National Energy Security Issue: Effects of Cheap Oil

Photo Liberated from Patterson UTI Drilling

Once again the oil and gas industry has done too good a job is finding and developing new sources - so much so that its success is eating the drilling industry - the Oil & Gas Journal reports US rig count nearing lowest level in generations:

The US rig count dropped 12 units to 502 during the week ended Feb. 26, according to Baker Hughes Inc. data. While the decline is the smallest thus far this year, it represents the eighth straight weekly double-digit drop to begin 2016.
The total is the lowest since Apr. 30, 1999, a week after the 1998-99 downturn hit its bottom of 488. With additional losses in the coming weeks, the current count could dive to a level not seen in generations.

The NYTimes has reported on the "simple economics" behind the drop in oil prices:

. . . [I]t boils down to the simple economics of supply and demand.

Well, yeah.

The NPR folks have noted that these low prices, coupled with a decline in exploration and drilling, might just have an impact on the overall U.S. economy as businesses associated with that part of the oil and gas industry find less demand in Why Cheap Gas Might Not Be Good For The U.S. Economy:

Arora analyzed government data, and found that what's changed is that the oil and gas industry as a share of GDP has about doubled in the past decade. Now it has grown so large that it's changed the basic equation of whether cheap gas is a good thing overall.

"The benefits to consumers could be around $140 billion from gasoline savings," Arora says. "But the losses on the other side due to lower production, less investment, less build-out of infrastructure could be around that amount. So we're kind of at a wash."

This might help to explain why the economy still isn't exactly charging forward even with the stimulus of cheap energy. But Arora himself notes that the question needs more study.

Meanwhile, analysis by the research firm Moody's Analytics finds that cheap oil and gas are still a net positive. And plenty of experts remain in that camp.

Last year the NYTimes offered up Lower Oil Prices Provide Benefits to U.S. Workers:

Wall Street may be growing anxious about the negative impact of falling oil prices on energy producers, but the steep declines of recent weeks are delivering substantial benefits to American working-class families and retirees who have largely missed out on the fruits of the five-and-a-half-year economic recovery.

Just last week, the federal Energy Information Administration estimated that the typical American household would save $750 because of lower gasoline prices this year, $200 more than government experts predicted a month ago. People who depend on home heating oil and propane to warm their homes, as millions do in the Northeast and Midwest, should enjoy an additional savings of about $750 this winter.

“It may not have a huge effect on the top 10 percent of households, but if you’re earning $30,000 or $40,000 a year and drive to work, this is a big deal,” said Guy Berger, United States economist at RBS. “Conceptually, this is the opposite of the stock market boom, which was concentrated at the top.”

Of course, more dollars in the pockets of the 90% of the households not in the top 10% really ought to mean much more money available in the economy because of the law of big numbers. More from the NYT:

But the latest drop in energy prices — regular gas in New England now averages $2.35 a gallon, compared with $2.94 in early December, and it is even cheaper in the Midwest at $1.95 — is disproportionately helping lower-income groups, since fuel costs eat up a larger share of their more limited earnings.
**
“Oil prices, gas prices, food prices — luckily it’s going down, which is great,” Ms. Smith said, explaining that when prices were higher she had to scale back on groceries to save money for heating oil. “I hope it keeps going.”

You might want to, at this point, recall President Obama's plan to increase taxes on oil as discussed in Oil Dumbness from President Obama an increase in taxes is paid for by customers of the oil companies just like Ms. Smith.

This ought to be self-evident, but here's another source talking about the effect of higher gas prices.

It's not just the U.S. that rides this roller coaster of oil prices. Oil exporting states like Saudi Arabia are also taking hits, as discussed in this Forbes article, 4 Reasons Saudi Arabia Can't Control Oil Supply:

In the past, OPEC—led by Saudi Arabia—would reduce production in order to maintain the oil price. Today, however, the process isn’t that easy, and there are four reasons for that…

Reason #1: The US
Oil above $60 or $70 would mean that US production would continue to increase, and the US is already the world’s #1 producer. OPEC would have no choice but to keep cutting further in order to maintain that price.

Reason #2: Cheating among OPEC Members
OPEC members (other than Saudi Arabia) almost always cheat on their production quotas when they can. Considering that other OPEC nations are desperate for income, the incentive to cheat is all powerful.

Reason #3 The US-Iran Nuclear Deal
The deal and subsequent lifting of sanctions means that an additional one million barrels per day will soon hit the market. As international oil companies vie for the privilege of drilling more oil in Iran, it will put further upward pressure on supply.

Reason #4: US Production in the Market
Although drilling rig usage in the US is down by nearly 75%, production has just now begun to fall off. It will take some time before enough US production comes off the market to put upward pressure on prices.

The U.S. Energy Information Adminsitration produces all sorts of reports on oil production like this one:

The "International Energy Agency" (which is actually a creature of its 29 member countries)has issued its 2016 Medium Term Market Report:

Global oil supply growth is plunging as an extended period of low prices takes its toll, the International Energy Agency (IEA) said in its annual Medium-Term Oil Market Report (MTOMR) released today. While U.S. light, tight oil (LTO) output is falling steeply for now, the market will begin rebalancing in 2017 – and by 2021 the United States and Iran are seen leading production gains among non-OPEC and OPEC countries, respectively.

There is this warning:

“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future,” said IEA Executive Director Fatih Birol, launching the report at IHS CERAWeek.(emphasis added)

What "oil-security surprises?"

From the downloadable Overview of the IEA report:

Another downside to low oil prices is the impact on investment. The IEA has regularly warned of the potential consequences of the 24% fall in investment seen in 2015 and the expected 17% fall in 2016. In today’s oil market there is hardly any spare production capacity other than in Saudi Arabia and Iran and significant investment is required just to maintain existing production before we move on to provide the new capacity needed to meet rising oil demand. The risk of a sharp oil price rise towards the later part of our forecast arising from insufficient investment is as potentially de-stabilising as the sharp oil price fall has proved to be.

In addition to the effects of insufficient investment there are the lost "experience" costs that will result from personnel cutbacks in the oil and gas industry as rig counts and exploration budgets drop. Experienced oil field workers will, as they have in the past, move to other jobs (assuming they exist) that might pay less.

Ah, you might say, "So what?"

The "so what" is the lag time it would take to get those workers back into the fields should there be a national need for an increase in U.S. crude oil and natural gas production.

That lag time has national security issues.

Suppose, for example, Russia decides to cut off natural gas supplies to Europe beginning in late 2016 using that gas as an economic weapon to force the nations dependent on Russian gas to accept Russian claims in the Ukraine or the Baltic States. One way for the West to resist this pressure is to have some assurance that the U.S. and its allies will be able to set into motion a stream of LNG ships carrying gas to replace that of the Russians, ameliorating the gas situation for those affected states. In addition to LNG shipping, a force of air and naval escorts protecting that LNG stream at sea might be required to prevent interference with the flow of gas in competition with that of the Russians.

Or, suppose the Chinese interfere with the flow of gas and oil through the South China Sea sea lanes to Taiwan,South Korea and Japan. Can the U.S. and Canada help mitigate the harm while alternative sea lanes that avoid the South China Sea are developed? Who will protect those shipments and how?

Or, what if Iran or someone else takes the big step of managing to destroy the Saudi oil production - say through using nuclear weapons - can the U.S. and non-Middle East producers step up and provide  at least minimal supplies to the world now depending on Middle East oil?

Cheap oil is good, but not all good.

Energy Wars: The "Shale-Oil Insurgency"

Interesting analysis from Nikos Tsafos writing in The National Interest Shale-Oil Surprise: OPEC Faces an Insurgency, Not a Price War

Between June and November 2014, oil prices have fallen by some 40 percent, courtesy of robust growth in output and a bleaker outlook for oil demand. In late November, The Organization of Petroleum Exporting Countries (OPEC) chose to keep its production quotas intact, triggering several obituaries and talks of a price war between OPEC and the United States, where most of the additional supply originates. Yet war is not quite the right term; insurgency is more like it—decentralized, adaptive and, likely, inconclusive.

***
Gone are the days where high oil prices triggered a production response with a seven-to-ten-year lag (to allow for acreage acquisition, exploration, appraisal and then development of an oil field). When a system can grow as quickly as the United States’ can, then clearly, the world has a competing source of “spare capacity,” meaning capacity that could come online quickly to meet market needs.

Good read.

And, really, isn't "energy independence" mostly about being able to quickly fill market needs?

"Decentralized" "Adaptive" -- I like that in the energy context.

Mining Methane Hydrate and What It Means

First, the "Methane Hydrate" scary story:

(University of Göttingen, GZG. Abt. Kristallographie).
Source: United States Geological Survey.

As greenhouse gas, methane is more powerful than carbon dioxide, but there is a much more important difference between these two gases. Carbon dioxide emissions are something that we create and that we can control, at least in principle. If we stop burning fossil fuels, then we stop generating CO2. But, with methane, it is another matter. We have no direct control on the huge amounts of methane buried in ice in the permafrost and at the bottom of oceans in the form of "hydrates" or "clathrates."

Methane hydrates are a true climate bomb that could go off by itself as the result of a relatively small trigger in the form of a global warming. Sufficient warming would cause the decomposition of some hydrates to release methane to the atmosphere. This methane would create more warming and that would generate more decomposition of the hydrates. The process would go on by itself at increasing rates until the reservoirs run out of methane. That means pumping in the atmosphere truly a lot of methane. There are different estimates of the amount stored in hydrates, but it is surely large - most likely larger than the total amount of carbon present today in the atmosphere as CO2. The effects of the rapid release of so much methane would be devastating: an abrupt climate change that could bring a true planetary catastrophe. It is a scenario aptly called the "clathrate gun" and the target is us.

Source

Second, a quick look at issues in trying to exploit methane hydrate as a fuel source in The Risky Business of Mining Methane Hydrate:

The potential rewards of releasing methane from gas hydrate fields must be balanced with the risks. **** Let's start first with challenges facing mining companies and their workers. Most methane hydrate deposits are located in seafloor sediments. That means drilling rigs must be able to reach down through more than 1,600 feet (500 meters) of water and then, because hydrates are generally located far underground, another several thousand feet before they can begin extraction. Hydrates also tend to form along the lower margins of continental slopes, where the seabed falls away from the relatively shallow shelf toward the abyss. The roughly sloping seafloor makes it difficult to run pipeline.

Even if you can situate a rig safely, methane hydrate is unstable once it's removed from the high pressures and low temperatures of the deep sea. Methane begins to escape even as it's being transported to the surface. Unless there's a way to prevent this leakage of natural gas, extraction won't be efficient. It will be a bit like hauling up well water using a pail riddled with holes.

Believe it or not, this leakage may be the least of the worries. Many geologists suspect that gas hydrates play an important role in stabilizing the seafloor. Drilling in these oceanic deposits could destabilize the seabed, causing vast swaths of sediment to slide for miles down the continental slope.

On the other hand, developing methane hydrate mining might ease some of those worries of a catastrophic release if done safely and it does offer a fuel source. As set out in Mining "Ice That Burns":

Trapped in molecular cages resembling ice, at the bottom of the ocean and in terrestrial permafrost all over the world, is a supply of natural gas that, by conservative estimates, is equivalent to twice the amount of energy contained in all other fossil fuels remaining in the earth’s crust. The question has been whether or not this enormous reserve of energy, known as methane hydrates, existed in nature in a form that was worth pursuing, and whether or not the technology existed to harvest it.
***
While no one believes that all of the world’s methane hydrates will be recoverable, the scale of global reserves has been described by the U.S. Department of Energy as “staggering.” They occur anywhere that water, methane, low temperatures, and high pressure co-occur–in other words, in the 23 percent of the world’s land area covered by permafrost and at the bottom of the ocean, particularly the continental shelf.
***
The United States is not the only country with plans to attempt long-term production tests of methane hydrates. Japan is spending by far the most money on methane hydrate research; it provided most of the funding for the Mallik tests, which were sponsored by the Japan Oil, Gas and Metals National Corporation and by Natural Resources Canada, with field operations by Aurora College/Aurora Research Institute and support from Inuvialuit Oilfield Services.

According to the Center for Hydrate Research’s Koh, Japan is investing heavily in attempts to harvest deep-sea hydrate reserves discovered off the southern coast of Japan in the Nankai Trough.

“The Japanese are planning commercial production from the Nankai Trough by 2017,” says Koh. If they succeed, Japan will tap the first domestic fossil-fuel reserves the country has ever known.

A Popular Mechanics "demystification" of "Fire Ice" here, which looks at the "scary story" above:

But what if the earth released the gas as a result of heating up? Not only energy companies but also scientists studying climate change have a major interest in methane hydrates. Methane is a greenhouse gas, a far more powerful one than carbon dioxide, and some scientists fear the warming of the earth could destabilize hydrates to the point that they release methane into the atmosphere, further worsening global warming. Ideas such as the clathrate gun hypothesis suggest that methane hydrate dissociation is linked to prehistoric global warming.

However, according to a Nature Education paper published by the USGS, only about 5 percent of the world's methane hydrate deposits would spontaneously release the gas, even if global temperatures continue rising over the next millennium. In addition, bacteria in the nearby soil can consume and oxidize the methane so that only a minute fraction (as low as 10 percent of the dissociated methane) ever reaches the atmosphere.

So, now, you have the background to understand this report, Methane hydrate flow established off Japan:

Japan Oil, Gas and Metals National Corp. (Jogmec), Tokyo, said it has produced methane from methane hydrates during tests of a well drilled in about 1,000 m of water offshore the Atsumi and Shima peninsulas of Japan.

The well, operated by Japan Petroleum Exploration Co., produced methane by depressurization of hydrates in a layer 270-330 m below the seabed.

Jogmec said it was the first offshore test of methane hydrate flow ever conducted.

Jogmec's summary of its activities here.

Baby steps to diminishing the importance of Mid-East energy and easing some issues over sea lanes.

World Oil Transit Chokepoints - Add One More to the List

The U.S. Energy Information Agency has a dandy list of those narrow places on the earth where oil flowing in commerce on ships can be threatened by "pirates, terrorist attacks, and political unrest" at World Oil Transit Chokepoints. The list includes the Strait of Hormuz, the Strait of Malacca, the Suez Canal, Bab el-Mandab, the Bosporus, Panama Canal, and the Danish Straits.

Time to add another narrow area to the list, the "O Gap" sometimes located in Washington,DC and, unique to chokepoints, known to be more a part of a calculation than a real spot on the planet.

Shown below is a rare capturing of the "O Gap" as it begins to close off a route of oil to the U.S.:

Some might feel that the "O Gap" would be better known as the "Keystone Twist". Many people are unhappy with its existence, as set out in Expected Keystone XL permit rejection strongly criticized:

US Sen. Richard G. Lugar (R-Ind.), the primary sponsor of legislation that set a deadline for a decision, said the administration misled the American people on the pipeline. “In the face of Iranian threats against oil affordability, [it] once again is trying to blame Congress and the State of Nebraska instead of taking responsibility for American jobs and security,” he said during an appearance at a Greenwood, Ind., instruments and gauges manufacturer who potentially would be doing work for the project. “This political decision offers hard evidence that creating jobs is not a high priority for this administration,” said US Chamber of Commerce Pres. Thomas J. Donohue. “By placing politics over policy, the Obama administration is sacrificing tens of thousands of good-paying American jobs in the short term, and many more than that in the long term.”*** “Blocking the Keystone pipeline would be an enormous mistake by the Obama administration,” said National Center for Policy Analysis Senior Fellow H. Sterling Burnett. “We need the oil and we need the jobs it would bring. This is as ‘shovel ready’ as anything Obama has proposed, yet because his radical environmental constituency objects, he’s apparently halting the pipeline.”

Or, as set out in the video linked at Instapundit, “He chose Venezuela over Canada.”, which really ought to be watched.

China must like the result, Canada will look to China to sell its oil. I guess the oil tanker owners will be happy, too.

Remember the "O Gap" - the new chokepoint. UPDATE: Here, read Re-Election Obsessed Obama Goes Political On Keystone By ROBERT J. SAMUELSON

How many Iranian threats to "close the Strait of Hormuz" does it take to make oil prices jump??

One, apparently, even if made by some obscure clown who was almost immediately slapped down for being a dolt, as reported in Strait of Hormuz Not Closed, Iran Foreign Ministry Says:

The Strait of Hormuz remains open to shipping, an Iranian Foreign Ministry spokesman said, after oil prices surged amid speculation that vessels might be blocked from using the strategic waterway.

The spokesman, Ramin Mehmanparast, said reports about the strait’s closure were untrue. Oil prices spiked by as much as 3.6 percent today in New York and London.

“These claims are sometimes made, but they are by people who have no role, no official title or authority,” Mehmanparast said by telephone from Tehran.

"No role, no official title or authority" - sounds like just the guy to quote to make oil prices jump a bit.

About 1/6 of the daily global consumption of oil travels through the Strait, but that's just because it's easier that way.

Closing the Strait would not mean the end of civilization as we know it and the rest of the world would adjust in a fairly short time.

More to follow on this when I get time.

Worldwide Energy: Turkmenistan has a great big gas field - #2 in the world

The Oil & Gas Journal reports another one of those nasty fossil fuel finds that drives the gloom and doom "We're running out of energy" crowd insane, in GCA: Turkmenistan's Iolotan gas field is world's second-largest :

Gaffney, Cline & Associates (GCA) said Turkmenistan’s South Iolotan natural gas field is the world’s second-largest, with an estimated 21.2 trillion cu m (tcm) of gas reserves. Supergiant Iolotan field was discovered in the country’s Amu Daria basin in late-2006 (OGJ Online, Nov. 22, 2006).

In a recent presentation, Jim Gillett, GCA business development manager, said South Iolotan’s latest reserves estimate make it second only to giant South Pars gas field, shared by Iran and Qatar.

“Turkmenistan’s gas reserves are more than enough for any potential demand over the foreseeable future, whether it be from China, Russia, Iran, or Europe,” Gillett said.

However, Gillet said estimates of the central Asian nation’s reserves could increase even more, noting that in addition to South Iolotan, the country’s Yashlar field has substantial gas, too.

For the geographically challenged, the map above will help you locate Turkmenistan.

Expect big pipeline investments from the Chinese. Pipeline rights through a couple of other 'Stans should not cost all that much.

And they probably won't have idiot "greens" whining about a way to get fuel to flow into China.

An Unimportant Navy News Release

Pilotless aircraft in a pilot program (U.S. Navy photo by Kelly Schindler)

Fire Scout Completes First Navy Unmanned Flight on Biofuel

To which my mind says, "So what?"

What did the testers think was going to happen? Hadn't they tested the fuel ahead of time?

If it's fuel that burns in a gas turbine, it's gas turbine fuel. I don't believe there will be much chemically different from a fuel based on petroleum. In fact, I bet it is almost like a petroleum product.

The question of whether or not Department of Navy funds should be diverted to support this "biofuel" industry is not answered by this sort of rigged test. As I've noted over and over, the U.S. has plenty of fossil fuels available to help us become energy independent - the announced goal of the Secretary of the Navy and his ultimate boss, the President. SecNav's pitch, which we heard repeatedly during a DoD Bloggers Roundtable with him earlier this year, is that he is seeking alternative fuels that, essentially, cost the "same" as fossil fuel products. Oddly enough, fossil fuels cost the same as fossil fuels and don't require a dime of Navy (taxpayer) money to develop a market or to build refineries, pipelines and the like.

The "Green" Navy and "Energy Independence" were the topics of DoDLive Bloggers Roundtable: Secretary of the Navy Ray Mabus. From the transcript:

SecNav: ***The most overarching or broadest goal was by no later than 2020, at least half of all Navy energy, both afloat and ashore, would come from non-fossil fuel sources. I did this to address a vulnerability. We simply buy too much petroleum from volatile places on earth, and we need to address that vulnerability to reduce our dependence on foreign sources of fuel.

My translation: "So, instead of focusing on buying fuel from non-volatile places (like say, the U.S. and Canada), we have decided create a whole new industry using your tax dollars."

The U.S. Navy's least polluting ship?

SecNav: The Navy will do two things. One is, we will make our contribution of about $170 million to help either build or retrofit biofuel plants for -- to produce biofuel. We will also be willing to sign offtake contracts so that we will provide the market for these biofuels. And finally, earlier this summer, the Defense Logistics Agency, on behalf of the Navy, issued a request for proposals for 450,000 gallons of biofuels for our test purposes, which we think is the largest biofuel purchase ever undertaken in the United States.

My translation: "Biofuel production is not 'shovel ready' so we are going to take taxpayer money and try to push production of this product into a market in which the only real demand will be the taxpayer funded military. Building plants and all that is needed to get the biofuels ready for real production has yet to be accomplished."

More Defense Money Baloney: "New Biofuels "Market" to Reduce Foreign Oil Dependence"

Runnng on empty

I guess discovering that in the real world biofuels still are an expensive novelty, the decision has been made to dump a few hundred million dollars of Department of the Navy dollars into an attempt to create a "market" for them, as reported at New Biofuels Market to Reduce Foreign Oil Dependence

The Department of the Navy is providing the market share for the nation's nascent biofuel industry as part of a White House initiative to kick-start the alternative energy sector, administration officials announced Aug. 16.

The Navy, in partnership with the departments of Energy and Agriculture, is working with the private sector to create a sustainable U.S.-based alternative energy industry as part of a plan President Barack Obama announced in March to reduce American dependence on foreign oil.

Navy Secretary Ray Mabus, along with Agriculture Secretary Tom Vilsack and Energy Secretary Steven Chu, announced the latest part of the plan in a conference call with reporters Aug. 16.

Under the plan, the Navy, Agriculture and Energy departments will share equally in a $510 million investment over three years -- estimated at half the private sector's cost -- in the production of advanced "drop-in" aviation and marine biofuels, which can be used with existing fuels to power military and commercial vehicles, they said.

The White House's Biofuels Interagency Work Group and Rural Council will oversee the initiative with the simultaneous goal of boosting America's rural economies, they said.

"America's long-term national security depends upon a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving sailors and Marines tactical and strategic advantages," Mabus said.

"Having energy independence in the United States is one of the most important things we can do from a security standpoint," he added.

The United States imports more than $300 billion in crude oil annually, and "price shocks and supply shocks" of the international oil market are "too much for the military to sustain," Mabus said. Every dollar per barrel increase in oil adds $30 million annually to the Navy budget, he said.

"Today's announcement not only leverages our home-grown fuel sources to support our national security, but it also helps advance the biofuels market, which ultimately brings down the cost of biofuels for everyone," Mabus added.

The initiative is in line with Mabus' goal to cut in half the Navy's oil usage by 2025, and supply its growing use of biofuels, which the secretary estimated at 8 million gallons per year.

"We've already flown an F/A-18 on biofuels," said Mabus. "We've flown a MV-22 Osprey on a mixture of biofuels and petroleum. We've tested our riverine craft, are sea hawk helicopters, so we are, well down the road to making sure we meet this goal tactically and strategically."

"The Navy can be the market," Mabus said. "We have a big need for biofuels. It will make us better warfighters, it will save lives, and it will reduce a vulnerability in our military that we simply shouldn't have."

The Energy Department already supports 29 biofuels projects in which producers manufacture fuels from cellulosic feedstalks -- wood, grasses and nonedible parts of plants, Chu said. Under the initiative, there can be no negative impact on U.S. food supply, they said.

The initiative is important, the secretaries said, to diversify the nation's energy supply, remove risk from the burgeoning biofuels industry, and create economic opportunities in recession-hit parts of the country.

The departments plan to release a request for proposals soon from biofuel manufacturers, and Mabus said the Navy conducted the largest-yet biofuels request of 450,000 gallons in a bid last spring.

"There is a market there that is real, that is solid," he said of producers, and added that it is growing enough that prices already are starting to decline.

The Navy will "repurpose existing funds" for its $170 million share of the investment, Mabus said. "It's a matter of setting priorities," he added.

Secretary of the Navy Ray Mabus laid out five aggressive energy goals in October 2009 to improve the Navy's energy security and efficiency, increase the Navy's energy independence, and help lead the nation toward a clean energy economy. This initiative assists in achieving the energy goal of increasing alternative energy afloat and ashore where by 2020, 50 percent of the total Department of the Navy energy consumption will come alternative sources.

As I have noted in previous posts (see Baloney at the Navy Top: "We use too much fossil fuel", Shale Gas and U.S. National Security), the U. S. has plenty of domestic energy which is being and can be developed further without taking money from the Navy and giving a "special deal" to the biofuels people who have already spent millions of dollars of taxpayer money.

Instead, the administration prefers to attack the gas and oil energy industry for receiving special "tax breaks" while taking tax money better spent on ship and aircraft repair and giving it to different politically-favored gaggle of "projects."

As I said in prior post:

The problem is not that we use too much fossil fuel, the problem is that we have allowed ourselves to become dependent on imported fossil fuel, despite sitting on the world's largest deposits of "fossil fuels."

It is the importation of foreign oil that is a strategic issue, not their use. It's the long lines of commerce that bring oil to our shore that are vulnerable.

If every dollar increase in a barrel of oil adds $30 million to the Navy budget, perhaps, now that the price of a barrel of oil has dropped, we should be stocking up . . . at current prices, assuming that oil is $10 a barrel lower than it has been, the Navy has "saved" $300, 000, 000. [Using Sec Mabus's $1bbl figure to assume Navy usage of 30 million barrels]. That's enough to build a ship. He should be celebrating!

If there is "a market that is real, that is solid" for biofuel, as Sec. Mabus asserts, then there is absolutely no need for this money to be diverted in this fashion.

I have no problem with the development and use of biofuels, I just think the Navy has little or no business funding them to "remove risk from the burgeoning biofuels industry"  - if it's a real "market" then let that market work. 

And let the existing energy industry assist us in being energy independent. "Drill, baby, drill" is not just a political slogan, it's a way to energy independence while allowing the scientists to work their way toward biofuel heaven.

Let these "projects" bid on the same basis as all the other energy providers. Let them develop the pipeline, storage tanks and associated equipment necessary to make delivery of the fuels they can provide.

I can't wait to see how we handle refueling our ships and aircraft around the world with this stuff. Will we have a fleet of new Navy oilers carrying only the finest vintage biofuels following each of our ships? Or will we still be buying fuel in foreign ports, using "carbon based" fuels when deployed while keeping up the pretense of "green-ness" domestically? Potemkin ships?

One final thought. The energy markets are global, so that if the U.S. does succeed in becoming energy independent by using biofuel, those nasty old oil and gas products being sold to us will simply be sold to some other country with an appetite for energy and an indifference to the environment. The net result will not be much of an improvement in the "clean energy economy", will it?

Shale Gas and U.S. National Security

A paper, sponsored by the U.S. Department of Energy from the James A. Baker III Institute for Public Policy at Rice University, "SHALE GAS AND U.S. NATIONAL SECURITY":

The Baker Institute study "Shale Gas and U.S. National Security," sponsored by the U.S. Department of Energy, investigates the role that U.S. shale gas will play in global energy markets as global primary energy use shifts increasingly to natural gas. Specifically, the study concludes that shale gas will diminish the petro-power of major natural gas producers in the Middle East, Russia and Venezuela, and it will be a major factor limiting global dependence on natural gas supplies from the same unstable regions that are currently uncertain sources of the global supply of oil. In addition, the timely development of U.S. shale gas resources will limit the need for the United States to import liquefied natural gas for at least two decades, thereby reducing negative energy-related stress on the U.S. trade deficit and economy.

But, hey, don't take this summary as truth when you can read the source document by downloading it from here.

Here's an interesting section that points out how global energy markets work (click on it to enlarge it):

 Not only is shale gas important for U.S. national security, it's providing a benefit to Europe and Asia.

Damn right it will "have significant geopolitical ramifications."

And we have a lot of it, as set out here:

The U.S. Has Abundant Shale Gas Resources

Of the natural gas consumed in the United States in 2009, 87% was produced domestically; thus, the supply of natural gas is not as dependent on foreign producers as is the supply of crude oil, and the delivery system is less subject to interruption. The availability of large quantities of shale gas will further allow the United States to consume a predominantly domestic supply of gas.

According to the EIA Annual Energy Outlook 2011, the United States possesses 2,552 trillion cubic feet (Tcf) of potential natural gas resources. Natural gas from shale resources, considered uneconomical just a few years ago, accounts for 827 Tcf of this resource estimate, more than double the estimate published last year.

Enough for 110 Years of Use

At the 2009 rate of U.S. consumption (about 22.8 Tcf per year), 2,552 Tcf of natural gas is enough to supply approximately 110 years of use. Shale gas resource and production estimates increased significantly between the 2010 and 2011 Outlook reports and are likely to increase further in the future.

So, why, instead of screwing around with ethanol and really expensive electric cars, are we not working hard to produce vehicles powered by shale and other natural gas?

U.S. Energy Information Agency study, Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays":

Although the U.S. Energy Information Administration's (EIA) National Energy Modeling System (NEMS) and energy projections began representing shale gas resource development and production in the mid-1990s, only in the past 5 years has shale gas been recognized as a "game changer" for the U.S. natural gas market. The proliferation of activity into new shale plays has increased dry shale gas production in the United States from 1.0 trillion cubic feet in 2006 to 4.8 trillion cubic feet, or 23 percent of total U.S. dry natural gas production, in 2010. Wet shale gas reserves increased to about 60.64 trillion cubic feet by year-end 2009, when they comprised about 21 percent of overall U.S. natural gas reserves, now at the highest level since 1971. Oil production from shale plays, notably the Bakken Shale in North Dakota and Montana, has also grown rapidly in recent years.

You can thank the engineers who developed the technology and techniques to make this possible.