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