Skip to main content

Energy Exports May Not Be Good

On May 17th, 2013, Joe Nocera of the New York Times wrote an editorial, Energy Exports Are Good!  In it he follows the classic paradigm of neoliberalism: Let the "markets" decide what will happen with natural gas and let us export it if someone so desires.

According to Wikipedia, neoliberalism in economics was originally coined in 1938 by the German scholar Alexander Rüstow at a colloquium that defined the concept of neoliberalism as “the priority of the price mechanism, the free enterprise, the system of competition and a strong and impartial state.” To be "neoliberal" meant that – in the name of liberalism – a modern economic policy was required.

So far so good, especially if everything can be traded over infinitely long times (centuries for us) with a perfectly smooth substitution of one resource for another and one product for another.  But this assumption does not hold for depletable resources, whose production does not adjust easily and instantaneously to demand.

I am always amused to see a plot like the one below, whether it refers to neoliberalism or some other simplistic, unrealistic concoction by economists.
A nice plot of linear demand and linear supply, with no delay and no saturation.  While this simplistic, static approach makes economics courses easier, it does not reflect the long-term reality of depletable resources.   Source: Wikipedia.

Judging from the birthday and birthplace of neoliberalism (Germany and Austria, 1938), would the "strong and impartial state" be expected to go to war to secure resources for the economy?  A year or two after 1938,  members of my family were put into concentration camps, became slave laborers, and were executed by the Nazi Germans and Soviets. In the leading Italian economic model, Fascism (from Latin fascio, a bundle or bouquet) was a synonym of seamless collaboration between corporations and state.

So let's look at Margaret Thatcher's United Kingdom (1979-1990) that pursued the neoliberal economic policy with gusto.  Here is the U.K.'s oil production, consumption and oil imports/exports until 2005:
Margaret Thatcher became the Conservative Party Prime Minister when the red and yellow curves crossed and was ousted by her party when they touched again. By the time U.K.'s North Sea production is over, U.K. will have produced at least 25 billion barrels of oil and exported roughly 6 billion barrels, or 25%.  The production and consumption curves crossed again in 2005.  You must be dying to learn what happened later. Image source: An OilDrum post by Euan Mearns, Oct 3, 2006.
Since you must be curious about what happened with U.K.'s oil exports after 2005, here is a recent update from the DOE's Energy Information Administration (EIA):
U.K's exports/imports through the year 2012.  Since 2005, U.K. has had to import ever more crude oil. Here two populations of reservoirs could be resolved with two Hubbert peaks. Source: EIA, accessed May 18, 2013.


From the data it follows that U.K. embarked on an aggressive field development and exported oil between 1980 and 2005.  The first peak in exports followed oil price of the day, but the second one occurred when oil price was very depressed.

Now imagine this: What would happen, if U.K. slowed down its production and did not export oil between 1990 and 2005?  I understand that this type of thinking is absolutely foreign to most everyone in the U.S. and would be dismissed as "socialistic talk."  Why think about future, when one can make a quick buck today?

Which brings me to Mr. Nocera's hot appeal to export each year one or two months worth of U.S. gas production.  Is this a wise idea?  Is it perhaps more profitable to use this gas to power a thriving steel and petrochemical industry?  Couldn't we export instead the high value added digital tool machines and complex industrial products, such as planes and cars? Shouldn't we be using the extra power from natural gas to mass produce solar photovoltaic panels and solar water heaters on most roofs in the U.S.?  Introduce U.S. to an early twentieth century in mass transit?  In short, shouldn't the U.S. have an industrial and social development policy, like Germany, Norway, or even China?

And as a sobriety check, here is what really happened with U.K.'s natural gas production and exports:
Natural gas production in U.K  The rapid production increase lasted for 12 years, followed by an equally steep decline. What you see here is a yet another classical Hubbert peak of production. Source: EIA, accessed May 18, 2013.
Natural gas exports/imports in U.K Since 2004, U.K. has become dependent on gas imports at an accelerating pace. Source: EIA, accessed May 18, 2013.

The neoliberal idea of exporting natural gas was good while the supply lasted, but today U.K. can barely replenish its stocks of natural gas by paying over US $10 per million BTU.  Of course, today Great Britain is dangerously close to a failed state and it's former glory will never be restored.

Now, do you want to compare the outcomes of the British neoliberal policies with the Norwegian brand of socialism?  Perhaps not, because this comparison is not kind to Margaret Thatcher and Company Limited.  Very limited it turned out, despite a jolly good little war in the Falklands.

P.S. Financial Times, UK gas supply six hours from running out in March, by Gill Plimmer and Guy Chazan, May 23, 2013:

"Britain came within six hours of running out of natural gas in March, according to a senior energy official, highlighting the risk of supply shortages amid declining domestic production and a growing reliance on imports. “We really only had six hours’ worth of gas left in storage as a buffer,” said Rob Hastings, director of energy and infrastructure at the Crown Estate, the property portfolio managed on behalf of the Queen. “If it had run any lower it would have meant . . . interruptions to supply.”"

P.S.P.S. 06/19/2013, from Rune Likvern, based upon BP SR 2013:

"The growing gap between consumption and production, UK imported fossil energy for an estimated US $ 35 - 40 Billion in 2012. I do not know of any other country that has experienced such a steep decline in energy production. From being a net energy exporter in 2003 to basing around 43% of its energy consumption on imports in 2012. UK’s energy production is now back to levels of late 60’s early 70’s."

Therefore, in nine years, UK has transitioned from a free market poster child that exports here and now whatever it has to offer, to a heavily indebted importer of crude oil, natural gas, and coal.  Let this be a  yet another warning for our darling manipulators of the media and public, and the incoherent, uneducated and rushed reporters.

Comments

  1. Thanks for this Pr, a small typo in Thatcher spelling.

    Otherwise any news on the Barnett shale, Texas University study ?

    Will somekind of estimate for U.S. shale gaz URR be done from it ?

    ReplyDelete
    Replies
    1. Oops. What was I thinking when I typed in P.M. Margaret Thatcher's name? Thank you.

      Delete
  2. Thank you Tad for making more clear some of the consequences of Reaganomics/Thatcherism/neoliberalism/whatever.

    That "socialist" bogeyman strategy sure has been effective.

    If intelligent discussion on anything spontaneously erupts, just say, "Socialism-Socialism-Socialism" really fast and everyone's minds go blank and they return to their regularly scheduled programming (i.e. meaningless cocktail party prattle).

    "Sell the commons today
    let tomorrow
    my grandkids pay "











    ReplyDelete

Post a Comment

I would like to learn what you are thinking about my posts and encourage you to share

Popular posts from this blog

Ascent of the Angry and Stupid

Scientifically speaking,  stupid  people harm themselves while also harming others. In addition, stupid people are irrational and erratic, and are very dangerous to others. After discussing the destructive role of the stupid in any society whatsoever, I will focus on the delicate interplay of actions of intelligent and helpless people, who in balance make or break a functioning democracy.  Unless things change fast in the US, we can kiss our democracy goodbye for decades. If you want to see how a virulent ascent of the stupid looks up close, and what implications it has for our fight against social injustice and climate change, please watch the brilliant " Don't Look Up " movie. Unvaccinated people demonstrating in Los Angeles. There are tens of millions of the raving mad and/or angry, stupid people in the US and other developed countries. Source: New York Times , 12/25/2021. I overlapped at UC Berkeley with Professor Carlo M. Cipolla for a decade, until his death in t

Confessions of a Petroleum Engineer and Ecologist

I just attended an SPE workshop, "Oil and Gas Technology for a Net-Zero World – Defining Our Grand Challenges for the Next Decade."  Of the 60 people in the audience, I knew 1/3, some very well.  It makes sense, because I have been an SPE member for 40 years, and a Distinguished Member for 20 years.  Last year, I received an SPE EOR/IOR Pioneer Award for my work at Shell and UC Berkeley on the thermal enhanced oil recovery processes that involved foams, and their upscaling to field operations. This was nice, because Shell recognized me as one of their best reservoir engineers, and in 1985 I received an internal Shell Recognition Award for the same work. But I am not a mere oil & gas reservoir engineer.  First and foremost, I am a chemical engineer and physicist, who has thought rigorously about the sustainability of human civilization , ecology and thermodynamics of industrial agriculture and large biofuel systems, as well as about the overall gross and net primary produc

Net Ecosystem Productivity is Zero on Planet Earth

In the last bog , I told you how the law of mass conservation governs the large-scale behavior of Earth's households - ecosystems - that must recycle all mass on average and export only low quality heat into the cold universe.  Now, I will give you a few useful definitions of cyclic processes, sustainability, and ecosystem productivity. Let me start from stating the obvious:  We live in a spaceship we cannot leave, a gorgeous blue, white and green planet Earth that takes us for a spin around her star, the Sun, each year. But this statement is imprecise. We really live on a vanishingly thin skin of the Earth, her ecosphere .   Think of this skin as of a thin delicate membrane, teaming with life and beauty, but incredibly fragile. We trample on this membrane and poison it.  Then we act surprised when it brakes and shrivels. Practically all life on the Earth exists between two concentric spheres defined by the mean Earth surface at the radial distance from the Earth's