Somehow I missed this, but the Wall Street Journal had an op-ed on natural gas on Monday. Amy Myers Jaffe makes a few of the same points I made yesterday, but she also adds a few more. Jaffe argues that increased use of natural gas will make it easier to subsidize sustainable sources and will have a positive impact on geopolitics.
Not only will the shale discoveries prevent a cartel from forming, but the petro-states will lose lots of the muscle they now have in world affairs, as customers over time cut them loose and turn to cheap fuel produced closer to home.
The shale boom also is likely to upend the economics of renewable energy. It may be a lot harder to persuade people to adopt green power that needs heavy subsidies when there’s a cheap, plentiful fuel out there that’s a lot cleaner than coal, even if gas isn’t as politically popular as wind or solar.
It’s a good article and well worth reading. I have a small issue with her assertion about our trade deficit. There’s too much hand-wringing about that statistic, but in terms of energy sources it would be wise to produce much of our own natural gas.
The Deepwater Horizon oil spill in the Gulf of Mexico has many people wondering what to do about the United States’ energy policy. As gas prices have increased over the last decade many people have wanted the United States to drill for more oil. The idea of drilling on our own soil is a very populist one. The problem is that without any more refineries it doesn’t matter how much or where we drill. Over the past 30 years the United States has quit building refineries. These refineries are at maximum output and cannot produce enough gas to adequately meet demand. That’s where the bottleneck exists today.
At this stage it doesn’t make sense to build a wave of new refineries. It can take up to a decade to get a refinery built, and it’s over 15 years too late to do it now. Technological advances in battery technology and fuel efficiency should offset the need for more refineries. If necessary, higher taxes on gas could also discourage people from driving as much, but that doesn’t reduce the risk of disasters like the Gulf spill. Is it really time to find alternatives to crude oil?
What are the alternatives? There are no viable alternatives to fuel automobiles. Subsidized government research isn’t the solution. The nation is going bankrupt already. There’s a free market incentive to find alternatives. The government isn’t going to make the process go any faster. At this stage it would be foolish to change the way cars are fueled. The infrastructure costs alone to make such a change would be enormous. The risk of environmental damage doesn’t outweigh the economic advantages of oil. The other option for cars is natural gas, but natural gas is better suited for power plants. My ideas about nuclear power have shifted over the last few months. I no longer believe that nuclear power is a viable solution for power plants.
Cato Institute energy analyst Jerry Taylor set me straight. Yes, the waste is manageable, he says, but affordable nuclear power is a Republican energy myth: “Take a Republican speech on energy and cross out nuclear, replace with wind and solar…and you’ve got a Nancy Pelosi speech on energy. Exact same thing.”
Even if Greenpeace et al stopped their ignorant obstructionism, says Taylor, new nuclear plants are “ just too expensive. The lifetime cost of building and operating is about three times more than coal-fired.” The Government Accountability Office and the CBO both recognize this. They peg the chance of default on a nuclear investment at 50 percent. Likewise, investors recognize the risk. They refuse to invest in nuclear unless the government guarantees every penny of the loan.
Politicians love to talk about wind and solar, but there’s a lot of work to be done before these ideas are anything other than eco-fantasy. Renewable sources of energy do not exist. Wind and solar are too expensive for large-scale use and wouldn’t exist at all without state subsidies. Natural gas is abundant in the United States. We should be moving toward building more power plants that utilize the resource. Plus, it’s cleaner than coal, nuclear and oil. Natural gas is really the most practical solution. However, there’s nothing practical about government or people in general.
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