Energy Information Administration: Shale Gas Is A Global Phenomenon!

When people talk about Peak oil or peak anything, they only look at current prices and the available quantity of declared reserves, which they see as fixed and which they equate with neo-Malthusian insights of shortages.

They do this without comprehending the economic value of resources and without understanding the concept of human action—or that people don’t just standstill in the face problems, we react by working to resolve such unease via the price mechanism.

People, via the markets, respond to prices. This means when scarcities are projected via price signals, the market resorts to either conservation (rationing) or substitution.

This brings us to the announcement by the US EIA that shale gas production is a global phenomenon, with US having been the pioneer in its development.

The EIA writes, (bold highlights mine)

The use of horizontal drilling in conjunction with hydraulic fracturing has greatly expanded the ability of producers to profitably produce natural gas from low permeability geologic formations, particularly shale formations. Application of fracturing techniques to stimulate oil and gas production began to grow rapidly in the 1950s, although experimentation dates back to the 19th century...

The development of shale gas plays has become a “game changer” for the U.S. natural gas market. The proliferation of activity into new shale plays has increased shale gas production in the United States from 0.39 trillion cubic feet in 2000 to 4.87 trillion cubic feet in 2010, or 23 percent of U.S. dry gas production. Shale gas reserves have increased to about 60.6 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

Shale gas production from the US has been exploding. (From the EIA) This accelerated progress has been buttressed by (free market induced) technological enhancements.

Shale reserves have likewise been expanding along with production. This proves the case of the growing economic value of Shale gas.

Shale Gas reveals of the substitution process in action.

Now for the global perspective, more from the EIA.... (bold highlights mine)

It appears evident from the significant investments in preliminary leasing activity in many parts of the world that there is significant international potential for shale gas that could play an increasingly important role in global natural gas markets... In total, the report assessed 48 shale gas basins in 32 countries, containing almost 70 shale gas formations...

The estimates of technically recoverable shale gas resources for the 32 countries outside of the United States represents a moderately conservative ‘risked’ resource for the basins reviewed. These estimates are uncertain given the relatively sparse data that currently exist and the approach the consultant has employed would likely result in a higher estimate once better information is available.

What does all this tell us?

The energy market is working quite well, despite numerous interventions applied by governments.

The diffusion of technological advancements combined with the attendant economies of scale enhances the commercial viability of these projects, which if the EIA is correct, would mean more nations utilizing their natural shale gas resources. This also means reserves will grow as usage grows, enabled by technology.

In short, shale gas is gradually being recognized as an economically valuable energy resource.

Shale gas is probably one of the possible candidates to compete, replace, if not compliment fossil fuel as a major energy source.

Only the markets will say.

Oh, I almost forgot: Please remember changes happen at the margins.

The US Energy Consumption Story: Americans Are Better Off Today

The US Energy Information Administration (EIA) reports, (emphasis mine)

While most home appliances have become more efficient over the past 30 years, the average U.S. household uses many more consumer electronics —in particular, personal computers, televisions and related devices, according to data released today by the U.S. Energy Information Administration (EIA) in the latest update to its Residential Energy Consumption Survey.

EIA on Household Devices

US households have increasingly been using more luxury items and convenience related devices than in the past.

Appliances and Electronic devices accounted for 31% of energy use in 2005 than in 1978 where energy use accounted for 17%. Moreover, air conditioning and water heating likewise reveal of the same story where energy use has materially increased today (8% for aircon and 20% for water heating), than in the past (3% and 14%).

EIA on Energy Intensity

And since energy intensity has been materially declining, this translates to even more intensive use of these devises.

This also is a great example of the Jevon’s paradox at work, which according to Wikipedia.org is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.

Wikipedia.org on Jevon’s Paradox

Bottom line: Compared to the views of the permabears, gains from increased fuel efficiency and technological progress (brought about by capitalism) highlight the fact that American living standards have vastly improved over the past years, despite the stagflation, recessions and financial crisis.

Reinventing Nuclear Energy: Thorium

Prolific author Matt Ridley is for Thorium, in lieu of Nuclear reactors. (From Wall Street Journal-all bold highlights mine)

Against this formidable competitor, uranium will struggle for many years to come—especially with the extra cost and political handicap that Fukushima is bound to add. So nuclear needs to reinvent itself. Because nuclear reactors were developed by governments in a wartime hurry, the best technological routes were not always taken. The pressurized-water design was a quick-and-dirty solution that we have been stuck with ever since. Rival ideas withered, among them the thorium liquid-fuel reactor, powered by molten fluoride salt containing thorium.

Thorium has lots of advantages as a nuclear fuel. There is four times as much of it as uranium; it is more easily handled and processed; it "breeds" its own fuel by creating uranium 233 continuously and can produce about 90 times as much energy from the same quantity of fuel; its reactions produce no plutonium or other bomb-making raw material; and it generates much less waste, with a much shorter half life until it becomes safe, so the waste can be stored for centuries rather than millennia.

A thorium reactor needs neutrons, and both ways of supplying these subatomic particles are relatively safe. They can be introduced with a particle accelerator, which can be turned off if danger threatens. Or they can be introduced with uranium 235, which in this process has a much lower risk of an uncontrolled reaction than it does in today's nuclear plants. The fuel cannot melt down in a thorium reactor because it is already molten, and reactions slow down as it cools. A further advantage of this design is that the gas xenon is able to bubble out of the liquid fuel rather than—as in normal reactors—staying in the fuel rods and slowly poisoning the reaction.

Nobody knows if thorium reactors can compete on price with coal and gas. India has been working on thorium for some years, but the technology is as different from today's nuclear power as gas is from coal, and very few nuclear engineers even hear about liquid fuel during their training, let alone get to work on it.

New technologies always struggle to compete with well-entrenched rivals whose costs are already sunk. The first railways couldn't rival canals on cost or reliability, let alone lobbying power.

Now is the time to start to find out about thorium's potential.

At the end of the day, energy is about economics.

Video: Hans Rosling On How The Washing Machine Enhances Our Lives

Fascinating talk by Hans Rosling. (hat tip: Steve Horwitz)