Hoping For A Warm Winter

There are dire forecasts for the winter in Europe. The forecasts aren’t about the weather, specifically, but more about the ability of Europeans to stay warm and European factories to operate when the temperature drops and energy supply problems reach a crisis point.

An article recently published in Fortune outlines the issues. Many European countries made the decision to rely on Russian natural gas as one of their primary energy sources. When it invaded the Ukraine, Russia provided 40 percent of the natural gas for the 27 countries in the European Union. Some European countries then responded to the invasion by stopping purchases of Russian natural gas, while others were cut off by Vladimir Putin.

Obviously, losing 40 percent of a primary energy source–natural gas is the second most popular energy source in Europe behind oil–puts a dent in your energy policy. And, as the Starks are fond of saying, “winter is coming.” Prices have skyrocketed to historical record levels. The cost of electricity has already tripled in some places, and governments are scrambling to reopen coal-fired and nuclear power plants that were shuttered in moving toward “green” energy. The EU countries also are looking to other, non-Russian sources, but they don’t yet have the infrastructure, such as pipelines and processing terminals, needed to use the alternative suppliers. Building that infrastructure can’t happen overnight.

That means there is an immediate energy crunch, and the experts consulted by Fortune paint a bleak and alarming picture of what might happen when the snow falls. They say that world energy supplies are so precarious right now that any increase in demand could cause even bigger price spikes, mandatory rationing, and mass shutdowns of factories and businesses, “devastating European economies with a wave of unemployment, high prices, and in all likelihood public unrest and divisions between European nations.” That’s petty scary stuff. Some European factories have already stopped or reduced operations, and some countries have already instituted some energy conservation policies to try to preserve supplies in advance of the winter. The rubber won’t really meet the road, however, until the cold weather hits and energy demand increases in response.

So let’s all hope that the European winter is mild, and our friends overseas aren’t left to shiver in the cold and dark. But praying for warm weather isn’t exactly sound energy policy. What has happened in Europe should cause our government, and every government, to take a careful look at their energy policies and focus on making sure that energy supplies are secure. That means reducing dependence on unreliable energy sources–like Russia–and taking steps like building nuclear power plants and pipelines to provide domestic sources of energy that won’t be turned off when winter comes.

Fracking And Utility Bills

This week the Toledo Blade ran an interesting story about fracking — the word used to describe horizontal drilling and using pressurized water to break up shale formations and free natural gas and other fossil fuels — and its effect on the utility bills of Ohioans.

The gist of the story is that there are abundant supplies of natural gas due to fracking, and as a result Columbia Gas is charging its lowest amounts in years. The story estimates that, without fracking, the cost would be somewhere between 65 to 129 percent more. In a winter that’s been brutally cold, with higher natural gas usage as a result, the lower monthly bills are welcome indeed.

As the Blade story indicates, environmentalists are concerned about whether fracking will have an impact on water and its potential for causing earthquakes. My sense, however, is that most Ohioans are happy with how the development of the Utica Shale formation in eastern Ohio has proceeded. There’s no denying that the discovery of apparently vast natural gas and fossil fuel supplies deep underground has produced an enormous amount of economic activity in a formerly economically depressed part of the state, producing new jobs and causing lots of money from other places to be spent in the Buckeye State. If fracking also is lowering utility bills, and Ohioans make that connection, it will further increase the support for the entire fracking enterprise.

Fear Of Fracking

Many environmentalists have voiced concerns about the consequences of fracking.  Now they are joined by a billionaire Saudi prince — who is concerned for a different reason.

Fracking is the process by which deep underground rock formations are broken up to free trapped natural gas, oil, and other fossil fuels.  It has produced a nascent oil boom in eastern Ohio and other parts of the United States that are home to shale formations where the fossil fuels are found.

The Saudi prince, Alwaleed bin Talal, is worried because he thinks the increased oil and natural gas production that has been caused by fracking threatens the Saudi Kingdom’s economy, which is almost wholly dependent on oil production.  The outspoken prince is a bit of a rogue element in Saudi Arabia, but his point is irrefutable:  If demand from the United States declines due to the availability of domestic shale oil production, it will inevitably have an impact on suppliers.  Two OPEC countries, Nigeria and Algeria, have already seen a sharp decline in U.S. imports of their oil.

For years, America has talked about the importance of breaking its dependency on middle Eastern oil — a result that also would reduce the pressure on America’s deep involvement in all of the geopolitical issues that are found in that troubled region of the world.  America’s shale oil and natural gas reserves are believed to be enormous and, as Prince Talal notes, may allow us to achieve that goal.  As we address the issues surrounding oil shale production in our country, we need to keep that fact in mind.

Another Impending Benefit Of The Utica Shale

Eastern Ohio is enjoying an economic boom from the discovery of apparently enormous natural gas deposits in the Utica Shale formation, far underground.  The discovery not only has led to economic growth and lower unemployment rates — as well as the promise of less dependence on foreign sources of energy — but it also is likely to have a significant positive environmental impact.

The U.S. Energy Information Agency, a part of the Energy Department, said this month that total U.S. carbon dioxide emissions for the first four months of this year fell abruptly to the lowest level in 20 years.  CO2, of course, is one of the dreaded “greenhouse gases” that are blamed for “global warming.”  The drop in CO2 emissions is attributed to power plants switching from coal to cheap, and plentiful, natural gas.  The discovery of large natural gas deposits elsewhere in the U.S. has caused the price of natural gas to fall dramatically in recent years.  With the Utica Shale drilling coming on line, the surge in the supply of natural gas means that the price should stay low — even if the demand for natural gas increases.

As the linked story indicates, businesses pay attention to price, and when it comes to behavior modification good intentions about reducing greenhouse gases can’t hold a candle to lower prices.