Unconventional Sources of Energy


Two Views on the Coming Age of Unconventionals: Final Exam Essay

These are assignments that I have turned in for my TECH 4310 Future of Energy and Environment class, these are my own thoughts and you may not take them without citing them. I will not post them all, but a majority of them.

Instructions:

Many of the reports and forecasts that we covered this semester focused on the transition from conventional to unconventional fuel supplies – particularly around shale natural gas and oil (shale; tar sands; et al).  This transition is gradual and dynamic.  It is filled with uncertainty and a diverse set of opinions on the risks and rewards.

Take both perspectives on the transition to unconventionals.  Describe two lenses – that of the optimist (‘bull’) and cautious (‘bear’) perspective.  You should include angles on resources, politics, business practices, local communities, environmental impacts, economic or industrial sector benefits, impact on geopolitics, et al.  You should ‘describe, not defend’ both perspectives on unconventionals!  I am not looking for you to take a position – but to show an understanding of complex issues around unconventional fuels and the future of energy and the environment. Even if you think unconventionals are the end of times – I need to see your ability to describe the opposite perspective:

  1.  The Bull* Perspective (Several paragraphs)
    (*Bull is a common term used in Wall Street financial markets – meaning confident to charge ahead.  So this is the optimistic angle in favor of embracing unconventional)

unemployWe should be using every single resource at our disposal. Politically, everyone benefits from “new” energy, unconventional oil being the start. States often get funding for new ways of extracting oil. Local communities greatly benefit from increased energy activity on their property and people in the community are paid well for their land use rights. This boosts the local economy, creates jobs, and helps real people. According to the Bureau of Labor and Statistics, “unemployment rate in the “shale counties” counties fell by 9.8 percentage points, which represents a 66 percent decline in total unemployment since 2010” (Stewart, “Ohio Shale Development Drives Down State Unemployment”).

Sufficient safeguards are in place to ensure that unconventional oil is no more dangerous than conventional oil. Furthermore, drilling for

fuelswitch

unconventional oil reduces dependence on foreign oil, reducing the impact it has on our national economy.

Environmental costs must be seen: the transition to cleaner fuels is a necessity that must happen immediately. If that were to happen, and all power plants switch to natural gas as opposed to coal, we would be polluting billions of metric tons of CO2 less than we are now. 1,713 million metric tons of CO2 are emitted by coal for electricity related uses, and according to the EIA, “Substitution of natural gas and renewable energy for coal in the electric power sector has contributed to the decline in carbon intensity of the energy mix since 2008.” (“U.S. Energy Information Administration – EIA – Independent Statistics and Analysis”). This alone is enough to promote the switch from coal as quickly as possible.

Charging ahead and using unconventional sources of oil and gas is a necessity, the coal industry is about to have a wakeup call when it comes to regulation on carbon emissions and a possible tax. This would be like the fine for not having health insurance. The fine itself costs much less than paying for insurance, but without health insurance, when a discontinuity occurs in your life, say a major car accident, you would be paying an arm and a leg (maybe literally, you never know); the same principle applies to car insurance as well, but the government has set regulations in place to ensure that you cannot register your vehicle without proof of insurance. The whole point of switching to natural gas and away from coal is akin to buying health insurance – do it now, and no fine can be levied, and if a Carbon Tax is ever passed, the company will be ahead of the industry. According to EIA projections, natural gas is expected to increase nearly 30% by 2025 (“Coal Facts: Fact Sheet”). Looking at the last 10 years of U.S. Natural Gas Prices gives a good indicator especially when I compared the UNG data to the USO data from NASDAQ (interactive chart). I noticed a quite pronounced trend with oil prices, every time the price goes up, there seems to be more oil in the market, with one exception: 2008. This is a prime example of how speculation can create false trends, the vast majority of these companies never actually had possession of the oil they were trading. Essentially they were trading “paper barrels” for real money.

In the following figure, we see a red horizontal line drawn across the price of oil, and for some odd reason the market failed to follow simple market trends, supply actually increased, the market was stable based on historical volatility. So what caused the price increase? Rampant speculation in the oil futures market. If the Speculation Crisis hadn’t happened, the price would likely have followed the trend of rising and falling, but not at a rate of $50 in the span of months. The ensuing drop between June 2008 to December of 2008 would not have caused as much damage to the US and global economy had proper regulations and checks been in place. The oil market effected every other fossil fuel based energy source, while it appears that the prices for natural gas are, overall, more stable than oil markets due to fewer dramatic highs and lows.

nasdaq1

 

 

“Coal prices are projected to rise 19 percent over the same period [2014 to 2025].” (“Coal Facts: Fact Sheet”). Imagine, if you will, the natrual gas market and how it might look: the solid white lines show periods where the rate of price changes drastically. Everything that is “boxy” is speculative, dashed lines are an attempt to guess the future market. In 2024, the world population is expected to reach 8 billion, and the red boxy line is 2040. Once 2024 occurs, I placed four scenarios of where the market could go, red being the highest increase as everyone in the world is using natural gas, the white represents a future where a majority of the world relies on natural gas for at least 50% of its power. The green line is, hopefully, where the market might end up if sustainable energy has increased its share of the energy mix while the purple boxy line signals the death nail for the natural gas market, and the presence of a full transisition away from fossil fuels to sustainable energy – this is highly unlikely – but highly desirable (“Coal Facts: Fact Sheet”). If we act quickly enough, we could see a large portion of our energy mix coming from renewables in the near future. This means adopting the newest nanotechnology invented, every potential avenue to increase the efficiency and emission issues that we are sure to face in the coming decades. President Obama puts it elloquently, “Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.”nasdaq2

 

2. The Bear* Perspective (Several paragraphs)

(*Bear is the opposite term – used to describe people who sit back and wait (hibernate) for the bad season of change and volatility to end.  So this the less optimistic – more cautious or critical perspective)

Unconventional oil, like tar sands, have yet to prove themselves as a cost effective or efficient way of retrieving fossil fuels. Shale gas has become a major boost for the energy industry, with fracking showing that it is a proven technology, and it is very efficient at enhancing the flow of previously trapped gas and other fluids out of the ground. While the technology has been around for 60 years, horizontal hydraulic fracturing has been around for less than 25 years, with unknown long-term consequences or problems that may occur (Shellenberger, “Where the Shale Gas Revolution Came From — Government’s Role in the Development of Hydraulic Fracturing in Shale”). There are still too many questions and not enough answers that are believable and honest, and economically sound.hype

 

 

Technology allowed us to transition from coal to natural gas, just as technology brought us from fire to coal, and from whale oil to petroleum. (Shellenberger, “Lessons from the Shale Revolution — A Report on the Conference Proceedings”). It is necessary in order to move the energy sector towards a cleaner burning fuel. When considering where the nanotechnology industry is – the innovation stage – if we wait a few years we will have much better technology and not have to spend excess money on today’s technology in addition to the cost of the future technology. 

The issue remains politically volatile as the environmental impacts have not been fully seen yet. There have been studies conducted by the University of Texas at Austin that have linked the disposal of fracking fluids to increased earthquake activity (Kelly, “How Oil and Gas Disposal Wells Can Cause Earthquakes”). We don’t have vast regulations on the use or extraction of unconventional oil, and any physical damage to land, property, or people could lead to problems that we cannot even conceive. According to Art McGarr at the USGS Earthquake Science Center, “With time, as an injection activity continues, so will the seismic hazard as measured by the maximum magnitude” (Kelly, “How Oil and Gas Disposal Wells Can Cause Earthquakes”). Essentially, the topic of the energy industry is a toxic hot potato that no one wants to be holding when it explodes, but the benefits of unconventional oil mean that we have a larger supply of energy resources. Unconventional oil could be a solution to energy issues and market instability, but it could be a bubble waiting to burst or it could be a sign of stable economic growth and lucrative investment opportunity; we don’t know which one it is.

Besides the market uncertainty, there are always advancements in technology that vastly improve our standard of living and increase everyone’s average lifespan, so why not wait for that to occur? Nanotechnology is rapidly becoming one of the most promising industries, and it will be one that changes every other industry, just like the advent of plastic did.

Resources:

Stewart, J. (2015, January 20). Ohio Shale Development Drives Down State Unemployment. Retrieved December 14, 2015, from http://energyindepth.org/ohio/ohio-shale-development-drives-down-state-unemployment/

U.S. Energy Information Administration – EIA – Independent Statistics and Analysis. (n.d.). Retrieved December 14, 2015, from https://www.eia.gov/environment/emissions/carbon/

Coal Facts: Fact Sheet. (2015, September 9). Retrieved December 12, 2015, from http://www.americaspower.org/wp-content/uploads/2015/09/Coal_Facts_March_2015.pdf

United States Natural Gas Fund LP (UNG) Interactive Chart. (2015, December 12). Retrieved December 12, 2015, from http://www.nasdaq.com/symbol/ung/interactive-chart

Shellenberger, M., King, L., & Nordhaus, T. (2015, August 10). Lessons from the Shale Revolution — A Report on the Conference Proceedings. Retrieved December 13, 2015, from http://thebreakthrough.org/index.php/issues/natural-gas/lessons-from-the-shale-revolution

Shellenberger, M., King, L., & Nordhaus, T. Where the Shale Gas Revolution Came From — Government’s Role in the Development of Hydraulic Fracturing in Shale. (2012, May 1). Retrieved December 13, 2015, from http://thebreakthrough.org/index.php/programs/energy-and-climate/where-the-shale-gas-revolution-came-from/

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