Category Archives: oil

ENERGY: it’s what’s for dinner

You’re probably just like me.

You go to the gas station, put in your credit card, start to fill up the tank, and immediately look away from the pump. You talk with folks near you. Fiddle with your keys. Sing. Work out the lyrics from “Someone Saved My Life Tonight“. ANYTHING to keep from letting the cost of today’s tank of gas to actually soak into your consciousness!!

………OK, maybe not just like me….

But: I’ll bet you’d like to pay less for gas, or at least feel better about WHY you’re paying so much, right? Wouldn’t you like to hear about the current energy situation from an industry expert, rather than from a beat reporter or (worse) a news anchor, whose only energy experience is buying extra Rayovacs on their way home?

Hugh Hewitt** currently has a special guest-blog on his website right now which addresses ENERGY. The author is Tim Dunn, CEO of CrownQuest Operating, one of the top oil producers in Texas.

Here’s a sample of Tim Dunn’s excellent first effort:

“The 5-Minute ENERGY Blog: Post 1” by Tim Dunn

Energy is to the economy what food is to a human.  You can’t get much more basic than the need to eat.  Energy provides the ability for humans to accomplish many times more than their own physical efforts.  It is energy that drives the machines that allows an American to be many times more productive than workers in non-industrial economies, from tractors to computers. 
The US economy needs Calories to burn for the same reason the human body needs Calories to burn: to accomplish work and activity, to generate heat and support life.  Impoverished people do not have sufficient Calories from food, so they suffer a lack of energy to work and might even die. 
 
So what is the outlook for “food” for our economy?  Are we headed for a subsistence diet of gruel and bread crust, or will we continue to eat beef and potatoes?
I would say “It depends.”  It depends on a number of factors.  But what I believe it depends on most is the political choices Americans make over the next dozen or so years.  And the primary question is “Who decides?”  Who will make energy choices for Americans?
If we decide as a country that policy experts in Washington DC should make decisions about energy, then I predict the bureaucracy economy in DC will be very fat and powerful, and the rest of the economy will get very thin and weak.  On the other hand, if we are able to retain our heritage of self-governance, and allow individual Americans to make their own choices in a free marketplace of ideas, businesses and consumer choices, then I think we will have a fit and prosperous economy for the indefinite future. 
And, of course, the bureaucrat economy will have to go on a diet.
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We are an advanced culture primarily because of energy. If you’re even a little curious about our country’s energy future, be sure to read all of his posts:
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**Bias Note: My wife and I have both been big Hugh Hewitt fans for years now. 

Host of a VERY entertaining radio show from California, Hewitt is also a practicing lawyer, a law professor at Chapman University, and a rabid Cleveland Browns fan (I try to not hold that last one against him). He also worked for almost 6 years in the Reagan administration.

If you’ve never heard him, check him out.

An Obliquity by any other name…

I just paid $4.05 per gallon to fill my car.

$4.05.

$71.00 for a tank of gas….and I drive a Camry, for goodness sake.

Regardless of where you live, you are paying a ridiculous amount for gasoline, and there appears no end in sight. Certainly not when President Genius sputters such inanities as “With only 2% of the world’s oil reserves, we just can’t drill our way to lower gas prices”.

This is pabulum, yet it persists.

I had as clients a couple of geologists whose job was coming up with the calculations for where to drill for oil and natural gas. Great guys. They were of one mind on this point: the US has as many or more natural resources per square mile of territory than any other country in the world. We are blessed with them. The problem is that we deny to ourselves their very existence and then lie about the reason.

Take the President’s words above. Only 2%? Really? By saying that, he is being deliberately duplicitous (read as: he’s fibbing).

By “reserves”, he undoubtedly is referring to “proved reserves”, which only counts oil that companies are currently drilling for in existing fields.

To quote the website oilprice.com:

How much recoverable oil does the U.S. have in addition to the 22.3 billion Obama had in mind? Start with the Green River Formationin Wyoming: 1.4 trillion barrels—sixty-two times as much as Obama counts.

After Green River, it’s almost embarrassing to count other sources: 86 billion on the outer continental shelf; 24 billion in the lower 48; 2 billion on Alaska’s north slope; 19 billion in Utah tar sands; 12 billion in ANWR. Then add in oil shale: 800 billion just in Wyoming and neighboring states. As IBD sums it up: “When you include oil shale, the U.S. has 1.4 trillion barrels of technically recoverable oil, according to the Institute for Energy Research, enough to meet all U.S. oil needs for about the next 200 years, without any imports.”

They even include a handy-dandy graph to depict more accurately what our actual energy situation looks like:

Newsflash to President Obama: bigger available supply = lower price.

“But, but, but, ….oil is priced on the world market”, they say, which is certainly true. But when more gas, or just the promise of more gas, enters the market, that changes the equation drastically. Then again, that is what the futures market does. It looks at what the energy demands and supply might look like….in the future. And, since we can’t control what the Middle East does with their oil supply, why wouldn’t we try to insure against any potential disruption by maximizing ours?

Additionally, if we are developing more resources here, producers will look to sell it where they can make the most profit. Given that there is one worldwide price and assuming that there is demand for it in the US (a relatively safe assumption), they stand to make more money selling as much as possible locally, rather than, say, in China.

In honor of my old algebra teacher:

faster delivery + cheaper transport = more profit.

Quod erat demonstrandum.

Obama knows all this, of course. He is quite aware that he is giving a deceptive view of our energy capabilities. The probable answer to the question, “why??” is that he wants to give the impression of scarcity in order to make the case for wind, solar and other largely unviable means of energy.

Paradoxically, he has also made the following claim:

Last year, American oil production reached its highest level since 2003. Let me repeat that. Our oil production reached its highest level in seven years.”

As I try to teach my boys, when you only tell part of the truth, it still amounts to a lie.

From freeenterprise.com:

The president did not paint an accurate picture of America’s energy reality on oil. Last year’s increase in domestic oil production is entirely a product of decisions to encourage new production that were made several years ago, in previous Administrations. The reduction in the percentage of oil we import occurred due to these previously-approved permits, as well as lower U.S. oil demand due to our weak economy.

The next big thing in energy will eventually come around and when it does, I’ll be one of the first in line. Until that day and then, only if it can compete on the open market, not developing as much of own energy as humanly possible makes as much sense as playing a hockey game where you only play defense and never take a shot:

you can’t win.

You can only, inevitably, lose.