This week, the price of a barrel of crude oil topped out at more than $104. With the growing unrest in the Middle East and Northern Africa, there may come a time when we view this price as a bargain. It was not that long ago when a sustained price of $100/barrel was enough to drive the average for a gallon of regular gasoline to $4 and above. It is not only a major drag on the U.S. and global economies, reliance on unstable oil supplies is major national security threat.
Egypt, Jordan, Yemen, Bahrain and Iran are or have been in turmoil. And while it is easy, and naive, to see this as a flowering democracy movement, it is much, much too early to tell how this will play out. For all of the hopes for a free and democratic outcome, there are many more fears of an eventual rejection of the West and its traditions, as a newly energized religious nationalism rearranges the map of the Middle East and Africa. Starving the First World of energy is but one weapon they will have in their arsenal.
Based on this threat, which is not new but has been hanging over our heads for decades, the U.S. government has both the duty and responsibility to provide for our energy future. It is constitutionally bound to protect and defend our nation, and doing so requires it to throw open the doors of energy exploration and recovery. However, this administration has taken it upon itself to institute and enforce a moratorium on Gulf Coast drilling, despite a judge’s ruling that this is unconstitutional. With the help of its friends in Congress, specifically former House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, vast tracts of oil and gas have been put off limits for exploration and recovery; often by designating the areas around these finds as ecological preserves. In effect, they have begun to strangle the engine of American commerce, and made us much more dependent on foreign oil.
While it is true that the majority of America’s foreign oil imports currently come from Canada, the fact remains that oil is a global market. Unrest in the Middle East and Africa have broad effects on the price and availability of oil and oil feedstocks. Europe may take the brunt of any decline in oil from these areas, but that will increase the price of a scarce resource globally–especially when refinery capacity is operating on the edge. There is little to no excess refining capacity in the world, and Europe provides North America with its excess unleaded gasoline in return for the diesel she cannot make. So any decline in output through Europe will have a devastating effect on North American drivers and businesses.
A new drilling technique is under investigation that could raise U.S. oil production over the next five years by at least 20%, and reduce imports by more than 50% in a decade. It is a variant of the technique used to tap natural gas in underground shale deposits by drilling down and horizontally into targeted rock formations. Water, sand and chemicals are then pumped into the well to crack the shale and release the gas. By increasing the number of cracks in the underlying rock and using a different mix of chemicals more suited to liberating the oil, energy companies say they can free the oil from its stone grave at a low cost. Something that is not possible with shale oil deposits currently.
In 2007, petroleum engineers used this technique to open a 25,000 square-mile formation under North Dakota and Montana. The Bakken reserve, as it is known, saw production rise 50% in the past year to 458,000 barrels/day. The initial attempts at the Eagle Ford formation in South Texas were so successful, drilling permits rose to 11 times its original output in just the last year. This extraction method is under investigation for the Niobrara (under Wyoming, Colorado, Nebraska and Kansas), Leonard (New Mexico and Texas) and Monterey (California) fields. So quickly is production rising in the Bakken formation , there isn’t enough pipeline to bring the liberated oil to market. Instead, it is being shipped by truck and rail car to refineries, and oil companies have had to hire new workers to handle the demand.
Energy experts expect the Eagle Ford and Bakken reserves to produce 4 billion barrels of oil. They would be tied as the fifth-largest oil fields ever discovered in the U.S. And the oil is cheaper to tap than that found in the deep waters of the Gulf of Mexico or Canada’s tar sands. But, as importantly, the natural gas deposits are many, many times larger than the oil finds. This will keep the prices for this commodity low for many decades.
These new fields are expected to produce from 500,000 (low estimate) to 2 million (high estimate) barrels of oil per day within five years, slashing U.S. oil imports by as much as 60% by 2020 as Gulf oil production rises and U.S. demand continues to fall. This would eliminate nearly half of our trade deficit. Good news, right? Wrong. Environmentalist and EPA have yet to weigh-in.
The Enviros worry that wastewater or fluids from the hydraulic fracturing process could pollute drinking water supplies. The oil industry says the EPA found the process safe in shallower drilling operations in 2004, but that was a different time and a different administration. The newly politicized EPA may use its regulatory powers to stop or interminably delay the use of this process, while environmental groups use the courts as a bulwark against progress. Delaying or ending energy extraction through hydraulic fracturing will signal markets and governments that the United States is willing to sacrifice its energy future, and place itself at the mercy of others. One need look no further than the transition from the Carter to Reagan administrations to see what effect even the threat of increased drilling has on world oil prices. From a period of relative instability, gasoline and fuel oil prices stabilized for more than a decade, and consumer prices for manufactured goods and food (oil is the single largest component of modern fertilizers) dropped precipitously. The world economy boomed.
I do not expect this to happen under the current regime, whose hatred for Western capitalism and freedom seemingly knows no bounds. Yet this antipathy affects not only the First World, but the Third World that Progressives, Socialists and Communists claim to love. As we have seen with the regulated increase in the use of corn-based ethanol, food prices have risen dramatically. Restricting oil exploration has the same effect. Nowhere is this effect more pronounced than in those countries unable to feed themselves. They cannot buy the foodstuffs they need to survive; a condition that shows just how deep-seated and satanic is the administration’s unmitigated hatred of Western civilization and capitalism. They would let the poor starve in order to subjugate the economy and the people.
We have the tools and technology. It’s time to demand from our representatives a market-based energy policy that unleashes the entrepreneurial spirit and resourcefulness of the American worker.
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