PROGRESSIVE VIEWS
Eight months ago I wrote that the United States was producing 13.1 million barrels of oil per day (MMb/d). We are now producing 13.6 MMb/d, the most of any country, ever.
To increase production by a half-million barrels per day over that time period is phenomenal.
Shale oil and natural gas developed by super fracking has been the key to this growth, and Texas has been a super beneficiary. Current Texas production is 5.8 million barrels per day, the most of any state.
The United States is a net exporter of about 1.6 MMb/d of oil and petroleum products. Prior to 2015, petroleum exports were banned except in special circumstances and products would build up in the industry tanks and, as a result, prices would have downward pressure.
Not so today; margins have been kept robust (except during the pandemic) and are causing higher than necessary gasoline prices. The refining and marketing industry continue to have high profits.
The price of oil is running about $70 per barrel which is a sweet spot for large producers Saudi Arabia, Russia and the United States. It is a good price to keep shale oil development growing since domestic oil is high cost compared to most large oil producers.
According to the Energy Information Administration, the U. S. cost of producing a barrel of oil is almost $40 versus $15 in Russia and $10 in Saudi Arabia.
The U.S. is also the largest natural gas producer in the world, with production of about 100 billion cubic feet per day (Bcf/d). It takes about 6,000 cubic feet (Mcf) of natural gas to have the equivalent energy of a barrel of oil. The current wholesale price for one Mcf of natural gas is about $3, so $18 of natural gas will get you the same energy as one barrel of oil.
Natural gas is a bargain. We have seen it displacing coal used to generate electricity which, unfortunately, has eliminated many coal jobs. Current natural gas demand continues to increase mostly from electrical generation and liquified natural gas (LNG) exports.
LNG is natural gas that is supercooled to 260 degrees below zero Fahrenheit so that it becomes a liquid. It can then be transported in ships which are basically giant floating thermos bottles.
Current LNG export terminal capacity is 11 Bcf/d but is set to grow to 24 Bcf/d by 2028. As with liquid petroleum, increasing natural gas exports may cause natural gas prices to rise. Also, some LNG plants have or will receive unnecessary tax abatements, reducing public school funding.
The incoming administration tells us that climate change is a hoax and has pledged to lower gasoline prices by helping the oil industry increase domestic oil production. They have even discussed using government subsidies to accomplish that goal.
The petroleum industry is doing a great job increasing production and already has a number of tax benefits. Lower oil prices will reduce the margin on our higher cost oil and could very well lead to reduced drilling and production.
The other unfortunate fact is that burning fossil fuels is the major cause of climate change and we can’t just hope it goes away. To keep global warming from accelerating, we must reduce carbon dioxide emissions.
China understands the risk of climate change and will be leaving us in the dust when it comes to solar energy and electric cars. We can’t let them win. Our children will be the ultimate losers if we aren’t competitive in the field of clean energy.
There are some new and upgraded technologies that could help us reduce carbon dioxide emissions. These include modern nuclear power and direct removal of carbon from the atmosphere (DAC). The world’s largest DAC project is in West Texas and is set to come online this year.
Also, since we have 4% of the world population yet use 16% of worldwide energy, there is tremendous room for conservation.
Don’t be misled by claims that climate change is a hoax.
To find out more about how to get involved with the Kendall County Democratic Party, visit www. kcdems.us.
Kevin Henning is a local Democrat.
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