The Impact of Shale Gas Technology on Geopolitics

Dr. Daniel Fine of MIT discusses how new technology in extracting gas will impact geopolitics and the environment

Dr. Daniel Fine of the Mining and Minerals Resources Institute at MIT addressed Fletcher students at a talk sponsored by the International Security Studies Program and offered his insights into how the development of new technology will allow the United States to tap vast, previously inaccessible, resources of natural gas that will impact everything from the price of gasoline to the ability of Chinese companies to buy equity in Russian natural gas fields.

The United States has a monopoly on “hydro-fracing” technology. The technology, short for hydraulic fracturing, releases natural gas trapped in shale deposits by injecting the deposits with high-pressure water mixed with sand and small amounts of chemical additives.

According to Dr. Fine, the “cloud over gas” used to be “do we have enough gas?” In 2003, Federal Reserve Chairman Alan Greenspan declared that the United States did not have enough natural gas, and that it would be necessary to import liquid natural gas (LNG). This, said Dr. Fine, was clearly a mistake in the light of the new hydro-facing technology, not only because importing LNG poses a security risk to the United States, but because tapping natural gas from shale represents an economic “bonanza” in “the most [economically] repressed parts of the country:” western New York, western Pennsylvania and West Virginia, areas which suffer from high rates of unemployment, and are estimated to host 490 trillion cubic feet of natural gas. The thousands of jobs that could be created in these areas could stand in the way of President Obama’s pursuit of subsidies for renewable energy.

For more of this excellent article go to —

http://fletcher.tufts.edu/news/2010/04/features/fine.shtml

Once again another facinating article from Dr. Daniel Fine of M.I.T on Energy Security. I recommend it an excellent read.

Fletcher Features

Energy Security and the Regulation Imperative in a New Economic Era

Did the economic crisis stabilize oil prices? What is the future of energy security? Has China bypassed the United States in the green energy revolution? How will the global community approach the “fourth corridor” pipeline in relation to Iranian power and Russian resurgence?

Dr. Daniel Fine, research associate at the Massachusetts Institute of Technology’s Mining and Minerals Resources Institute, addressed a diverse set of energy-related questions at The Fletcher School on September 15. The presentation was part of the International Security Studies Program Global Speaker Series.

Dr. Fine indicated that Saudi Arabia views the current price of oil, roughly $70-75 per barrel, as reflecting a price that is both fair and natural. The 2007-2008 price spike, which increased the per barrel price 220% over its 2005 level, was accompanied by a mere 2.5% increase in consumption. According to Dr. Fine, this undermines the oft-cited argument that consumption spikes drive price increases.

The real story of runaway oil prices, Dr. Fine said, lies in the enormous amount of available credit in the 2007-2008, which allowed speculators to buy and hold massive reserves, disturbing traditional forces of supply and demand. Combined with a global finance system that neglected deposits and encouraged rampant buying and a lack of regulation, this perfect storm brought the financial world to its knees in September 2008.

As the global economy shows signs of recovery, Dr. Fine urged the audience to ignore speculators. So-called “geopolitical analysts” on major news shows, he said, are often self-interested frauds with no actual training in geopolitics, serving only to promote a product (oil, gas, or energy) and make faulty predictions.

In the framework of energy security, Dr. Fine cited President Obama’s speeches in Cairo and on Wall Street, as evidence of the administration’s movement away from hard power “oil politics” and toward Joseph Nye’s conception of soft power. Dr. Fine cited President Obama’s Cairo speech as the backbone of a new regional policy in which the United States will move away from energy independence and toward energy interdependence, working alongside the global community and with regulators to ensure transparency.

The new geopolitics, Dr. Fine noted, focus on the location of and environment that surrounds oil supplies. He indicated that this symbolizes a shift from “great salesmanship” to true political geography with an associated acknowledgement of the reality of sector specific risk. In this context, Dr. Fine discussed the “fourth corridor” pipeline route, popularly known as Nabucco, which will stretch across the Caspian Sea to Austria. Turkey’s attempts to claim 15% of the overall revenue would, if successful, render the proposed pipeline uneconomic, while the tumult in Georgia poses enormous political risk to the project. Russia, which holds a virtual monopoly on European natural gas supply and is dabbling anew in great power politics, is vehemently opposed to Nabucco. This is one of the reasons, Dr. Fine stressed, that Russia does not want to see regime change in Iran; the current anti-Western hard line ensures Iran’s illegitimacy in the West and thus prevents Iranian oil sales to Western powers.

Dr. Fine also touched on China and its crucial coal factor. China will inevitability decline the carbon emissions cap to be proposed at COP15, and India, along with other developing powers, will follow suit in rejecting emissions caps. But Dr. Fine argued that China’s emphasis on carbon capture synchronization, or CCS, demonstrates its relative advantage over the West in certain green energy issues.

Dr. Fine concluded by citing President Obama’s recent hard-line regulation speech on Wall Street as an outline of future policy. If regulation fails, Dr. Fine indicated it is likely that a pricing bubble will return in concert with a buying surge. But with regulation, and with stringent enforcement by both the U.S. and Europe, a permanent cap on oil prices can be established that will maintain transparency and coincide with the fair and natural price.

Elise Crane, F11 ]]> http://www.redstate.com/redwill/2010/02/17/energy-security-and-the-regulation-imperative-in-a-new-economic-era/ This article is from the New Mexico Center for Energy Policy.

It is a brilliant piece of analysis on cap and trade by a national expert on Energy issues which should be read by all…

The author examines the legislative background and process of cap and trade and why Nuclear Energy should be included in any final Bill…

Cap and Trade Changing Everything

The questions below concern the discussion by Panel 2: “Renewable Energy and Crisis, Cost and Carbon.” Each question was submitted by attendees of the 2009 Energy Conference.

Q: Do you favor a Carbon Tax or carbon Cap & Trade? Since carbon Cap & Trade is fertile ground for abuse and a huge bureaucracy to support it, how would it be imposed? Europe imposed Cap & Trade and it was rife with fraud and failed.

A: I favor carbon Cap & Trade with the condition that offsets are provided. This allows investment in low or no-carbon emissions projects, e.g., reforestation and landfill methane mitigation. If an oil company invests in such ventures and they are effective in offsetting its carbon emissions from extraction or refining, then there is clearly a business outcome and an avoidance of GHG status quo output.  A second condition is that the Federal government establish regulatory reform that would limit speculation and manipulation of the price of carbon dioxide. Senator Bingaman has moved in this direction with provisions for government intervention as a seller of credit or allowances if price volatility occurs and threatens the sustainability of trading. Dr. Daniel Fine, NMCEP Research Associate at New Mexico Tech

Recently, Rep Mike Conaway intimated in an article in the Midland-Reporter (Permian Basin Oil Report- Sunday – April 12, 2009 -  page 4F). He stated that the “Cap and Trade system is mentioned that could be very negative for Texas” He went on to say that higher electricity costs could cost individual families (an average family) $3100 a year. Where will the average family come up with the cash to do this? And if that is true for Texas, what would be the case for NM?

A: The number of $3100 per family per year as a cost of cap & trade depends on the auction or free distribution to the utility industry of carbon credits.  Following the conference, the utility would be given free 35% of the total of emissions (cap).  This is pending action by the U.S. Senate.  It, alone, reduces the $3100 cost significantly. Dr. Daniel Fine, NMCEP Research Associate at New Mexico Tech

Q: Can Cap & Trade be structured so that tracking and accountability required of Cap & Trade does NOT suck all the benefits out of developing new energy systems? Explain how.

For more q&A from the New Mexico Center for Energy Policy go to–>http://nmcep.nmt.edu/index.php/2009-Energy-Conference/2009-conference-q-a-group-2.html