Is natural gas moving to the head of the fossil fuels triad?
An international attempt led by the Saudis is hard at work at putting a stop to America’s incredible ability to practically triple its increase of oil production through hydraulic fracking.
While the Saudis have the staying power due to a trillion-dollar reserve and a population of less than 30 million ruled by a tight-knit royal family, its aim to crush the U.S. fracking expansion will have only a short-term effect, despite the International Energy Agency calling for a downturn in international demand.
A more serious incursion into the global fossil fuel capacity is natural gas, which has made enormous strides into the usage of power generation, as well as commercial and residential applications such as heating and air conditioning.
Where oil was once the dominating factor in powering America’s expansive utility infrastructure, coal cut deeply into its use until it ran into the competition of much more environment-friendly natural gas prices, which also became effective in crowding out oil for power generation.
Although still used in the older existing utilities, coal continues to occupy 40% of universal use, but has been in a steady downward phase of replacement by natural gas, which combines low cost, better atmospheric conditions and a massive availability growth worldwide.
Natural gas has been particularly facilitated as a factor in the oil fracking expedient, from which it was initially flared off due to the inability to capture it for proper evolution into liquids as well as the lack of piping systems for utility usage.
With the world’s most competitive pricing at about $24 a barrel in comparison to equivalent energy produced by oil at three to four times that amount, it only is a matter of time until America converts natural gas to a liquid state for potential transportation to all parts of the world.
Look for natural gas to become the shining star of fossil fuels in 2015 as LNG enters the initial stages of exports with half-a-dozen export market sites becoming operational. With an energy import cost of $24 per barrel equivalent, U.S. leadership in this underrated fossil-fuel element will become its surprise growth factor.
Is the U.S. still headed for a banner 2015?
While weather forecasters are able to project the meteorological predictions with impunity, those brave enough to put their socio/economic/political forecasts into writing are more vulnerable to ridicule if and when their forecasts prove fallacious.
With this proviso, it’s incumbent on vigilant and intense analysts to project their forecasts for the coming year, despite the increasing number of pitfalls that can derail the most logical assumptions based on the variety of factors percolating at this particular juncture. With these prohibitions in mind and a pretty good past record at stake, I project the following outlook for the remainder of 2015.
· It’s a pretty good bet that this fifth year after the end of the great financial recession will prove to be the most proficient for the American economy. The biggest question mark in decades will be geopolitical events in the Mideast, Russia and an increasingly truculent China in Southeast Asia.
· The U.S. economy’s employment will experience an increasing awakening, although much will be comprised by part-time workers. This option will be primarily used by independent businesses that make up the bulk of America’s 140 million employables, as well as many employers wishing to escape the clutches of Obamacare.
· Despite the universally powerful strength of the dollar, America’s exports will reach a record well in excess of $2 trillion per annum. Also, record production of oil and natural gas will extend U.S. production to well over nine million daily barrels. However, due to crude oil per-barrel pricing, much of the hydraulic fracturing (fracking) will be performed by such solidly-financed companies as Exxon Mobil, Shell, Conoco/Phillips and BP.
· With continued EPA pressure mounting, much of the fracking of oil and natural gas will be limited to existing shales such as Bakken, Marcellus, Eagle Ford, Permian, etc., with much of it located in Texas, Oklahoma, the Dakotas and the Mid-Atlantic states that are hospitable to the revenues and employment such activity makes
· America’s astounding technological breakthroughs will add to the nation’s gross domestic product growth, accelerating its world leadership in the innovative creativity lacking in other major world economies.
· Manufacturing, which had been given up for lost due to the flight abroad during the latter part of the 20th century, will feature a surprising comeback as low-priced natural gas brings back chemical producers to the U.S., in a process already underway.
· The U.S. consumer sector, comprising 65% of America’s GDP, will benefit from the positive employment and wage growth anticipated along with a relatively dormant inflation and buying power supplemented by lower prices at the pump.
· An estimated 3.5% growth factor in goods and serviceswill affirm America’s world leadership among the major developed nations, (Germany, Japan, China, Russia), both in GDP per capita income as well as inflation control.
While global oil traders have concluded that “black gold,” the world’s main energy driver of modern civilization, was way overpriced and brought it down 40% from the mid-summer price, the long-term energy forecast of Exxon Mobil, tops among the global oil leaders, begs to differ.
In its annual long-term energy forecast, Exxon-Mobil especially focuses on the indescribable surplus of natural gas that will unquestionably move this fossil fuel far ahead of any competing global supplier.
According to Bill Colton, Exxon’s chief strategist, the U.S., and its North American Free Trade partners, Canada and Mexico, will together generate enough of that increasingly popular fossil fuel to supply a fast-growing developing world. Such abundance also will apply to oil as it becomes increasingly abundant through the amazingly expanding fracking process.
Colton believes that despite the ongoing pressure by the EPA and its political allies, opposition will be overrun by the sheer revenue-and-job enhancement that such energy development implies. Colton believes the abundance and affordability of these critical fossil fuels will be more than sufficient to supply the billions of new “middle-class” members of the developing world, whose urbanization will make the need for “automobiles and air conditioners” everyday mandatory consequences for this burgeoning population element.
Colton further refutes the fossil fuel “peak theory” as today’s seven-billion population is destined to grow from that number to nine billion in the next decade. He further states this need for a much broader global metropolitan/political resolution will shove aside much of the extreme regulations that will eventually see “climatological purity” as a stumbling block to economic progress.
Regarding the current price depression, Colton attributes it to the ups-and-downs of periodic economic trends, which always will accompany the massive needs and growth for energy between now and 2040. Colton notes pricing volatility will continue to be a factor as energy shortages and surpluses reflect the ongoing short-term price approach by the army of traders who view both oil and natural gas as a volatile trading commodity.
This has been particularly distinguished by such external circumstances as Saudi Arabia’s concerns over America’s fracking success, as well as the Saudi’s fear of geopolitical conflicts with Iran and Russia. Along with Russia, the Saudis and the U.S. are the world’s only oil producers to reach a 10 million barrel-per-day capacity.
Even the Paris-based IEA believes that although the developed world energy markets of the U.S., Europe, Japan and a fast-growing China will flatten out, the developing world will impose substantial additional demand on global oil producers’ expanding capability, thus requiring extensive supply not now available. That, Colton believes, will bring a new surge of supply and the higher prices that go with it.