Feb 8, 2014

Who Needs High Oil Prices?

Click on the image to see it larger.

This chart shows what oil prices are necessary to sustain different types of crude production. So, for instance, countries in the Middle East and North Africa can keep pumping out oil at a profit even when prices drop to $30 a barrel.

It's a different story in the United States, however. Production of "light tight oil," like that in North Dakota and Texas, typically requires higher prices (between $50 a barrel and $100 a barrel).

The flip side, however, is that many OPEC countries need high prices to sustain the social spending they've ramped up in recent years. By some estimates, Saudi Arabia needs oil prices to stay at about $82 a barrel to maintain its current budget. Iraq needs prices around $104 per barrel. Russia's "break-even" point might be even higher. So there are a lot of nations that would actually prefer to keep prices high.

The above is excerpted from an article in the Washington Post entitled, How the Oil Boom Could Change U.S. Foreign Policy.

Feb 7, 2014

9 Myths About Fracking

The following list is adapted from Phelim McAleer's Ten Big Fat Lies About Fracking. McAleer is an Irish filmmaker based in America whose pro-fracking movie FrackNation is described by the New York Times as "meticulously researched and provocative."

Fracking has gotten a lot of bad press, of course. But like everything else, there is another side to the story that should be included in our thinking about it. As we've already seen (here), at least some of the bad press has been generated by an OPEC nation with a good reason to stop American fracking (their own self-interest). Anyway, read the list and follow the links and let us know what you think. Here is the fracking myths list:

1. Everyone hates fracking.

From news coverage, you would think that everyone in America hates fracking. Even the name sounds awful. Who could support such a terrible practice?

Well, it turns out that just about everyone who lives with it loves it.

Dimock, Pennsylvania is one place where all journalists reported that everyone hates fracking. Yes, there were 11 families in the village involved in a very lucrative lawsuit with an oil-and-gas company, and the journalists always interviewed them. But they completely ignored a petition signed by 1,500 people in the community who said their water was fine and had not been affected by fracking. What is 11 out of 1,500? Less than 1%. It’s the 99% who support fracking.

There is one other group that is opposed to fracking in Pennsylvania — the New York elite. This coalition of grumpy hipsters and celebrities have holiday homes in Pennsylvania, or they’re concerned that if a new industry brings wealth and progress to Pennsylvania then the "traditional" (read poor) way of life there will be destroyed.

So once or twice a year, the likes of Mark Ruffalo, Susan Sarandon and Yoko Ono get bussed in from the city to meet disgruntled locals, and then are chauffeured back to their gas-heated homes after another day of successfully blocking natural-gas development.

If you want proof positive that communities love fracking, look no further than the ballot box. Consider this U.S. Businessweek report on the 2012 election: "Anti-fracking candidates in the Southern Tier [New York] were beaten up and down the ballot after intense campaigns, some of which were framed as referendums on shale-gas development."

At least 20 anti-fracking candidates were rejected by New York voters (New York is supposed to be the heartland of anti-fracking sentiment). But hey, keep protesting, fracktivists — after all, democracy is for the little people, and you can walk all over them on your way to your next starry TV interview about the ‘evils’ of fracking.

2. Fracking is brand new and untested.

Pop quiz: how long has fracking been around? Here are your choices:

a) Since 2010
b) Since 1990
c) Since 1975
d) Since 1960

Sorry, you’re wrong. Trick question. The first fracked well was in 1947! And more than one million wells have been fracked in the U.S. since then (2.5 million worldwide). In terms of industrial processes, it doesn’t get much older or more thoroughly tested than fracking.

3. Fracking makes your water flammable.

No myth about fracking is more widely believed than this one. It was popularized by Josh Fox in his HBO-funded documentary, Gasland. In it he shows a man who can light his tap water on fire, supposedly because of fracking.

I asked Josh about reports that some people could light their water before fracking occurred. He didn’t like this question.

He eventually admitted that he knew people could light their tap water on fire decades before fracking ever started but chose not to include this fact in his documentary because "it wasn’t relevant."

There are three places in the U.S. called "Burning Springs," and there are historical records of people lighting their water since the 1600s.

4. Fracking contaminates drinking water.

If fracking doesn’t make your water flammable, it must at least contaminate it with dangerous chemicals, right?

Not according to Lisa Jackson, the former head of the U.S. Environmental Protection Agency (EPA) and no friend to big business. She testified before Congress that there have been zero proven cases of water contamination due to fracking.

That’s right — one million fracked wells later, there are no examples of contaminated water anywhere. Zero.

5. Fracking uses a lot of dangerous chemicals.

Standard fracking fluid is 98.5% water, 1% sand, and 0.5% chemical additives. Some of these additives are also used in making ice cream! Colorado’s Democratic governor, John Hickenlooper, drank fracking fluid to prove its safety to his local residents.

But these are still chemicals and we should be scared of them — that is the cry of the fracktivists. But water is a chemical. Coffee has a whole bunch of chemicals in it. Everything is a chemical. Don’t be duped by bad science (like the people these American comedians convinced to ban the scary sounding "dihydrogen monoxide").

And fracking is still developing. It is being made even safer. Read about some new developments here, here and here.

6. Fracking causes breast cancer.

In his short film, The Sky is Pink, Josh Fox claimed that a spike in breast cancer in Texas was a result of fracking. Turns out he was wrong. Again. (Seems like a theme for Josh.)

The Associated Press interviewed leading cancer researchers who all concluded: There was no spike.

Did Fox apologize for scaring women and families? No. He’s an environmental activist. The media don’t ask him difficult questions or demand that he clears the record. Less than a year later, HBO released Gasland Part 2, Fox’s sequel about the dangers of fracking. There was no mention of breast cancer in it, and he has never withdrawn his original claim. This is the anti-fracking playbook. Scare people, get media attention. And when the science comes in debunking the scare story, move on to the next scare story.

7. Fracking uses a lot of water.

Even fracking fans have a hard time swallowing the water stats for fracked wells: The EPA estimates that fracking used between 70 and 140 billion gallons of water in 2011. That sounds like a lot of H2O. Unless you have a lawn.

Americans use 20 times more water on their lawns than they do on fracking.

Besides that, one of the developments in fracking is waterless fracking, also called "gas fracking." It actually gets a better yield than using water. Read more about that here.

8. Fracking should be banned because it causes earthquakes.

One of the scarier arguments against fracking is that it causes earthquakes, especially if you live in a tectonically charged U.S. state, like I do. Yet all activity under the ground affects the earth, and if you don’t like this fact then you should also campaign to ban supposedly ecofriendly hydropower, which actually has caused earthquakes.

But the biggest cause of man-made earthquakes is a very popular power source: geothermal. It seems that some earthquakes are more equal than others.

9. Fracking destroys the landscape and disturbs the serene vistas of rural America.

The process of fracking (which is separate from drilling) is noisy and looks messy — for a few days. Then the land is reclaimed and the industry moves on to the next area. All the scary photos of huge machinery and big trucks are taken during this initial process. Which is a bit like photographing the building site of a half-built house and saying all house-building should be banned. As a filmmaker, my biggest problem was trying to film working gas wells in a way that would look interesting. They are tiny and often hidden behind hills or behind bushes and trees.

Oh, and fracking does create traffic. That claim is true. Locals call this "jobs." They generally like it. They may complain sometimes but they know that the only thing worse than traffic in rural America is no traffic.

The list above was adapted from an article by Phelim McAleer. Read the original here: Ten Big Fat Lies About Fracking. Read more about his film here: FrackNation.

Feb 5, 2014

How Oil Industry Doublespeak has Influenced the Media

What's with the strange language writers are using to describe what OPEC is doing? In most articles, they describe OPEC's influence on the oil market as "stabilizing prices." I feel as if I've been dropped into the Stalinist Soviet Union where the title of everything meant the opposite of what it really was.

In an article by Sami Alnuaim, for example, he writes, "The observer of what is happening in some OPEC countries finds some undesired voices that question the successful, wise and balanced OPEC strategy which — in my opinion — was the main reason for the unprecedented oil prices stability in the global oil markets in the last few years."

Okay, he is a Saudi obviously defending Saudi Arabia's commitment to keep world oil prices high (which allows them to make maximum profit on their oil and not use it up too fast). But what about the rest of the writers on the oil market? What could they be thinking? In an article in Gulf Times, the author describes Saudi Arabia's heroic efforts: They are "willing" to increase production to "steady the market." How nice of them. World oil prices are high because of Saudi Arabia's leadership within OPEC (an illegal price-fixing cartel that has gouged the world for 40 years). And because some oil production in other OPEC nations temporarily dropped, Saudi Arabia "came to the rescue" to sell more of its oil.

In other words, the Saudis could have been producing more oil all along, but they haven't because they want the world's oil price to remain high. So the entire world has been paying extra for a product that the Saudis are making deliberately scarce, and now the Saudis are heroes for selling some extra oil at top dollar? This is doublespeak at its finest.

In an article in Trend, OPEC Secretary General Abdalla El-Badri is quoted as saying, "The Organization is making sure its consumer's needs are met. At the same time, spare capacity remains at comfortable levels. And we see these comfortable levels remaining for the foreseeable future." Comfortable levels of spare capacity? The Energy Information Administration says that in September and October 2013, "OPEC pumped an average of about 2.3 million barrels a day below its capabilities..." And that doesn't even count the oil fields they have deliberately left undeveloped.

El-Badri also was quoted as saying, "It is important that prices do not witness extremes — neither too high nor too low."

Yes, God forbid we have low oil prices. The whole world might experience an economic boom!

Okay, so these people might be excused because they're in favor of high oil prices. They benefit from them, of course, and need some way to justify it. But what about the language from this article in Business Week: "OPEC may have to reduce crude output next year (2014) amid increasing supply from producers outside the group..."

What an odd thing to say. Or what? The price of oil will come down! I want to grab the author by the lapel and yell, "Whose side are you on!?"

What about this one from Bloomberg? "Analysts at banks including BNP Paribas SA, Citigroup Inc. and Deutsche Bank AG predict that some members of OPEC, notably Saudi Arabia, will probably need to reduce output in 2014 to prevent a global glut."

A global glut? What a strange way to put that. Oh my God! Cheap fuel prices! Further in the same Bloomberg article is this little gem from Michael Lewis, head of commodities research at Deutsche Bank in London, saying: “Downside risks to the oil price may require OPEC to cut production to defend oil prices.”

Defend oil prices? I might expect that kind of language from someone rooting for OPEC. But from Deutsche Bank of London?

This perspective is common in writers all over the world. Here's one from South Africa's Business Day Live: "In the months ahead, new oil supply is expected to outstrip new demand, largely following improvements in output in Iraq and Libya. By the end of the first quarter of 2014, Saudi Arabia will likely have to reduce production to keep prices stable."

In other words, if Saudi Arabia doesn't reduce production, the world price of oil will drop. So "stable" is doublespeak for "high." Wouldn't that sound completely different without the doublespeak: "Saudi Arabia will have to reduce their oil production to make sure oil remains expensive for the whole world."

Everybody in the world — rich people and poor — have to pay double or more for their fuel because Saudi Arabia has bills to pay. They've got to pay off all their non-working citizens (which is most of them) so the people don't revolt against the dictatorship, and the Saudis have mosques and madrassas to build all over the world, spreading Wahhabi fundamentalism (Saudi oil money funds 90% of all Islamic institutions around the world), and they've got American lobbyists to pay (they have 100 full-time lobbyists in America promoting their agenda to our representatives). So yes, I guess Saudi Arabia will have to reduce its production to keep prices "stable."

I think if the language in the media was more straightforward, the level of outrage at this ridiculous situation we're in would reach a threshold and everything would change overnight. People would immediately grasp how pathetic it is that the greatest nation on earth hasn't solved the problem of oil's monopoly yet. It is clear to anyone with better than a tenth grade education that the answer to a monopoly is, of course, competition. And yet the icon of free markets — the United States — hasn't yet allowed a free market with the most important commodity on earth?

The media probably won't change. So it's up to us. Please take up this cause. Explain to your friends and family what is at stake here. You will know you've succeeded when they become outraged. Light them on fire and encourage them to light others on fire. We need to hit that threshold. Sooner is better than later.

Author: Adam Khan, the co-founder of OpenFuelStandard.org and co-author of the book, Fill Your Tank With Freedom. 

Jan 31, 2014

What Competition Can Do

The Superbowl is a demonstration of what competition can produce. Each player competes with others to get on the team. The teams compete with each other to get into the Superbowl. Even advertising companies compete with each other to make the best ads.

Each competitor's innovation or extra effort forces the other competitors to bring their level of excellence up another notch.

While you're watching the Superbowl, amazed by feats of athletic execution, think about this: Shouldn't we see what transportation fuel — the most important strategic commodity on earth — could do with the same kind of vigorous competition?

The Open Fuel Standard would make that happen.