“You have raw emotion deep under your surface. Frack it!” – The Simpsons
From the movie Sad Max®: Beyond Soy Latte™.
Energy rules our world. Advanced civilization depends entirely on the availability of inexpensive energy, and wars have been fought for energy, and lost because of the lack of energy. Every task you or I do during a day is made easier by the availability of that energy. Every task. Even something as simple as a hike in the woods is made easier due the hiking shoes I wear that incorporate polymers and plastics and artificial fabrics made possible through cheap energy and more specifically: cheap fossil fuels. Cheap energy gives us fresh strawberries in winter, and baby oil for sunbathers in summer.
Even though the oil changes are more fun, I imagine the upkeep is more expensive than a Buick®.
I’d even make the case that when energy is cheap, freedom flourishes. Why have a slave? It’s much cheaper to have a gas powered weed trimmer. Slavery is immoral, but cheap energy removes that pesky incentive. Why have serfs? You have to feed them, which is a big drawback. If the Russian Emperor had used tractors instead, he might have lived long enough to be on Dancing with the Czars®.
Cheap energy is freedom.
One of the biggest recurring questions that has popped up (again and again) during my lifetime has been the impending end of the Age of Oil. If you say “impending end of the Age of Oil” in a really deep, booming baritone like Brian Blessed it sounds even cooler. The first time the impending end of the Age of Oil reached mass public consciousness was in the 1970’s, and for good reason. Texas had passed its peak in oil production in 1973, it was thought that every year after would see the production decline.
True Life Snippet From Stately Wilder Manor: Whenever I agree with The Mrs. by saying, “Indeed” she says, “Now say it like Brian Blessed.” And she’s serious. She won’t let me say the word “Indeed” without impersonating Brian Blessed.
How crazy were we for oil in the 1970s? When oil was found in Alaska on the North Slope, several major oil companies put together a four-foot wide (16 meters) pipeline that brought oil 800 miles (6 kilometers) from the Arctic sea down to the Gulf of Alaska. At the time, the project was one of the most ambitious construction projects in United States history, and cost the equivalent of $34 billion 2019 dollars, or about what Elon Musk spends on weed and hair implants in a year. It was expensive, and even in the 1970’s the lawyers and environmental groups had their knives out. In 1970, they were all NIMBY – Not In My Back Yard. In 2020? They’ve gone BANANA: Build Absolutely Nothing Anywhere Near Anyone.
Nothing as grand or great as the Alaska Pipeline will ever be built again in the United States.
After the Alaska Pipeline oil started flowing and the United States sweet-talked the Saudis into making oil cheaper than a date with Miley Cyrus, oil concerns continued – with oil companies looking for oil in ever more remote locations, including the a mile under the sea, couch cushions, and the faces of teenage boys. Billions were invested in both conventional oil (think about a Texas oil derrick) or unconventional (think about the oil platform used by a James Bond villain as a secret hideout). Exxon© even spent millions trying to learn how to mine shale, crush it, and cook it so that it could be turned into Happy Motoring™ gasoline, but gave up.
These concerns disappeared in 1999 when it became obvious that if you wanted a barrel of oil, in the future all you would have to do is order one on the Internet via Hotmail® after you looked it up on AltaVista™. At that point The Economist© had a woefully stupid cover proclaiming that oil would be cheap from here on out since it was trading as low as $15 a barrel at that point, even though oil doubled in cost over the year. In 2008, crude oil would hit its (so far) all-time high in 2019 dollars of $173.
On a positive note, with her skin Meg Ryan could now do commercials for Jack Links® beef jerky.
The thought in 2008 was that we were certain to have hit impending end of the Age of Oil (indeed!). How certain? George W. Bush, an oilman president from Texas, was in favor of creating incentives to add ethanol to gasoline, despite the anguished cries of people who would rather have consumed the alcohol directly. Ethanol plants appeared throughout the corn belt of the United States, turning seed, sunlight, fertilizer, and diesel fuel into food. Which was turned into fuel. Farmers loved this.
This led to yet more investment in energy alternatives – schemes to turn natural gas into ammonia for fuel, yet deeper wells into the ocean, fracking, turning coal into liquid fuels, turning “switch grass” into fuel, and any other silly idea that would could come up. People even touted the coming “hydrogen economy” because they forgot that hydrogen had to be made using some other form of energy. The world was needing an energy savior.
Or, could he be the foretold Anti-Cat?
A Funny Thing Happened On The Way To The Apocalypse
Of course in 2008, the trend was clear: impending end of the Age of Oil (indeed!) was upon us. But one of the unlikely saviors had turned out to be real.
In 2012 if you would have asked me, I would have told you that fracking was just a great way to turn money into wasted fuel – it took almost as much fuel to make fracked oil as you got out of it – not a good investment. In 2015, I would have told you the same thing – the fracking companies were losing money like there was no tomorrow – if you had to invest more energy (think Btu or kilowatts) into getting oil out of the ground than it was worth in energy terms, you were just sinking yourself faster by using that kind of energy – it’s like burning your blankets to keep your bedroom warm in winter.
I was putting together my notes for a Big Energy Post in October of 2018, and had even written the first few paragraphs (okay, 500 words or so) when my research was showing something different. I skipped the Big Energy Post and moved on to another topic, since it was clear to me that my preconceived notion that fracking was a waste of energy might be wrong. My research was showing something other than fracking was a waste of energy. It was showing that fracked oil might actually be . . . worth it?
It turns out that when anyone first starts doing anything, they suck at it. And unless it’s me practicing singing, I have learned that if I practice, I’ll get better. There’s even a curve that describes this – it’s called an “S-Curve” or logistics curve or learning curve. When you first start walking, you suck. When you first start driving, you suck. When you first start, well, anything you’re awful at it. Over time you get better, and the more you practice, the more competition there is? The better you get.
If you have hundreds of people practicing something with billions of dollars on the line? They get better. Quickly.
And that’s the story of fracking oil in the United States. Water usage in fracking is down. Chemical usage in fracking is down. Drilling costs, energy expended, and labor per barrel are down. After practicing thousands of times on thousands of wells, companies have figured out how to frack a well to maximize crude oil production and minimize cost (and energy) put into it. One metric I saw showed that fracked oil was now competitive (with a profit) compared with the cheapest oil on the planet – oil from Saudi Arabia. Companies have gotten so good at fracking that natural gas in the United States is essentially free.
I guess I’m not a fan.
Fracked oil is on a trajectory to be competitive with the lowest cost oil produced conventionally any place in the world. And fracked oil has some other advantages – it’s “lighter” than conventional crude – that means it contains more gasoline and diesel, and less of the “heavier” stuff that is harder to turn into gasoline and diesel – think asphalt.
The United States is the largest crude oil producer in the world. I never thought I’d type that sentence and it represent a real fact, but in 2019, it does. The United States is, as promised by every president starting with Nixon, actually, really and for trues, energy independent.
[Edit – Chart added after Lathechuck’s comment]
Was it alternative energy, like windmills? No. Was it the communist fever dreams of The Teen Girl Congress Squad®? No.
Is it “sustainable”? Kinda. It is for a while. There are an estimated (as of 2019) 1.7 trillion barrels of recoverable shale oil in the world, 293,000,000,000 of them are in the United States. At 20,000,000 barrels a day in just the United States, using just United States resources, that’s forty years that we have from 2020 – until 2060 – to find an alternative, like, oh, nuclear. And don’t believe me – here’s an actual clean energy evangelist who finally did that math and discovered . . . windmills are worse than natural gas as far as carbon emissions.
We still face headwinds – economic, exponential growth, two billion people that would love to hop the border to the United States, and communists that want to tear the place down. But oil? Oil isn’t the place to look for an apocalypse, at least this week.
And, trust me, if I hear a whiff that any of the above is wrong, I’ll pop it right back up on this blog as soon as I can confirm.
So, at least for today, Happy Motoring©. We have maybe forty years to fix this, so let’s not waste it. This has obvious foreign policy implications we’ll discuss in future posts. Upside? Why do we care about the Middle East anymore?
I’m sure you have been waiting to write “Dancing with the Czars” until just the right moment.
Well, it was at least better and more topical than Czar Trek.
Look in the stockrooms of a “big box” grocery store, like the massive Meijer stores that we shop at in the Midwest. You will notice that there really isn’t that much extra food in the back. These big stores rely on regular, multiple times a week, delivery from their distribution centers and from their vendors (pop, bread, etc.). That works great when gas is cheap and you can afford to run trucks 24-7 to your stores but if that suddenly stops being affordable? Uh oh. Look at a grocery store after a winter storm warning, it can be cleared out in hours. Now imagine what happens if the trucks to replenish the store don’t show up for a week.
Our economic system is a house of cards, held together by cheap energy and a childlike faith in fiat currency. It wouldn’t and it won’t take much to see it collapse. When it does, don’t be somewhere with lots of people and especially not with vibrant diversity.
Also, a date with Miley Cyrus isn’t cheap. Have you seen the cost of penicillin?
Yikes, you’re right! And some things are penicillin-resistant nowadays . . . .
Very true – I see several weak points – but at least right now, oil isn’t one of ’em.
Spot on, the connection between energy and freedom/stability, and I remain cautiously optimistic that the rise of American energy can allow the country to begin to disengage from the need to police the world in order to guarantee the flow of cheap energy which enables the affluent lifestyle we take for granted as some kind of birthright. I’ve questioned the need for “600” overseas military bases, and worry every day about good friends in Afghanistan right now. But maybe our shepherds and goatherds (including an unfortunate number of wolves and coyotes) know us better than we know ourselves. Some of us can’t behave for even a few hours when there’s a power outage, and take away our “right” to drive 10 miles on a whim to sit in an air conditioned Starbucks and we have instability. They knew us pretty well even back in 1980, but no one remembers the Carter Doctrine. So hurrah for American energy while we bridge the gap to something more sustainable, and hopefully the price of oil will stay high enough that we won’t see a wave of defaults on the massive debt which enabled the rise of domestic energy.
Exactly, and very well said – and it is where a future post is going. Why, exactly, do we need to have an overseas presence?
I don’t really want to get into too much of this, as my natural pessimism would refute everything you said. And I could still be wrong. I have to admit against my better judgement you put forth some good points. One thing I might disagree on is that you get much diesel from fracking-it is my understanding it is pretty much ALL gasoline. However, don’t take that to the bank as I’ve only seen a few sources on that. Also, beating Saudi Arabia is not exactly the milestone it once was-they were seeing 90%+ water cut in their main fields twenty years ago. Ten years ago the major shortage in rigs wasn’t from fracking but from the Saudi’s desperately building production in the Persian Gulf waters to replace lost production inland. They won’t be a major player much longer. I won’t hold my breath for ANOTHER ten years of keeping the lights on, but your arguments perhaps mean we have a few more years than I thought. Not that that is a bad thing. On some things, I pray I’m wrong.
I think we do – especially if you look at the graph. We really shouldn’t waste those years, though. Unless we have Netflix.
While it is true (“indeed”) that the US produces more oil than any other country, we’ve been here before, and we’ve always been competitive. Whether or not “we” are “energy independent” depends on what you mean be “we”, and by what you mean by “independent”. The fact is, the USA still imports almost half of the oil that it consumes. If you say “we now produce more than we import!” with the right tone of smug satisfaction, people will think you’ve said that we produce more than we consume, but that’s not at all true. It’s like saying “with my new promotion, I’m making more money every month than I borrow!” OK, I guess that’s kind of a milestone… Now, if you include Canada in “we” (and why wouldn’t you?), the balance looks better, because we import a lot from Canada. (Mexico, though, is now a net importer.) And if you mean “we can choose who we import oil from” when you say “energy independent”, that claim is easier to defend. (Absurd? Yes, but I’ve heard it explained that way, in public, on the radio.)
And don’t too worked up by the fact that we now export oil and gas. China exports pandas, but that doesn’t mean that there are enough of them that every Chinese family gets one as a pet. We export certain grades of oil that can be refined in other countries, but we import far more oil to feed our own refineries.
If you look at the official statistics, https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrimus1&f=a , note that the Y-axis goes up to “4,000,000”, and the legend says “thousands of barrels”. Not many of us would really appreciate the difference between “3 million barrels per whatever” vs “3 billion barrels per year”, but it’s important if you want to think seriously.
This is not to dispute your overall claim that we have a little breathing room before we need to start walking to work, tending potatos in the back yard, and burning just enough gas to keep the plumbing from freezing all winter.
Lathechuck,
I added the graph after your post (you know that, but I want to make sure everyone does). As you look at the current progress, plus add in the fact that there are 3000 (not a typo) wells that could come online in just one field at any time . . . we’re in the best spot of my life.
Allegedly-funny (but certified true) story. One day a few years ago, I’m chauffeuring my wife from our home in northeast Indiana to Cleveland, for medical reasons. When you cross the state line into Ohio, on US 30, you are immediately in the middle of a vast array of wind-power devices. You know, the giant 3-bladed props. They’re kind of scattered here and there, no doubt where farmers were bribed/intimidated into ceding bits of land for the purpose. So, as I’m driving, I can spare enough attention to see a row of four of these monsters, close together. Three of them are churning away, while the fourth is stationary. They’re immediate neighbors — they must all be experiencing the same wind. No maintenance activity that I can detect. I remark to my wife about this curiosity. She says:
“Maybe that one’s not turned on.”
We are doomed.
I live like 10-15 minutes from those windfarms and can confirm that they often are stationary.
Heh!
I sat next to an engineer on a wind farm at a bar. His wind farm was doing great. Another guy in his office had the farm next to him, which was doing poorly.
The difference? Not wind. Not technology. Tax credits. One field was newer and the tax credits weren’t as good.
Hmmm.
No, actually, wind turbines ARE “turned off” when the energy isn’t needed and there’s no reason to wear out the gears. They’re also turned off when the wind is too strong, and (as you hinted) when maintenance is needed.
What we need is some industry that’s really good at taking a variable supply of energy, to absorb it into some storable product, when we have more sun and wind than we need. And hibernating when we have less. If that industry was a utility-scale battery, then the battery could return energy to the grid when the sun and wind fall short. Liquid-metal batteries seem more plausible than most new energy proposals:
https://www.greentechmedia.com/articles/read/ambri-is-still-alive-and-chasing-its-liquid-metal-battery-dreams
Wind and solar are the suck for electric generation. Steven den Beste had a great article years ago on the problems with these. Bottom line, whatever generating capacity you build that can suddenly quit you have to build that much generating capacity in something throttleable. So for each kW of wind or solar you build you pay at least twice the amount because you have to build two systems. And given how much more expensive wind and solar is over other methods, you pay more than twice the amount than if you just built something reliable to begin with first off.
And if you were a believer in Global Warming, you’d learn they aren’t at all “carbon friendly” – it’s a way to siphon off wealth and redistribute it to people you like.
I think I’ve been reading “Peak Oil is here, we’re all DOOOOMED” almost as long as I’ve been reading that self-sustaining fusion reactors were 20 years away, so since the mid-70s? So peak oil and fusion reactors are probably a hundred years out.
In 1980, we were forecast to have a 27 year supply of oil. 37 years later, in 2017, instead of there being no oil for the last decade, the supply expanded to 46 more years. One guy who has studied the Permian Basin in Texas and New Mexico says it’s totally reasonable to consider it a permanent source. Essentially infinite. Of course, what happened was that new techniques were developed to get oil out of the ground and that increased the amount that was recoverable. All because the free market was allowed to function properly. (Blog pimping for references.)
Of course resources are finite. The planet is finite. The thing that’s apparently infinite is human ingenuity and as long as people are allowed to do what they do best, innovate, we’ll be fine.
There is so much bullcrap and sloppy thinking in the writing about those things that it’s hard to sort it out.
That’s why I wanted to see it play out before I made the call – we now have the receipts – the data is clear. We’re in a happy place. And nice post – I remember seeing it the first time ’round, but was still planning this post after I had time to gather just a bit more data.
I try to follow the shale oil story and it’s very confusing. Everybody seems to agree that while miraculous amounts of oil are being pulled up, nobody can make any money doing it and debt is going to cripple production before depletion will. The other key point I’ve read is that there is a drive on to squeeze the oil out faster using pressurized water to help cash flow that is reducing the total well production and causing them to run dry sooner.
A good overview:
https://geopoliticalfutures.com/wp-content/uploads/2019/05/is-the-shale-revolution-here-to-stay-geopoliticalfutures-com.pdf
Great article. As usual. We’ll see about well management . . . water is the big enemy of an oil field.
Glaring error: you stated the Alaskan pipeline is “a four-foot wide (16 meters) pipeline”.
That should be 1.2192 meters wide — not 16meters.
I’m trying to imagine a 16m wide pipeline -that would be 52.5 feet wide!
Keep reading . . .
https://wilderwealthywise.com/stonewall-jackson-patton-wrecked-cars-and-dealing-with-fear/
Is another example.
I’m sure that was feigned ignorance of the metric system for comical effect. Right, John?
It’s actually ribbing those who think the US is silly for not adopting the metric system, otherwise known as communist units at the Wilder House. (And I know ’em both!)
Yup! I can convert most of ’em accurately in my head.
The future looks extremely grim.
There are no more free countries.
No country has religious freedom, free speech, gun rights, or protection from warrantless searches, forfeiture, indefinite detention, torture, or extrajudicial assassination.
You might have slightly more freedom in Ireland or Switzerland, but soon the whole world will look like North Korea.
People in Venezuela, China, Vietnam, and Cuba seem to deal with tyranny by just ignoring it and living their lives, but making plans are difficult because everything is illegal and you can be arrested at anytime.
https://www.heritage.org/index/ranking