Wednesday, February 8, 2012

The United States is Not Running Out of Oil. Far From It.


I think we spend way too much time worrying about energy independence, stable supplies of oil and gas, and the need to "create the green energy economy." The reality is we have plenty of oil and gas right here in the US, a lot more in Canada, and if Mexico were to ever rationalize its petroleum industry an abundance from that ally. We have stupid programs like ethanol, subsidize uneconomic industries like fuel cell, solar and wind and why? Because we are running out of oil? Because of instability of supply? Nope and nope again.

The US Energy Information Administration, part of the Department of Energy, recently released its Annual Energy Outlook 2012 Early Release Reference Case. In it, EIA destroys the myth that the US is running out of oil and gas. Today, EIA released a summary of its projections for US oil production through 2035.

As you can see, oil production is set to rise sharply over the coming decade, from 5.5 million barrels per day in 2010 to 6.7 million barrels per day in 2020. Oil consumption in the US, believe it or not, was lower, at 19.1 million barrels per day, in 2010 than it was in 2000, 19.7 million barrels per day, and most projections call for a flat to down trajectory. Numerator up, denominator flat to down means more oil coming from the US. I personally don't care where the oil comes from, just like I don't care where bananas or cell phones come from, but it seems to matter a lot to some.  As long as I can fill 'er up, I'm happy.

The story in natural gas is even better. The optimistic estimates are for a 100 year supply of natural gas in the US.  

 The Wall Street Journal this morning had a pretty good piece on why it's important. Lower natural gas costs means lower costs for many plastic-based goods, it's good for the pipeline business, so its good for the steel business, good for the construction business, good for tax revenues, good for the poor since energy costs are a higher percentage of their budgets than it is for the 1%. That's right, if you are against low oil and gas prices the group you hurt the most is the poor. 

 It's a feel good story. So riddle me this. Why are we flushing money down ratholes like Solyndra, A123 and Fisker Auto, when abundant cheap energy is right under our feet?


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