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The Bakken Oil Boom Will End Like Every Other ‘Gold Rush’
Figure 1: Map of the U.S. Bakken-Lodgepole Total Petroleum System (blue), five continuous assessment units (AU) (green), and one conventional assessment unit (yellow) (Source: USGS)
[This post by Derik Andreoli, Senior Analyst at Mercator International LLC, is republished with permission from The Oil Drum.]
In 2009, U.S. oil production began to climb after declining for 22 of the previous 23 years.
The shale oil production of the Bakken formation, which straddles the Montana-North Dakota border and stretches into Canada, has been a significant contributor to this temporary uptick in oil production.
The Bakken boom has inspired a number of prominent commentators to resurrect the energy independence meme. Daniel Yergin was first at bat, asserting in an essay published by The Wall Street Journal that rising prices and emerging technologies (especially hydraulic fracturing) will significantly drive up world liquid fuels production over the coming decade(s). Ultimately, Mr. Yergin argues that tight supplies lead to high fuel prices, and high fuel prices will bring previously inaccessible oil to the market. The trouble with this line of thinking is that high prices aren’t merely a symptom of the supply problem; high prices are the problem.
After Mr. Yergin stole first base through this apparently convincing display of contortionist logic, the next up to bat was Ed Crooks who recently penned an analysis piece for the Financial Times. In this piece, Mr. Crooks declares that “the growth in U.S. and Canadian production from new sources, coupled with curbs on demand as a result of more efficient use of fuel, is creating a realistic possibility that North America will be able to declare oil independence.”
Mr. Crooks thus ‘balances’ rising production from shale oil and Canadian tar sands against declining consumption, which he mistakenly chalks up to efficiency gains rather than the deleterious effects of the greatest recession since the Great Depression. Beyond this obvious blunder, Mr. Crooks manages an even greater and far more common gaffe by neglecting to integrate decline rates of mature fields into his analysis.
But in a game where the media is the referee and the public doesn’t know the rules, Mr. Crooks manages to get on base by knocking a foul ball into the bleachers. With Yergin on second and Crooks on first, Edward Luce steps up to plate and takes a swat at the energy independence meme, directing the ‘greens’ to look away as “America is entering a new age of plenty”. And while the greens looked away, Mr. Luce took a cheap shot at clean energy through an attack on the federal government’s support for the now bankrupt solar panel manufacturer, Solyndra. Luce thus willingly employs the logical fallacy of hasty generalization to sway his audience. Of course the Solyndra bankruptcy is no more generalizable to the solar energy industry than BP’s Macondo oil spill is to all offshore oil production, but in a game of marketing one-upmanship one should not expect a balanced and rigorous evaluation of the possibilities.
With the bases loaded and oil prices remaining stubbornly high as tensions in the Middle East and North Africa persist, the crowd is getting anxious. And the crowd should be anxious. After all, tight supplies and rising oil prices strain personal finances and threaten to send our fragile economy back into recession. It is, therefore, unsurprising that the public is as eager to consume the myth of everlasting abundance, as they are eager to consume these scarce resources.
While the Bakken boom offers a hopeful story in which American ingenuity and nature’s endless bounty emancipate us from energy oppression and dependence on evil and oppressive foreign dictators, musings of energy independence are premature, misguided, and misleading. The problem with the Bakken story as told by Crooks and others is that it lacks historical context. Referring to recent developments as an energy revolution implies that there are no lessons to be learned from history. But as Mark Twain put it, “history doesn’t repeat itself, but it does rhyme.”
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- DANIEL YERGIN: America’s New Energy Security: Thanks to new technology, the U.S. has become less d… (pjmedia.com)
- Why Bakken? (dailyfinance.com)
- The U.S.’s Oil Future – More Crude from Americas: Yergin (ibtimes.com)
- Time Lapse Video From International Space Station Captures Mystery City in North Dakota (indiancountrytodaymedianetwork.com)
- Bakken Shale Bursting with Oil, Opportunities (OXY, HES, MRO, EOG, BEXP, CLR, CXO, KOG, FST, SGY, WLL, AXAS, AREX, TPLM, RPC, TLLP) (247wallst.com)
- Don’t let Big Green stymie boom in energy jobs (energyindependenceforstates.com)
- The Irrational, Non-Economic Exuberance Underlying Hydraulic Fracturing (forbes.com)
REVEALED: The 29 Global Megabanks That Are Systemically Important And Too Big To Fail
The G20’s enforcement agency found that 29 banks globally are too big to fail.
It published a long-awaited list of “systemically important” banks Friday. Banks on the list will have to cooperate with regulations imposed by the agency as well as the Basel Committee of Banking Supervision.
Here are some of those new rules (via WSJ):
– By the end of 2012, all banks will have to map out a plan to unwind their businesses in the case of a collapse.
– By 2016 they have to hold more capital than other banks. They’ll be sorted into five different “buckets,” based on which they’ll be required to maintain 1%-3.5% more capital than less significant banks.
– By 2019, that capital requirement will be an added 3.5% on top of other regulations.
The list will be updated every November and the methodology to choose the banks will be reviewed every three years.
Click here to see which banks are too big to fail >
Related articles
- Global regulators publish list of too-big-to-fail banks (business.financialpost.com)
- Why the big banks aren’t sweating Bank Transfer Day (blogs.reuters.com)
- Here’s Your Official List of 29 ‘Too Big to Fail’ Banks [Banksters] (gawker.com)
- ICBA Statement on Conclusion of House-Senate Conference on the Financial Reform Bill (prweb.com)
- 2 Big 2 Fail (maxredline.typepad.com)
- Saturday, November 5th is Bank Transfer Day – Move Your Money Out of ‘Too Big to Fail’ (crooksandliars.com)
- ‘Too big to fail’ Barclays, RBS, Lloyds and HSBC will be forced to increase capital buffers (telegraph.co.uk)
- Megabanks may face new international rule (search.japantimes.co.jp)
Is Mexican Gulf Energy Production Recovering?
By Kevin Mooney on 9.16.11 @ 1:59PM
If a report in the Wall Street Journal is to be believed, energy development in The Gulf Of Mexico has staged a remarkable comeback in recent months. The Obama administration imposed a moratorium on deepwater oil and gas drilling last May in response to the BP oil rig explosion last year. The moratorium was lifted last October, but industry officials are convinced a “de-facto” moratorium remains in effect at the expense of the Gulf coast.
As the Pelican Institute for Public Policy has reported, the latest research shows that up to 20 oil rigs could be leaving the Gulf Coast, in addition to 11 that have already left, unless the feds get moving on the permitting process. It is difficult to see how this scenario translates into a recovery in the affected region. Nevertheless, this is how the WSJ report opens:
The Gulf of Mexico has staged a comeback as a source of oil for big energy companies, little more than a year after the Obama administration largely shut down drilling in the wake of the largest offshore oil spill in U.S. history…
The burst of activity comes as the government prepares to toughen its oversight of offshore drilling. On Wednesday, federal regulators probing the Deepwater Horizon disaster issued a report that recommended numerous changes.
Robert Bluey, who heads up the Heritage Foundation’s investigative journalism unit, has kept careful tabs on the regulatory policies Team Obama has aimed against the Gulf region. As Bluey has noted in his reports on the the Foundry, deepwater permits are down 71 percent from their historical monthly average of 5.8 permits per month. Shallow-water permitting have also fallen in past few weeks by 34 percent from the historical monthly average of 7.1 permits.
The WSJ report does not seem to square with reality and should be re-visited.
Bonner Cohen, a senior fellow with the National Center for Public Policy Research (NCPPR), has commented on economic fallout associated with the depleted rig fleet in the Gulf.
“Each rig that leaves the Gulf of Mexico taxes jobs and energy away from the U.S. and sends them overseas,” he observed. “The White House now wants Congress to pass a so-called jobs bill, when its own policies systemically destroy jobs. What’s more, the oil and gas in the Gulf region are real energy, not the phony energy of Solyndra, the solar-panel manufacturer and the recipient of a $535 million taxpayer-funded loan guarantee that went belly-up last week.”
Meanwhile, Sen. David Vitter (R-LA) has sent a letter to administration officials asking them to come clean the slow pace of drilling permits. He has also introduced a bill to audit federal subsidies for green jobs.
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- New Oil Finds Around the Globe: Will the U.S. Capitalize on Its Oil Resources? (mb50.wordpress.com)
- Obama Doesn’t Care About Creating Jobs (mb50.wordpress.com)
- Louisiana Remains on the Receiving End of Washington D.C.’s Worst Regulations (mb50.wordpress.com)
- US experts eye Cuba oil plans after BP spill (mb50.wordpress.com)
- Rigged For Failure (mb50.wordpress.com)
- Bernard L. Weinstein: US energy resources worth the investment (mb50.wordpress.com)