It seems the world is not running out of oil after all. President Obama’s hope of presiding over the beginning of the end of the era of fossil fuels will be dashed.
In fact, producing nations and America’s frackers are beginning to worry that we are facing a glut of the stuff. Crude oil prices have softened, Saudi Arabia is offering its customers discounts and has cut its production by some 400,000 barrels a day, and the new fracking industry is getting nervous, really nervous, as prices drop below the $100 a barrel they feel they need to get to assure their viability.
As always with economic changes, there are winners as well as losers: airlines are looking forward to cheaper jet fuel, and American consumers saved $700m a week last month compared with petrol prices a year ago, according to Tom Kloza of Gasbuddy.com.
This rather bright picture is somewhat different from what observers here see on the other side of the Atlantic.
German chancellor Angela Merkel’s decision to phase out fossil fuels and nuclear power, and place the country’s economic future in the hands of renewable energy, is running into economic reality. Her Energiewende, or energy revolution, has driven manufacturing costs up and economic growth down — the economy contracted by 0.2% in the second quarter — and is costing about as much as it did to reunify the country. German manufacturers, especially medium-size and smaller firms, say they can no longer compete with American companies that have access to abundant supplies of cheap oil and natural gas.
Policymakers, fuel producers, lobbyists and environmentalists with whom I made contact last week are taking note also of Britain’s difficulties in meeting its green goals while keeping the lights on. In order to get supposedly emissions-free nuclear plants built, the government is guaranteeing investors utility rates high enough to produce a profit regardless of the staggering cost of new nukes — the taxpayer will pick up the tab even as politicians rail against the high bills facing consumers. I have been involved in the energy business long enough to know that nuclear plants always cost more than originally budgeted. Lots more.
None of this will prevent President Barack Obama from telling other world leaders meeting on September 23 at a United Nations climate conference that he will continue to fight to end the use of fossil fuels in America in order to reduce the carbon dioxide emissions he believes are causing dangerous increases in world temperatures.
He will undoubtedly cite last week’s UN report that emissions are rising much faster than originally predicted. Never mind that nothing America does can offset the effect of the massive increases planned by China and India in the use of coal, or that even dedicated environmentalists admit to me that renewables cannot compete with fossil fuels unless heavily subsidised and will not be able to do so even if the economies of scale obtained from wider use of wind and solar are realised. [...]
The president’s hope of presiding over the beginning of the end of the era of fossil fuels will be dashed. The hard fact is that America will remain largely dependent on our huge resources of oil, natural gas and coal as far ahead as the eye can see. Thanks to fracking, US oil production has risen 65% in the past six years, and we are, or are about to become, the world’s largest producer of oil. No longer need we fear supply interruptions that send prices skyrocketing and force drivers to queue at petrol stations, as they did during the misbegotten presidency of Jimmy Carter.