for arctic extraction, it will be a friendly competition between allies.

    7) America Will Struggle To Keep Pace
    This only applies if you see oil production as a zero-sum game whose sole purpose is to outproduce the rest of the world. It's not. Cheap energy favors creative, free states that will use it to innovate. Expensive energy favors tyrannical regimes that use oil revenues to maintain power and export their problems in the form of aggression.

    8 ) But Fear Not, America Can End Up A Chinese Lake

    9) Blunt Conclusion: China Gains Most From Cheap U.S. Oil
    These two are variants on the same theme, that China will buy up all of our oil, expand into the dominant superpower of the next century and dominate us. It assumes that China's current regime can retain control, despite the dislocations and internal stresses which have toppled other nations. China's communist party's sole remaining claim to legitimacy has been economic growth, but growth in China has slowed dramatically as their exports declined during the Obama recession. Without markets, China's production facilities are idle, and unemployment is rising. Given a nation with an imbalance of men to women (that one child policy is going to bite them big time), a surplus of idle, angry men who have been fired without pay (factory closures often occur just before payday, without warning, in order to avoid that last drain of cash), is not a guarantee of stability. China needs stable markets, and an expanding US economy is good for them, but only if we keep buying their products.

    10) Blunt Footnote: Climate Mitigation Gone, Climate Adaptation The New Game
    Ahhhh... Now we get to the heart of the matter; Gaea won't like the new US energy industry. We'll still be burning carbon! The oceans will rise! Cats and dogs will live together! Mass confusion! The Staypuff Marshmellow Man will be going down Park Avenue any minute now!

    Forbes published this idiocy? I'd expect it from Fortune or even Mother Jones, but Forbes is usually in favor of free markets.
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    I use IEA reports for investment purposes, but their forecasts are not very useful.

    T Boone Pickens; now there's a guy whose forecasts are worth reading, and he has a lot to say about the subject in his books.

    I believe we have reached the era of "peak oil", with was predicted back in the 50s. Peak oil refers to the point when we are pulling oil out of the ground as fast as we ever will, and that figure seems to be a bout 80 million barrels/day. We are there.

    Pickens made many hundreds of millions of dollars in 2005 by recognizing that fact. When consumption (demand) soared in 2004 in China and India and production did not answer, Pickens knew the world had reached peak oil, and the price, which was about 30$, would soar. It went to $100 +.

    Things have settled down a bit since then, but that's only because of a world wide recession. The worst thing that could happen (this is just me talking) is that the world's economy would come roaring back and demand for oil increase another 20%, to, say, 100 million barrels/day. That would mean 200$ oil.

    Cheap natural gas may be, as Pickens says, the bridge to the next energy source. It'll keep us going long enough to develop whatever it is that powers future civilizations.......
    And as an addendum to my point that natural gas is a pretty good alternative to oil, let me shout out that
    There is no international market for natural gas! What is developed here, stays here.
    Last edited by Starbuck; 11-21-2012 at 05:06 PM.
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    Repair post
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    Ancient Fire Breather Retread's Avatar
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    Interesting times to say the least - It's sometimes funny how time develops the facts and fiction.

    Can't export natural gas? Better check that out a little closer. U.S. Natural Gas Exports: Lift Restrictions and Empower the States

    I still think that Hulbert has a good handle on it and that bonehead pickens only opens his mouth when it will benefit him. First he was all for wind when he was lining his pockets with gubmint largesse, now he's changed over to NG since his profits on his gas production have dropped.

    No matter how much the US produces, it is still a global market and world demand will grow.
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    Quote Originally Posted by Retread View Post
    Interesting times to say the least...............Can't export natural gas? Better check that out a little closer................No matter how much the US produces, it is still a global market and world demand will grow.
    We certainly will export natural gas. Cheniere Energy, Inc. (LNG) is engaged in the development, construction and operation of LNG terminals and marketing of LNG and natural gas. Investors should look at their chart.

    I've looked at their facilities (by internet), and they are impressive. Yes, we'll export natural gas, and someday, because of the U.S. price, we'll be a major exporter.
    My hope is that the Arab countries wither and contract. Saudi Arabia, with unemployment of 50% has already said they need to get 94$ a barrel to pay for social commitments........ Lotsaluck!
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    Quote Originally Posted by Retread View Post
    Interesting times to say the least - It's sometimes funny how time develops the facts and fiction.

    Can't export natural gas? Better check that out a little closer. U.S. Natural Gas Exports: Lift Restrictions and Empower the States

    I still think that Hulbert has a good handle on it and that bonehead pickens only opens his mouth when it will benefit him. First he was all for wind when he was lining his pockets with gubmint largesse, now he's changed over to NG since his profits on his gas production have dropped.

    No matter how much the US produces, it is still a global market and world demand will grow.
    All the more reason to expand the supply.

    Hulbert's article is completely backwards. His arguments are based on suppositions that US production won't make a dent in global supplies, that the economic benefits to increased domestic production will accrue to China and that we will not be able to compete with the most backwards, regressive regimes in the world (when most of their production is the result of our having invested our knowledge into the infrastructure that they ended up nationalizing). The last time that a major power was dependent on oil exports for hard currency, it was the Soviets, and Reagan's solution to that was to cute deal with the Saudis that increased their production and depressed oil prices, which meant that our economy boomed while the Soviet economy tanked. This time around, we will be doing the production ourselves, and it will be the various Middle Eastern tyrannies that will end up on the ash heap of history.
    --Odysseus
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    Quote Originally Posted by Odysseus View Post
    All the more reason to expand the supply.

    Hulbert's article is completely backwards. His arguments are based on suppositions that US production won't make a dent in global supplies, that the economic benefits to increased domestic production will accrue to China and that we will not be able to compete with the most backwards, regressive regimes in the world (when most of their production is the result of our having invested our knowledge into the infrastructure that they ended up nationalizing). The last time that a major power was dependent on oil exports for hard currency, it was the Soviets, and Reagan's solution to that was to cute deal with the Saudis that increased their production and depressed oil prices, which meant that our economy boomed while the Soviet economy tanked. This time around, we will be doing the production ourselves, and it will be the various Middle Eastern tyrannies that will end up on the ash heap of history.
    That is precisely my hope. And, with natural gas expansion, we have reason to be hopeful.

    Just to check, I went online and asked who the leading LNG exporters were:
    #1 QATAR. Well, I was a little disappointed; it used to be Indonesia. But now Qatar provides 1/3 of all LNG exports. It must have been extremely disappointing to them that the U.S. has surged ahead in production to the point of becoming an exporter

    #2 Malaysia

    #3 Indonesia

    My biggest fear with this whole natural gas expansion is that the Feds will begin to see LNG exports as a way to control other countries, the way the Arabs see oil. Then they will buy into the international spot price idea. As usual, We, The People, will not be at the meeting, but will be expected to 'pay our fair share' when the world price of natural gas is 'stabilized'.

    I do not look forward to that.
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    Quote Originally Posted by Retread View Post
    Interesting times to say the least - It's sometimes funny how time develops the facts and fiction.

    Can't export natural gas? Better check that out a little closer. U.S. Natural Gas Exports: Lift Restrictions and Empower the States

    I still think that Hulbert has a good handle on it and that bonehead pickens only opens his mouth when it will benefit him. First he was all for wind when he was lining his pockets with gubmint largesse, now he's changed over to NG since his profits on his gas production have dropped.

    No matter how much the US produces, it is still a global market and world demand will grow.
    Don't forget to add that "peak oil" is bullshit........proven reserves increase every year.........production may wax and wane, however the planet is awash with oil in many forms and locations, five years ago, no one would have thought that the Bakken fields would rival Saudi Arabia in production potential.

    doc
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    Ancient Fire Breather Retread's Avatar
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    Quote Originally Posted by Odysseus View Post
    All the more reason to expand the supply.

    Hulbert's article is completely backwards. His arguments are based on suppositions that US production won't make a dent in global supplies, that the economic benefits to increased domestic production will accrue to China and that we will not be able to compete with the most backwards, regressive regimes in the world (when most of their production is the result of our having invested our knowledge into the infrastructure that they ended up nationalizing). The last time that a major power was dependent on oil exports for hard currency, it was the Soviets, and Reagan's solution to that was to cute deal with the Saudis that increased their production and depressed oil prices, which meant that our economy boomed while the Soviet economy tanked. This time around, we will be doing the production ourselves, and it will be the various Middle Eastern tyrannies that will end up on the ash heap of history.

    I really hate to disagree with someone like you Ody but…. Speaking from the view of 40 years in the energy sector and being involved from the glint in a geowhizzers eye to the plant supe’s smile, that is not Hulbert’s argument and, when you get to the base of it, he’s way more right than wrong. The demand for hydrocarbon, oil, gas and coal, will continue for decades to come, expand to a significant multiple of today’s need and even after we no longer need it for transportation, it will still be a major part of our daily lives (unless the dim dream comes true and we all revert to cavemen but that’s another discussion) China can do nothing but benefit with their population and their expansion of their own holdings in the industry. With their partnerships, leases, nationalism and ability to copy/imitate/steal technology, they will more than likely replace the Saudis as a swing power. The other fly in the soup is the gubmint and their power over the industry. It is still the most taxed and regulated industry in the US and plans are already on the table to double both the tax and the regulations. Add to that the scare tactics of the envirowacko groups and accept their power to influence states and feds and a great opportunity we inside see today melts like chocolate on a car dash in August in Galveston.


    Yes, the production of oil from shale is a powerful ability but, if or when the dims allow the economy to truly rebound, the country will revert to a net importer of oil on that basis alone. The only thing I see as a saving grace is the remote possibility that we can convert transportation to NG and extend the time between now and then. We will fly high for a while if, and only if, the gubmint gets out of the way. But it will be a relatively short flight. Hopefully, the landing will not be a huge impact crater.


    Had we that utopian environment of everybody living their own lives without government interference, we could and would do a lot better.


    Quote Originally Posted by TVDOC View Post
    Don't forget to add that "peak oil" is bullshit........proven reserves increase every year.........production may wax and wane, however the planet is awash with oil in many forms and locations, five years ago, no one would have thought that the Bakken fields would rival Saudi Arabia in production potential.

    doc

    Sorry for disagreeing again doc but “peak oil” is entirely real, the difference is technology keeps moving the goal posts. When the Standard Trust was mighty, any oil over 250 feet down that would not flow large volumes for years was “non-productive”. Now we're producing from 30K down and an added 30K sideways in the same borehole along with 7 or 8 more right beside the first. We're producing from rock that has been our seal since the 1500’s. Someday we might even be able to go back to the US oilfields of the 30’s and 40’s and produce a significant amount of the 80% that we left behind the first 3 or 4 times around. None of that changes the fact that the world is using it up immeasurably faster that the earth can form new. The supply is limited.


    On the remark above re: ‘the other 80%’ it must be noted that “proven reserves” and ”recoverable reserves” are hugely different numbers. There are abandoned oil fields in the US with millions of bbls of oil still in them. But no one has figured how to economically get it out. They are too deep to mine and have been water-flooded, steam-flooded, gas-flooded and fire-flooded and still have those volumes left.
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