Forget About the Environment: We’ve Found More Oil!

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Conventional wisdom has it that the United States is a declining producer of energy, and that we’re likely to need more imports unless we can work our way off of fossil fuels. But a recent New York Times article paints a different picture.

“In the last five years, the United States and Canada combined have become the fastest-growing sources of new oil supplies around the world, overtaking producers like Russia and Saudi Arabia,” the Times reported.

Will the U.S. become the new Middle East? And, if so, how has it happened? The short answer to question one is that it is now a distinct possibility we could become the world’s leading producer of oil and gas. As for how it happened, the one-word answer is, “technology.”

Through technological advances in exploration and drilling, we’ve been able to turn previously uneconomical oil fields into powerful new resources. These developments have included the ability to mine oil and gas from shale and from oil-laden sand fields, and new methods of drilling both underground and in open waters.

An example of the resurgence of American oil production is the Permian Basin in Texas, a formerly declining oil field that is now experiencing its greatest boom in three decades.

This new oil boom is almost entirely the result of advanced technologies that have allowed us to discover more oil and coax it out of the ground. In the Permian Basin that translates into pumping large quantities of water into nascent oil wells in order to drive out triple the prior yield; using “fracking” techniques developed by the natural gas industry; and drilling horizontally instead of vertically in order to extract oil that could not otherwise be found.

Meanwhile, due to the recession and more fuel-efficient vehicles, Americans are pumping less gas, bringing the country to the verge of energy independence without a surge in green energy solutions.

“Taken together,” the New York Times reported, “the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure American foreign policy, the economy and more.”

Ed Morse, head of global commodity research at Citigroup and a longtime energy analyst put it this way in a recent 92-page report called Energy 2020:

“The reduced vulnerability of North America — and the world market — to oil price spikes also has deep consequences geopolitically, including the reduced strategic importance to the U.S. of changes in oil- and natural gas-producing countries worldwide. Pressures towards isolationism in the U.S. will likely grow, with consequences for global stability that can only just begin to become understood.”

However, Duke Energy CEO Jim Rogers thinks total energy independence on the part of the U.S. is not only the wrong goal, but also unhelpful.

“In my judgment, energy independence is wrong question and wrong goal, because we live in an interdependent world,” he said at a New York Times energy conference. “We need to think about the development of energy systems and the evolution of new technologies in an interdependent way.”

T. Boone Pickens told the same conference that while energy independence is possible, it is not always in our best interest. In some cases, our trading partners for energy resources are good friends, such as Canada.

“I don’t think you want to be energy independent, because you want to stay connected to Canada,” he said. “We’ve got to work with them.”

The downside risk of all this fossil-fuel flavored energy independence is the cost to the environment of blasting so much carbon into the atmosphere. One clear result is an increase in greenhouse gases, believed to play a major role in global warming. In addition, the fracking process uses so much water that it is running some important desert aquifers dry.

But politicians, oil men and the general public have all shown a preference for short term solutions to gas and oil shortages over longer term, green oriented answers that might leave the planet better off but leave us thirsting for energy.  And for the time being, fossil fuels are gaining the high ground.