President Obama and his obedient lap dogs are out in full force this week attempting to convince voters that those evil guys on Wall Street have moved on from destroying the value of their homes to artificially raising the price of gasoline. Soon they are coming for your first born. From one of Obama’s speeches this week:

So today, we’re announcing new steps to strengthen oversight of energy markets.  Things that we can do administratively, we are doing.  And I call on Congress to pass a package of measures to crack down on illegal activity and hold accountable those who manipulate the market for private gain at the expense of millions of working families.  And be specific.

First, Congress should provide immediate funding to put more cops on the beat to monitor activity in energy markets.  This funding would also upgrade technology so that our surveillance and enforcement officers aren’t hamstrung by older and less sophisticated tools than the ones that traders are using.  We should strengthen protections for American consumers, not gut them.  And these markets have expanded significantly.

Now the ability to place blame for rising gasoline prices on Wall Street (or Republicans) is good politics, but its not true. The Center for American Progress report linked to above, chillingly titled “Is Big Oil Rigging Gasoline Prices?” begins by alerting the reader to the fact that the American people, having been polled, believe that Wall Street must be behind the recent rise in gasoline prices. Apparently the average American’s opinion on financial speculation, oligopoly pricing, and their link to gasoline prices is sufficiently meaningful to include in an article not accusing Big Oil of manipulating oil prices, but just putting the question out there. I hastily blogged about that report here, as did the editors of RealClearEnergy.

Obama pulled the exact same stunt last year. He set up some sort of task force/executive agency/working group/etc. to make sure that there isn’t any illegal price manipulation going on. The agency never found anything, and its unclear if they even really did any investigating:

Pressed by McClatchy for details on how an active working group would be reconstituted, Carney said simply that rising prices are a worry now.

“What we are seeing now in the last several weeks and months is a new surge in the price of oil for a variety of reasons that have to do with the global oil market,” he said. “We are seeing then the concurrent spike in the price of gasoline that Americans pay at the pump, and the president believes that it’s important to be sure that there’s no fraudulent speculation involved in that — in those spikes in the price.”

As to why restart a working group if it didn’t find anything last year and went dormant, Carney offered that, “you don’t know until you investigate what you might find. And whatever they found or didn’t find a year ago is not dispositive towards what they might find or might not find as they investigate going forward.”

Just days earlier, McClatchy asked in a March 1 report what the task force had done over the past 10 months; the answer was, very little. Administration sources who spoke on condition of anonymity because they weren’t authorized to say such embarrasing truths acknowledged that the working group had met only five times last year, three of those soon after the April 21 formation of the inter-agency task force. The working group now has met seven times in all, the Justice Department said Thursday.

It’s less embarrassing when you realize this is nothing more than a political stunt designed to convince voters that Obama is doing something about high gasoline prices. From here we take it away to an excellent post by an economics professor/blogger on a similarly ridiculous op-ed in the NYT:

Let me close by pointing those interested in this issue to a recent survey of academic studies of the role of speculation by Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva. The authors conclude:

We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets.

And another post, by Craig Pirrong, an expert in energy markets who pulls no punches:

In sum, the parts of Obama’s markets aimed at speculator-manipulators are intellectually confused, empirically baseless, and deeply irresponsible because they encourage a witch hunt atmosphere by slandering (by slimy insinuations) legitimate market actors as criminal manipulators.

Well played.  Because of all the practice, no doubt.

A few other things stand out.  First, he repeats the “we use more than 20 percent of the world’s oil and we only have 2 percent of the world’s proven oil reserves” mantra.  Hell, even he admits he says this repeatedly: “But as I’ve said repeatedly.”  Repetition of a dubious factoid does not make the conclusion it is intended to support true. Indeed, that’s a staple of the Big Lie.

Second, he continues to take credit for increased US oil output when in fact he and his administration don’t have a damn thing to do with it, except that it could have been higher yet without some of their counterproductive policies.

Third, take a look at this remark: “We’ve added enough new oil and gas pipeline to circle the Earth and then some.”  To which my first response is:  What do you mean “we” kimosabe? Again, a guy who has never done anything that would risk getting a callous taking credit for the actions of those that actually put hands to shovel and made some truly shovel ready projects realities.  Moreover, it raises the question: if building so much pipeline capacity is such a great thing, why is he doing everything in his power to stall or stop Keystone?  Is that uniquely damaging? (To the environment, I mean, not to the fortunes of Buffett’s BNSF.)

A rule of thumb to keep in mind.  Whenever Obama talks about energy generally, and speculation specifically, it is safe to conclude you are being manipulated: that’s not at all speculative.

Read the rest here. It’s definitely disconcerting that the President is denigrating a completely legitimate, and valuable, aspect of our market economy.

The shale-gas revolution in the United States has led to massive increases in natural gas production, increasing our domestic supply and reducing prices. While global trade in natural gas exists, the infrastructure and volume is low enough such that there isn’t much of a single global price for natural gas (unlike oil, where there are a few prices which tend to stick close to one another). You can look at spot prices for various countries here, note the large disparity.

The shale gas revolution in the U.S. has been so enormous that infrastructure that was built with the expectation of importing natural gas is now being switched to export natural gas to other countries. Congressman Ed Markey (D-Mass.) is apparently concerned that producers of natural gas in the U.S. would like to export some of the excess to take advantage of higher prices in other parts of the world. Yet as Markey so often likes to point out, America has in recent decades consumed more oil than we produced. If other countries had decided 40 years ago to shut off their oil exports to keep domestic prices as low as possible, America would be a much different place today (and much worse off).

Believe it or not, low energy prices are good for countries other than just the United States. Trade helps make this possible, so its odd that Markey would want to restrict natural gas exports:

I am worried that exporting America’s natural gas would raise energy costs for American consumers, reduce the global competitiveness of U.S. businesses, make us more dependent on foreign sources of energy, and slow our transition away from fossil fuels.

The rest of the letter can be read here. This simplistic — and incorrect — protectionist argument could be rattled off for hundreds of domestic industries. If the world listened, everyone would be much worse off. Markey argues that exporting natural gas might raise energy costs for America and reduce our competitiveness (presumably in manufacturing and related industries heavily reliant on the price of energy). This might be true, but as Markey notes later, the end result might not change significantly as domestic production can also increase (if Markey doesn’t shut down hydraulic fracturing).

Finally, Markey notes that natural gas is a “bridge fuel” on the way to a world which Markey envisions as running on only intermittent energy sources such as solar and wind power. He sees the low price of natural gas as responsible for the closure of numerous coal plants, which to some extent is true. However, even if you accept Markey’s premise that this is a good thing, exporting natural gas from the United States might very well displace coal powered generation in other countries. This wouldn’t make Markey and his band of guilt-ridden environmentalists feel good about the U.S. “doing its part,” but it would still wouldn’t increase carbon dioxide emissions on net while allowing for more efficient trade in global energy markets.

Oh, and exporting natural gas would help with our trade deficit, which Markey also yammers on about when talking to different interest groups.

Coming out of The New York Times of all places, “Number of Green Jobs Fails to Live Up to Promises.” Unsurprisingly, it has the green groups riled up.

A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.

Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.

The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.

(Note that it took seven months, as in 210 days or almost 60% of a year, to figure out wage standards for an industry. Good enough for government work.)

This isn’t the first report on the green jobs fiasco. There are numerous reports of outrageous amounts of money spent “creating” very few jobs. There are reports of stimulus-receiving green-tech factories closing (or moving abroad), some after receiving praise from Obama himself.  Could the failure of promoting ‘green’-jobs have been predicted? Well, you could have looked at Spain, or Germany.

Finally, does the Times seem pessimistic on the results of the Brookings Institute study? Because that’s not the impression I got from reading certain other blogs, which loudly cheered the alleged 2.7 million green jobs. Upon closer inspection, it turns out that a large portion of those jobs are in fields not traditionally seen as representing the future of green-technology, such as waste management or mass transit services. It’s also worth noting that the ‘number of jobs saved or created’ should be secondary to the amount of wealth produced. The fewer workers necessary to produce this (again, contra the green blogs who snub the oil industry for its efficiency), the more workers freed up to focus on other parts of the economy.

It is rumored that President Obama is set to announce another attempt at job creation later this fall. Let us hope that he avoids the ‘not actually shovel ready’ green jobs approach and instead focuses on liberating the economy.

 Yesterday, I excerpted some key facts and figures presented by Acting EIA Administrator Howard Gruenspecht at a Senate Energy and Commerce hearing on the future of natural gas. Today I summarize some of the main points presented in testimony by MIT Professor Ernest Moniz.

Global Gas Resources — Scale and Cost

Global natural gas resources [including resources not economically recoverable at current prices] are estimated to be between 12,400 trillion cubic feet (Tcf) and 20,800 Tcf, with a mean estimate of 16,200 Tcf. For perspective, 2009 global gas consumption amounted to 109 Tcf. These estimates do not include shale gas outside of North America. EIA recently estimated that an additional 5,300 Tcf of shale gas exists in regions lacking large conventional resources.

Much of the global resource base can be developed at relatively low prices. Globally, over 4,000 Tcf can be developed at or below $2.00/MMBtu, with 9,000 Tcf at or below $4.00/MMBtu. For perspective, yesterday (July 19, 2011), U.S. natural gas traded at $4.53/MMBtu on the New York Mercantile Exchange (NYMEX).

Unlike oil, the cost of transporting gas long distances (via pipelines or in tankers as liquefied natural gas [LNG]) is high. An additional charge of $3.00-$5.00/MMBtu is required to cover transport costs.

 Global Gas Production – Recent Trends

Over the past two decades global production of natural gas has grown by almost 42% overall from approximately 74 Tcf in 1990 to 105 Tcf in 2009. This is almost twice the growth rate of global oil production during the same period.

The most rapid growth was in the United States and Russia.

Greater production has expanded gas markets and cross border trade. From 1993 to 2008, global cross-border gas trade almost doubled, growing from 18 Tcf (25% of global supply), to 35 Tcf (32% of global supply). Most cross-boarder gas movements have historically been via pipeline. However, LNG plays an increasing role. In 1993, 17% of cross-boarder gas trade was via LNG. By 2008 the proportion had increased to 23%, and the absolute volume had increased by 5 Tcf, or 166%.

U.S. Natural Gas Supply – A New Paradigm

Two technologies — hydraulic fracturing (“fracking”) and horizontal drilling – have rapidly increased natural gas production from shale formations. The proportion of total U.S. gas production coming from shale resources grew from less than 1% in 2000, to 20% in 2010. By the end of 2011, this is expected to reach 25%. Shale gas now makes up an estimated 36% of all U.S. gas resources.

U.S. Shale Gas Resource – Uncertainty and Relative Economics

MIT’s mean estimate of recoverable shale gas volumes is 630 Tcf, or just over 30% of all U.S. gas resources.

Shale gas is “moderate cost gas,” not “cheap gas.” Of the 900 Tcf of U.S. gas recoverable at or below $8.00/MMbtu, 470 Tcf is shale gas.

Of U.S. gas available in the “moderate” price range of $4.00-$8.00/MMBtu, over 60% is shale.

Shale Gas Development - Environmental Concerns and Impacts

“The risk of groundwater contamination via gas migration or from the drilling fluid [used in fracking] can be effectively dealt with if best practice case setting and cementing protocols are rigorously enforced.” [For more on this issue, see the House Science Committee May 11, 2011 hearing on hydraulic fracturing technology.] 

MIT recommends:

• Regulatory best practices should be applied uniformly to all shale plays.
• Complete public disclosure of all fracture fluid components. [For more on this issue, see here and here.]
• A DOE-EPA study to assess claims that fracking releases more methane — a potent greenhouse gas [GHG] – than conventional gas production. [For more on this issue, see here, here, and here.]

The Role of Natural Gas in a Carbon-Constrained World

MIT modeled the energy market impacts of a global GHG control regime requiring a 50% reduction in industrial country emissions below 2005 levels by 2050, with no offsets; a 50% reduction in large emerging economy emissions by 2070; and no emission reductions from least developed countries. Driven by “ruthless economics,” MIT’s model projects:  

• Significant demand reduction from business as usual.
• Significant increase in natural gas consumption.
• Total displacement of coal generation with natural gas by 2035.
  • Among the reasons: “Carbon capture and sequestration (CCS) is too expensive to make inroads for many decades.”
• By around 2045, natural gas becomes too carbon-intensive to meet the GHG reduction targets, and starts to decline. Nuclear scales up to replace gas in MIT’s pre-Fukushima model run.

Natural Gas Substitution for Coal in the Power Sector

U.S. natural gas generation has a bigger “nameplate capacity” (technical, full-load sustained output) than does U.S. coal generation, but gas supplies only 23% of our generation compared to 44% from coal. ”This demonstrates that there is significant unused natural gas capacity,” Moniz writes. [Comment: It also demonstrates that coal is a better buy!]

Natural gas combined cycle [NGCC] generation units in the USA in 2009 had an average “capacity factor” (the ratio of actual output over a period of time to nameplate capacity) of only 42% but they are capable of capacity factors around 85%. Although relatively inexpensive to build (compared to nuclear and coal power plants), natural gas plants “typically have the highest marginal cost (although that is changing) and tends to get dispatched after other sources of generation. This is because marginal cost is dominated by fuel cost.” In other words, the cheapest power is dispatched first.

MIT estimates that an environmental policy requiring the dispatch of surplus NGCC before coal would:

• Reduce CO2 emissions by 20%
• Cost $16 per ton of CO2 avoided
• Reduce mercury emissions by 33% and nitrogen oxide (NOx) emissions by 32%
• Increase natural gas consumption by 4Tcf

Moniz clearly favors this policy. His testimony does not estimate the impacts on consumer electric rates or natural gas prices.

Natural Gas Substitution for Coal in the Industrial Sector

Industrial consumers account for about 35% of U.S. natural gas demand. About 85% of industrial demand is the manufacturing sector, and 36% of manufacturing demand is for industrial boilers. In other words, about 11% of U.S. natural gas demand is for industrial boilers. Around 68% of large industrial boilers are coal fired.

EPA’s Boiler MACT (maximum available control technology) Rule (proposed and then withdrawn for reconsideration) assumed that manufacturers would retrofit coal boilers with post-combustion emission controls rather than switch to natural gas boilers. However, says Moniz, ‘The price of gas assumed in the EPA analysis was $9.58 per MMBtu in 2008; today’s price is less than half that.” Using EPA’s methodology but plugging in current gas prices, MIT concludes that it costs less to comply with MACT by replacing coal boilers with super high efficiency natural gas boilers than by retrofitting coal boilers.

Gas Substitution for Electricity in the Buildings Sector

U.S. buildings, both residential and commercial, account for about 40% of total national energy demand. The Department of Energy (DOE) has historically set building and appliance efficiency standards based on “site efficiency” – how much useful energy is provided on site versus how much retail energy is consumed. A more accurate measure, Moniz argues, is ”full fuel cycle or ‘source’ efficiency (accounting for all energy used to extract, refine, convert and transport the fuel as well as the efficiency of the end use appliance).”

For example, using a site calculation, a gas furnace consumes 10% more energy than an electric furnace. When source energy is considered, an electric furnace consumes 194% more energy than a gas furnace. Moniz recommends incorporating such considerations in energy efficiency standards, though he cautions that fuel cycle standards are “complicated to establish because of regional climate and regional electricity supply mix.” [Comment: All coercive efficiency standards have serious downsides (see here, here, here, and here). But note the implication of Moniz's analysis: DOE efficiency standards are promoting inefficiency!]

Arthur Brisbane of the NYT this weekend published an op-ed which reads a bit like a ‘mea culpa’ in response to repeated criticisms of reporter Ian Urbina’s jumbling attack on natural gas hydraulic fracturing published late last month:

I also asked why The Times didn’t include input from the energy giants, like Exxon Mobil, that have invested billions in natural gas recently. If shale gas is a Ponzi scheme, I wondered, why would the nation’s energy leader jump in?

Mr. Urbina and Adam Bryant, a deputy national editor, said the focus was not on the major companies but on the “independents” that focus on shale gas, because these firms have been the most vocal boosters of shale gas, have benefited most from federal rules changes regarding reserves and are most vulnerable to sharp financial swings. The independents, in industry parlance, are a diverse group that are smaller than major companies like Exxon Mobil and don’t operate major-brand gas stations.

This was lost on many readers, including me. Michael Levi, a senior fellow for energy and the environment at the Council on Foreign Relations, wrote that the article “repeatedly confuses the fortunes of various risk-hungry independents with the fortunes of the industry as a whole.”

He told me he hadn’t realized that the report was focused on independents and read it more broadly, adding, “If I didn’t know they were talking about certain independents, then Times readers — who don’t know what an independent is — they aren’t going to know what they are talking about either.”

This confusion stems from the language in the article, which near the top referred to “natural gas companies” and “energy companies.” The term “independent” appeared only once, inside a quoted e-mail.

The rest is here. His overall criticism is well founded. The original piece was quite one sided, with only a small section dedicated to those with confidence in the industry. It failed to differentiate between small and large producers, and used scare words such as ‘Enron’ and ‘ponzi scheme’ which were unwarranted. To readers unfamiliar with the natural gas industry, it might have been helpful to point out, as Brisbane notes, that natural gas production has increased from 2% of natural gas production to over 20% in the last 10 years, leading to a steep drop in the price of natural gas.

There is already enough mis-information in the media concerning natural gas, such as the widely touted Gasland, or Stephen Colbert’s recent attack (criticized here). The NYT does a disservice to its readers when misleading criticisms like this are published to support the narrative that hydraulic fracturing is not something Americans should support. Unfortunately, despite the very fair criticisms, the lead author and editor are standing behind their work.

Get with the Plan

In The National Review, T. Boone Pickens again makes the case for The NAT Gas Act of 2011. I slept through the first few paragraphs (the piece began with a constitutional argument).

There isn’t a whole lot of new information in here, its more of a response to the ongoing attacks on the legislation. He reminds us that Americans get all antsy when gas prices go up, but when prices drop again we are lulled back into indifference.

Near the end:

Congress is considering a bill named the NAT GAS Act (H.R. 1380). It provides targeted tax credits (“lay and collect Taxes”) for companies to replace their current fleets burning imported diesel with vehicles running on domestic natural gas. Keep in mind, a tax credit means someone gets to keep more of the money he’s earned, rather than give it to the government to spend on who knows what. It is not a government grant. And this tax credit, unlike many others, has a sunset provision of five years.

Why do we need a tax credit at all? Because there is almost no manufacturing capability for natural-gas vehicles in the United States. Rather than support manufacturers in China and India, this credit would help jump-start that industry here, adding jobs up and down the supply chain.

There are people and companies — and think tanks they fund — that oppose the NAT GAS Act for a variety of reasons, most of them self-serving. There is no greater believer in free markets than I, but if you think OPEC is a free market, I have a bridge in Brooklyn to sell you. Absent a plan of their own, critics of my plan are for the status quo, which is to continue sending billions of dollars to OPEC nations, many of which, in return, are helping to fund terrorism.

As a member of a think tank opposed to the Pickens Plan (though its unclear how our reasons are self-serving), I think that a couple of points should be made. It is true that this is a tax credit, allowing people to keep more of their hard owned money. However, we can only get that tax credit back if we purchase a natural gas vehicle. This is right-wing economic engineering. Perhaps we should ask Newt Gingrich’s opinion on it.

Second, while OPEC’s control over the international oil market does not constitute a completely free-market, this doesn’t strengthen the argument for the Pickens Plan. On the contrary,  it weakens it.

Assume that OPEC is currently capable of (or engaged in) restricting petroleum production such that the price is artificially higher than it would be. This creates an even larger incentive for vehicle manufacturers to consider the feasibility of using natural gas as a fuel rather than petroleum, to capture some of the profit headed towards OPEC. That they haven’t done this likely indicates that they don’t believe consumers will switch over at this point in time, given the costs of converting vehicles on the road, building infrastructure, etc. This market could assuredly start up on its own. Being that it hasn’t, aside from certain niches like city buses, it seems as if the Picken’s Plan has failed the market test.

It’s true, the status quo isn’t perfect, though nothing is. But two wrong’s don’t make a right. Doubling down on natural gas subsidies will further distort the use of resources in our transportation sector, and lock in infrastructure that likely shouldn’t be built in the present. As far as a 5 year sunset, look at some of our other energy subsidies. Did they sunset after 5 years? Have we even been able to get rid of any of them? No.

1. Everything you’ve heard about fossil fuels may be wrong, Michael Lind (Salon):

The arguments for converting the U.S. economy to wind, solar and biomass energy have collapsed. The date of depletion of fossil fuels has been pushed back into the future by centuries — or millennia. The abundance and geographic diversity of fossil fuels made possible by technology in time will reduce the dependence of the U.S. on particular foreign energy exporters, eliminating the national security argument for renewable energy. And if the worst-case scenarios for climate change were plausible, then the most effective way to avert catastrophic global warming would be the rapid expansion of nuclear power, not over-complicated schemes worthy of Rube Goldberg or Wile E. Coyote to carpet the world’s deserts and prairies with solar panels and wind farms that would provide only intermittent energy from weak and diffuse sources.

A healthy, optimistic look at future energy supplies.

2.  Obama taps former energy CEO, green group co-founder for Commerce Chief, The Hill’s Energy & Environment Blog:

Obama praised Bryson in a statement Tuesday announcing his decision.

“I am pleased to nominate John Bryson to be our nation’s Secretary of Commerce, as he understands what it takes for America to succeed in a 21st century global economy,” he said. “John will be an important part of my economic team, working with the business community, fostering growth, and helping open up new markets abroad to promote jobs and opportunities here at home.”

As Tim Carney tweeted, (thousands of different) “Subsidies!” are apparently the answer.

3. The Streetwise Professor comments on the case brought forth by the Commodity Futures Trading Commission against oil speculators (More Reuters commentary here.):

Corner manipulation cases are hard: the CFTC has never won one.  Trade impact manipulation cases in which it is alleged that buying or selling created false perceptions of demand are even harder to analyze and prove.  Thus, just based on the nature of the allegation alone, the CFTC has filed a very challenging case.  When one looks at the evidence the CFTC presents in its complaint, the odds become even higher.  For the January episode in particular, the most straightforward interpretation of the evidence cuts squarely against the allegations.  This will be a very difficult case for the agency to win.

There’s another lesson here that has been lost in all of the hue and cry over the filing of the complaint.  CFTC has been examining the oil market with a fine tooth comb going back to 2005 if memory serves.  If this is the best case they can find after all that, the oil market must be pretty damn clean.

Remember, speculation does play a beneficial role, as explained here by Jerry Taylor and Peter Van Doren.

4. More Weather Deaths? Wanna Bet?, Donald Boudreaux in The Wall Street Journal

So confident am I that the number of deaths from violent storms will continue to decline that I challenge Mr. McKibben—or Al Gore, Paul Krugman, or any other climate-change doomsayer—to put his wealth where his words are. I’ll bet $10,000 that the average annual number of Americans killed by tornadoes, floods and hurricanes will fall over the next 20 years. Specifically, I’ll bet that the average annual number of Americans killed by these violent weather events from 2011 through 2030 will be lower than it was from 1991 through 2010.

If environmentalists really are convinced that climate change inevitably makes life on Earth more lethal, this bet for them is a no-brainer. They can position themselves to earn a cool 10 grand while demonstrating to a still-skeptical American public the seriousness of their convictions.

But if no one accepts my bet, what would that fact say about how seriously Americans should treat climate-change doomsaying?

Do I have any takers?

A potential acceptance by Roger Pielke Jr.

As readers of this blog are no doubt aware, I’m a big fan of ‘fracking,’ a.k.a. hydraulic fracturing, the American-made technological miracle in natural gas production that has roughly doubled known North American gas reserves in only the last five years. In previous posts, I’ve defended fracking from nonsensical attacks launched by ill-informed environmentalists. Quite contrary to what the alarmists would have you believe, we’re lucky for the fracking revolution. Not only has it dramatically increased our domestic supply of natural gas, but now it’s being used to extract oil, too, and it could prove just as revolutionary for that industry.

Fracking does, however, have one major drawback: it has caused rampant rent-seeking. While gas supply has exploded, American consumption increased only 9 percent from 2005 to 2010. The sagging economy has further increased this disparity between gas supply and demand. For consumers, this is great, as it should usher in a period of relatively stable, low prices in the historically volatile gas market. For gas producers, it could be great. The low prices should make their product more attractive relative to other forms of energy. In turn, this could lead to whole new sectors of demand.The problem is that a couple major players in the gas industry refuse to wait for market forces to work their magic.  Instead, these impatient industry titans are trying to convince politicians to enact policies that force Americans to use natural gas.

Consider, for example, Chesapeake Energy CEO Aubrey McClendon, who is leading a nationwide charge to force Americans to use more gas for electricity. As I’ve explained, McClendon has been traveling around the country trying to convince eco-friendly governors to switch from “dirty” coal to “clean” gas. So far, he’s scored one major success. In Colorado, Governor Bill Ritter pushed through a law requiring fuel switching from coal to gas for almost 1,000 megawatts of electricity. If McClendon gets his druthers, other states will follow suit. As I understand it, McClendon’s next targets are Texas and Arkansas.

Then there’s natural gas mogul T. Boone Pickens. He’s trying to get the Congress to enact H.R. 1380, a.k.a. the “Pickens Your Pocket Boondoggle Bill” or the “T. Boone Pickens Earmark Plan,” which would have taxpayers finance the use of natural gas as a transportation fuel, in particular for the trucking industry.

At the very least, these policies are special interest rip-offs. But they could be much, much worse, due to unintended consequences typically wrought by such massive market manipulations.

It’s a welcome development that fracking has increased gas supply; it’s an equally unwelcome development that it has also increased rent-seeking.

British columnist Johann Hari recently took to the Huffington Post to try to whip up alarm about the supposed dangers posed to drinking water by ‘fracking,’ a.k.a hydraulic fracturing, an American-made technological miracle in natural gas production that has roughly doubled known North American gas reserves in only the last five years. I rebutted Hari’s baseless environmentalist talking points in a previous post, and I am much pleased to report this morning that the British Parliament agrees with my debunking of his nonsensical claims.

According to Public Service Europe (by way of the Global Warming Policy Foundation),

“Shale gas drilling has been given the go-ahead by members of the UK parliament who have insisted that the process is safe. An inquiry by the Energy and Climate Change committee concluded that fracking, the process by which gas is extracted from shale rock, poses no risk to underground water supplies as long as drilling wells are properly constructed.”

Dow Jones NewsWire’s writeup includes this money quote from Tim Yeo, the Conservative member of Parliament who chairs the bipartisan committee,

“There has been a lot of hot air recently about the dangers of shale gas drilling, but our inquiry found no evidence to support the main concern–that UK water supplies would be put at risk. There appears to be nothing inherently dangerous about the process of ‘fracking’ itself and as long as the integrity of the well is maintained shale gas extraction should be safe.”

Hear, hear! Is Hari listening?

Energy blogger Robert Rapier has an excellent post about the naive hatred shown towards the fossil fuel industry by what he calls Democrats. I’m not completely convinced that its a position held by all of those on the left (rather than environmentalists, a subset of the left) but the knee-jerk anti energy sentiments tend to aggregate more on that side of the isle. Read the whole thing, especially his thoughts on clueless celebrity activism. He quotes an environmentalist who struggled to come to this realization:

There was virtually nothing in my office—my body included—that wasn’t there because of fossil fuels… I had understood this intellectually before—that the energy landscape encompasses not just our endless acres of oil fields, coal mines, gas stations, and highways…. What I hadn’t fully managed to grasp was the intimate and invisible omnipresence of fossil fuels in my own life…. I also realized that this thing I thought was a four-letter word (oil) was actually the source of many creature comforts I use and love—and many survival tools I need. It seemed almost miraculous. Never had I so fully grasped the immense versatility of fossil fuels on a personal level and their greater relevance in the economy at large.

Comfort, check. Survival, check. And this is a common phenomena by many who engage in similar types of activism against fossil fuels. The individuals who have worked to make our lives, while often getting rich in the process, are reviled by a good portion of the population. A prime example is the newest assault on the Koch brothers by Henry Waxman (D-Calif.):

Waxman, the energy panel’s top Democrat, on Friday urged committee Chairman Fred Upton (R-Mich.) to press Koch – a refiner helmed by billionaire brothers active in conservative politics – about whether it’s invested in oil sands projects that would benefit from TransCanada Corp.’s proposed Keystone XL pipeline.

The GOP aide attacked Waxman’s Friday letter to Upton, calling it a “transparently political stunt that has absolutely nothing to do with the real issues at stake – lowering gas prices, jobs, and energy security.”

Industries that stand to benefit from economic activity tend to lobby for it. A Koch representative has stated that they aren’t involved with the project, but even if they are, who cares? It will make another good zinger on ThinkProgress.org, but other than that I fail to see its relevance. Or consider the millions of words written about the “dirty polluters” across the internet. Fossil fuels aren’t perfect, but they actually work, and life on planet earth without them would be much more miserable.