Gas prices are about to fall through the floor. Here's what it will cost you

By Marshall Connolly, Catholic Online (NEWS CONSORTIUM)
2/26/2013
Catholic Online (www.catholic.org)

Economic benefits always tend to outweigh moral implications.

America is on track to become a great producer of oil in the decades to come. Within the next ten years, we will likely export oil, rather than import. This is made possible by the practice of fracking, which allows drillers to extract untapped energy reserves deep beneath the crust. Yet the question remains, will it lower prices at the pump? More importantly, is it the right thing to do?

These days are coming back sooner than you think.

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LOS ANGELES, CA (Catholic Online) - Fracking is the process of injecting high pressure chemicals and steam into the earth for the purpose of cracking rocks beneath the crust. When those rocks fracture, they can release pockets of natural gas and oil that are pumped to the surface.

The amount of energy waiting for extraction is so great that with the rapid, planned expansion that is now ongoing, the United States is just years away from becoming a net exporter of oil and gas, rather than an importer.

This bodes well for our economy and our foreign policy. No longer will we be inexorably linked to political developments in the Middle East, and the influx of cash could help to ease our national deficit.

However, fracking has its detractors and many claim the practice can pollute water supplies as well as cause earthquakes. Furthermore, it leads the country down the road of future oil dependency rather than towards alternatives, which some say are necessary to offset the advance of global warming.

There's also the question of profits, and if in a tight refining market, will increased supplies in raw materials lead to lower costs?

Proponents of fracking say the practice is safe, although they acknowledge that small earthquakes have been caused by the it. Fortunately, the quakes are too small to be felt over a wide area and have done no significant damage. Of greater concern is if fracking damages water supplies.

Several viral videos filmed in areas where fracking is prevalent show flaming water coming out of faucets, the product of natural gas contamination and a flame. That these water supplies are contaminated is beyond question. What remains unresolved is if fracking is to blame.

Proponents of fracking say the procedure is done far deeper than most people realize, so deep that it is actually impossible for groundwater supplies to be contaminated. However, they do acknowledge that if mistakes are made and if equipment fails, pollution can occur. Air pollution can also occur at the site of the well.

As for scientific studies, they conflict. Some studies say yes, fracking pollutes, including one done by the EPA, and still others say no.

Despite the inconclusive answers, the nation seems to be barreling ahead into fracking regardless. Our insatiable demand for energy and high prices at the pump have oil producers scrambling to drill. It does not seem to matter that the same water we give to our ranch animals and use to water our crops, could be polluted.

Once extracted, the oil we take will need to be refined into gasoline. This is the great bottleneck in the supply chain. Most refineries are old and must make do with aging infrastructure. New refineries are very difficult to build because of tight environmental regulations. This means that even in times of ample oil supply, a disruption in refining capacity will cause a spike in prices.

These spikes do occur. In states like California, home to less than two dozen refineries and requiring a special summer blend, the state is susceptible to supply disruptions.

Refineries have been enjoying good times. Profits at Texas-based Valero were up 22 percent in the last quarter of 2012. They were not alone in posting records. With such tremendous profits, it's difficult to imagine an incentive to do anything different.

Still, the basic economic laws apply. As prices remain high, there also remains an incentive to increase production. That's what's leading the dive into fracking, and the eventual stockpiling and export of massive oil reserves that will someday soon occur.

Beyond the world of supply and demand, there are other considerations. The cost of gasoline is not the same as its price. Eventually, as supplies increase prices will trend downwards. Another era of cheap gas is approaching. That means bigger cars, a return of gas guzzlers, and more pollution. It happened in the 1990's as increased prosperity caused Americans to ditch their fuel-efficient economy cars for the iconic Hummers and other sport utility vehicles that became popular over the last twenty years.

Now, a trend towards hybrid and electric cars will probably reverse as gas become cheap once again.

Of course, hybrids and electrics stand little chance of catching on since they are priced at a premium. Most consumers realize that buying a fuel efficient all-gas car is cheaper over the long run than paying the premium on a hybrid.

However, the cost of this reversal is great. Although a few Americans still insist that global warming is a myth, scientific data from around the world confirms the climate is trending warmer. As it does, extreme weather becomes increasingly common. That includes both severe storms, droughts in some areas, flooding in others, and even more severe snowstorms colder places. Global warming doesn't just mean hotter average temperatures, it means ...

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1 - 6 of 6 Comments

robertburford
2 months ago
If it sounds too good to be true, then maybe it is too good to be true. Cheap gas is a pipe dream but the reality of further polluting our air and ground water is a nightmare. In North Dakota they are doing just that. The problem is that the West does not have the water resources to support such industries as well as crops and cattle. Something has got to give. The truth is that the oil companies want higher oil prices and the benefit packages of their executives depend on high oil prices. Markets rule but when you have oligopolies like the oil companies , markets can be manipulated and they are and will continue to be.
Jerry N
2 months ago
Jim: "We are clearly in a warming cycle which is contributing to droughts, crop failures and the resulting wildfires world wide in both hemispheres..."

This is total baloney, unsupported by any semblance of scientific data or measurement. Why should any thinking, fact-observing person believe or heed you or any other enviro-socialist, when you almost always start out with huge, unsupportable lies, stated as if they are well-established facts, which they most certainly are not? I do not trust or respect liars, no matter how well-meaning or noble the cause about which they are spinning their lies.

Good environmental stewardship starts with knowing the true facts,a nd knowing what does and does not affect the environment. Humans having "wasteful lifestyles" do not affect the environment in any measureable way. Condemnation of "wasteful lifestyles" is mere political propaganda aimed at promoting socialism and demoting individual liberty.
Jim
2 months ago
Regardless of the correctness of his scientific facts, I think the author made some good points about environmental responsibility. I found the article written reasonably, more or less balanced in perspective and not overly condemning of any particular position. We are clearly in a warming cycle which is contributing to droughts, crop failures and the resulting wildfires world wide in both hemispheres. not to mention the increased tropical depression activity and severity. Maybe it is just a natural cycle that will last as long as it will, years, decades, centuries, who knows, with or without the activities of industrial age humans. Heating and cooling cycles have occurred before and they will occur again. Still should we not always try and be good stewards of our planet. Not tree huggers or so-called vile polluters but rather wise consumers and custodians of both non-renewable and renewable resources. Should we not strive to work towards alternative energy sources with an eye on the day that we will run out of many non-renewable fossil fuels. Until that day shouldn't we use those resources in the most efficient and productive ways possible. Petroleum is not just important as an energy source, shouldn't we also consider conserving it as well as we can to prolong other uses like medicines, polymer plastics and other valuable and needed products. Perhaps the portion used for energy does not impact what remains for other critical uses but if it does, let's be intelligent consumers, not glutinous ones. Shouldn't we work intelligently and in a practical sustainable manner to reduce emissions that contribute, at least in part, to problems like acid rain, respiratory disease and overwhelming increase in environmentally caused cancers? Let's be intelligent and take a long term view as custodians and smart consumers as opposed to focusing our view on immediate gratification of wants, convenience and perhaps wasteful lifestyles far beyond our needs as humans and children of God. Value can and should be measured by more metrics than just profit and stock yields alone.
Jerry N
2 months ago
This article is mostly nonsense and full of psuedo-scientific global warming religion gobbly-gook.

The available scientific data over the last decade indicates the globe has begun a tiny cooling trend, but both the warming trend prior to this, and the current cooling trend are so small, and so speculative as to the level of measurement accuracy, that both can be dismissed as interesting observations that have virtually no significance whatsoever in terms of global climate.

The author of this bunk blatantly claims to know with absolute certainty that global warming is a scientifically establish fact. That claim, in itself, is enough to tell me that his conclusions are mere enviro-socialist propaganda. Here is the most revealing sentence of this author's somewhat obvious socialist agenda:

"Rather than decreasing our use of fossil fuels, which unquestionably belch tons of carbon dioxide into the atmosphere each year, we are about to increase it in a big way. Is this moral? "

Why does our use of fossil fuel "belch" CO2 instead of merely release it?

Has anyone asked the plant life on earth if it is immoral for them to have more breathable air available to them?

What evidence is there that we will drastically increase our use of fossil fuel? Is it not just as likely that fossil fuel use will decrease due to the ever-improving efficiencies being developed in energy consuming devices?

Is it moral to lie to someone about a non-existent threat in order to scare them into voluntarily reducing their own standard of living?
rob lobato
2 months ago
it sounds too good to be true.hopefully it isn't.
Jim Carter
2 months ago
While the mental gymnastics the author contemplates are valuable, he needs to do some of these gymnastics around the global warming debate. While the earth has had some warmer years in the past two decades, the extreme warming that some scientists predicted never occurred and the temperature trend observed is not dissimilar to the one observed in the 1930's world wide. The models that predicted the rapid increase in average worldwide temperatures have been proven wrong and scientists are admitting that they did not take into account many variables (for example, a recent article that pointed to the models insufficiently including the effects of water vapor (clouds) in the atmosphere).

If you look at the worldwide climate over the past 10,000 years, we have had several periods where the weather was warmer by several degrees than it is now without the disastrous effects that some scientists predict. The vikings sailed in ice-free seas north of Canada and, as glaciers recede, we are finding new stone-age settlements in mountainous regions that are only now becoming habitable. Many scientists believe we may be at the beginnings of a new ice age that will effect us much more than any warming period.

To believe that man could significantly effect the weather due to our increased usage of greenhouse gasses flies in the face of the laws of thermodynamics as well as ignores the tens of thousands of acres of recovered coast land and dessert that are now planted in vegetation that uses the CO2 in the atmosphere. Readers should become more informed (e.g. use some mental gymnastics) to get all the facts from multiple sources and make an informed ethical and moral decision on this issue.

J K Carter, CPA
BS Petroleum Engineering
MS Accountancy

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