Shale gas key to liberty in energy
Shale has entered the language — and the income stream — of Western Pennsylvanians.
But whatever the regional payoff, shale is the best reason for national optimism to come along in a generation.
It should mean goodbye to OPEC's 40-year stranglehold on oil prices.
Goodbye, too, to U.S. trade deficits in the black gold.
Hello to a tangible bounce in gross domestic product and 3 million more jobs. And to lower energy prices for a $750 boost to household incomes, $30 billion more all told for consumer spending not at the gas pump.
Foreign Affairs magazine sees the geopolitical dynamite. In a special section, it's reporting the United States way ahead — and likely to stay ahead — of the rest of the world in shale exploitation.
This is more than a matter of having humongous stores of oil and gas deep underground. Other countries are similarly blessed.
The clincher for us is how deep our property rights go.
“Any company can strike a deal with a willing landowner and start drilling,” writes veteran rig master Robert A. Hefner III. Almost everywhere else, he says, mineral rights are “virtually all owned or controlled by governments.”
No surprise, then, that we've got the most drillers — 6,000 independent oil and gas companies — and an equal army of service firms.
Nor is any competitor so innovative.
The trick of turning drills a mile down from vertical to horizontal was made in America.
Think of it like this, says Hefner, chairman of GHK Cos. A drill straight down might penetrate a 100-foot layer of the good stuff. But horizontally it can move for miles, collecting all the way.
So U.S. gas production is up 25 percent since 2010; oil production up 60 percent since 2008. We've become the “fastest growing hydrocarbon producer in the world,” writes Edward L. Morse, head of commodities research at Citibank.
He foresees decades of “plentiful energy” at lower cost, spurring “major advances in global economic growth.”
But whoa. What about “fracking?”
The fracturing of deep rock by injections of sand, water and chemicals worries environmentalists, who charge pollution to groundwater and encouragement to earthquakes. But Morse expects “best practices” among drillers to spread like other innovations, and the public to insist on it.
He sees U.S. natural gas prices settling around $5.50 per thousand cubic feet (mcf) and oil at $70 to $90 a barrel by decade's end. Oil regularly bubbles over $100, and gas was $4.64 per mcf the other day but inflated as high as $13.50 before the shale boom hit stride.
Hefner says finding gas is no problem and extracting it is as cost-predictable as manufacturing vs. a crapshoot.
While shale-rich Europe stagnates, stymied by green activisms, America will be in a position to reindustrialize for decades, says Hefner. With one caveat: “As long as the politicians don't get in the way.”
Jack Markowitz is a columnist of Trib Total Media. Email email@example.com.