Wednesday, January 9, 2013

PERSPECTIVE: WHY THE NEW ENERGY SUPPY IS IMPORTANT!


This Blog will pick up where the last one left off.



At last the Media has caught on to the idea that the United States is up to its eyeballs with natural gas and oil supplies due to deep well drilling technology that has recently been demonstrated to be viable and environmentally safe. It has also suddenly become known that the cost of compressed natural gas (CNG) is significantly less than gasoline and diesel fuels and that it is being adopted by trucks and buses everywhere. And soon the public will learn that when we abandon the foolish idea of using corn and soy beans for automotive fuels, the price of foods will come down. Once the public becomes better informed, perhaps they will start to lean on their representatives to get off such senseless ideas as windmills, solar panels and using foods to substitute for transportation fuels, and instead get on with the use of our own low cost environmentally friendly natural gas to get our economy moving again. This “windfall” will not only result in low cost energy and lower food prices but it will strengthen the dollar and create a multitude of new high paying jobs. And if that is not enough, getting off foreign oil means that the United States could reap multibillion dollar cost savings by withdrawing its military commitment to the Middle East and let the Russians and the Chinese deal with the radical Muslims and their Arab Spring. What’s not to like?

In addition to methane, the main energy source, natural gas contains other hydrocarbons such as ethane, propane and butane which are attractive feed stocks for chemical plants. Shell Oil and Dow Chemical Company have just recently announced multi-billion dollar plants based on natural gas products. Normally, these chemical companies would obtain their feed stocks and energy sources from oil, and, in all probability, without this new low cost supply, these chemical and polymer producers would locate their new plants overseas. And there is another development which needs be noted. This new low cost energy source coupled with our innovative and rapidly developing digital technology is attracting manufacturing back into the United States. More on that subject will be in a future blog.

Now, you would think that the environmentalists would be wild about natural gas, because it produces about 50% less carbon dioxide than other fossil fuels. It also practically eliminates the production of toxic gases from the combustion of gasoline and diesel fuel. Finally, natural gas does not require a petrochemical refinery. Actually, environmentalists have been trying to kill refineries for years, and for the most part they have been successful. With the exception of two new refineries under construction out west, we haven’t built a new refinery in the United States in 35 years because of expensive environmental regulations and the NIMBY syndrome (Not In My back Yard).

Nevertheless, we can expect the “spoil sport” environmental activists to do everything they can to thwart the development and exploitation of this new drilling technology. However, it will be difficult for them because these new supplies of energy are being procured from privately held land. Drilling on public land, wildlife refuges or off-shore is not needed at this time. Nevertheless, we can expect the Obama Admistration to do everything within its power to regulate natural gas development claiming that fossil fuels are the cause of climate change, citing such examples as Sandy, Katrina and the large number of tornados.

Fortunately for us this energy windfall is being spear headed and financed by the big oil companies; consequently, this exciting development does not require new entrepreneurs who have to learn how to run businesses, raise capital and develop the US and export markets. Most importantly, it does not require the Federal Government to provide capital and subsidies to make it competitive as do wind, solar and bio energy sources.

The biggest advantage of this enormous new source of energy is that it will doubtless cause the GNP of the United States to grow at a huge rate. This, in turn, will produce large increases in Federal revenue, which in all probability, will cover the cost of the Medicar , Social Security and other entitlements that the voters will not permit their representatives to reduce or even touch.

This new source of energy will last more than 100 years, and if we believe that it will create a huge economic boom, then we should stop worrying about the problem with entitlements. Actually that problem will end in about thirty years anyway.

Here is why. The 80 million “boomers” are retiring at the rate of 10,000 per day and are in the final two or three decades of their lives, and the next generation is only half the size of the boomers. Therefore, it is clear that the entitlement problem will take care of itself without the government or anyone else doing anything about it.

What this tells us is that we should stop wasting time fretting about whether the Congress and our current President are hopelessly gridlocked. Instead, we should hope that they remain gridlocked so the private energy entrepreneurs can get the infrastructure in place to provide and transport the new low cost energy to us the consumers as fast as possible so that we can realize the large increase in GNP. All our representatives have to do is get out of the way.

The voters are not stupid; they consume energy and food, and most of them seek work, so we can expect them to support this development even while the Obama Administration tries to convince them that that this opportunity should be regulated so as to promote wind, solar, bio and other so-called clean energy ideas. Consequently, sooner or later they will be screaming for their representatives to get on board with this energy windfall.

Finally, the mantra of the Conservative Party should be this: Waste no time worrying about entitlements, do everything we can to capitalize on this “energy windfall” and speed us on a sensible path that will keep the United States the greatest country on the planet for the next one hundred years.