E. Thomas McClanahan: Sudden U.S. energy abundance a testament to human ingenuity

By E. Thomas McClanahan

The Kansas City Star

Published: Thursday, Nov. 22 2012 12:00 a.m. MST

In this Tuesday, March 6, 2012, file photo taken with a long exposure, a pumping unit sucks oil from the ground near Greensburg, Kan. The United States will become the world's largest oil producer by around 2020, temporarily overtaking Saudi Arabia, as new exploration technologies help find more resources, the International Energy Agency forecast on Monday, Nov. 12, 2012.

Charlie Riedel, ASSOCIATED PRESS

Enlarge photo»

Four decades ago, the Arab oil embargo consigned Americans to gas lines. Odd-even rationing became routine, and everyone with a passing interest in energy policy heard regular predictions that the planet was nearing "peak oil."

We've been told forever that we're "running out of resources," that we're facing a future of shrinking options, that we'd better change our ways and oh, by the way, our friends in the green movement will tell us exactly how our ways must be changed.

Which is why this month, the greens no doubt reacted in horror at the International Energy Agency's latest forecast on oil production.

Forget about peak oil. What the future portends is energy abundance. Within eight years, the IEA says, the United States will overtake Saudi Arabia as the planet's largest oil producer. All those predictions about running out? The ever-gloomy greens ignored the most important resource-production factor of all: human ingenuity.

New drilling techniques involving hydraulic fracking have produced a gusher of oil and natural gas from shale formations in several states including Kansas, but mainly in Texas, North Dakota, Ohio and Pennsylvania. The boom has added tens of thousands of new jobs and more revenue for state, local and federal government.

True, the IEA's prediction could be too optimistic, just as the environmental-disaster scenarios of the last 40 years have been too pessimistic. And one risk is that the Obama administration will do everything in its power to curb the new drilling techniques, denying much of this new bounty to the nation.

Yet while there's no way of knowing how long production can increase at the current exponential rate, the new oil and gas is already creating geopolitical waves.

"The big thing is a change in the dynamic," said economist Chris Kuehl of Kansas City, Kan.-based Armada Corporate Intelligence. "Back in the embargo days, OPEC was responsible for about 70 percent of world oil. I think OPEC is now supplying 35 percent globally. They still have a role to play and the Saudis can always ramp up production. But now it's harder for them to throw their weight around."

With the nation's oil-import bill falling from 60 percent of U.S. energy demand in 2005 to nearly 40 percent, there's a lot less fear about embargoes or arbitrary price increases imposed by malodorous regimes. "The Irans and Venezuelas," says Kuehl, "are almost becoming nonentities when it comes to oil."

For those concerned about climate change, the shale revolution also brought unexpected benefits in the form of lower carbon emissions. Since 2008, the use of coal in U.S. power generation has dropped from 50 percent to about 34 percent, while the share of natural gas, a cleaner-burning fuel, has risen to almost the same level. The nation's CO emissions have dropped to levels not seen since 1991.

Naturally, some greens see in the shale revolution cause for lamentation. Economist Frank Ackerman, writing at a blog called Triple Crisis, called fracking a "disaster in the making."

Greens worry about the threat to ground water or the release of methane. While these are real concerns, I'm betting the attendant problems will fall far short of the potential catastrophe some predict. To me, that seems a reasonable bet, given the apocalyptic hogwash environmentalists have put out for the last 40 years.

Let's recognize that there aren't any environmentally cost-free ways to produce energy. And while the shale revolution entails risk, the risks must be balanced against its considerable benefits.

If the trend holds, a lot more Americans will have jobs, the nation will become an energy superpower and the Middle East will drop several notches on Washington's priority list. The IEA energy forecast is excellent news in a period of seemingly endless economic malaise.

E. Thomas McClanahan is a member of the Kansas City Star editorial board. Email: mcclanahan@kcstar.com.

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