Gas prices are, of course, evidence of just one of President Obama’s many energy policy failures. There’s the ludicrous diversion of tax dollars to solar energy companies whose business model depends on evading the laws of both economics and thermodynamics. There’s the remarkably short-sighted decision to kill the Keystone XL pipeline. There’s the continuing effort to undermine drilling in the Gulf by throwing up pointless regulatory obstacles. Yet, in spite of all that this president has done to damage the cause of American energy independence, there is one sector of the energy business that even he hasn’t been able to screw up – yet: the natural gas industry.
Make no mistake: were it not for the incredible renaissance of the American natural gas industry, what is currently an economic mess would be a far larger economic disaster. The natural gas industry is creating hundreds of thousands of jobs, developing export markets that will help address our trade imbalance and recovering byproducts that will revitalize our chemical manufacturing sector. Natural gas will also take a big bite out of foreign oil sales. The big natural gas producers are investing billions in infrastructure that will allow semi-trailer tractors to use natural gas fuel, at less than one fifth the price of diesel. Will natural gas-powered automobiles dominate the roads a decade from now? It would not be at all surprising if that were the case.
The growth in natural gas production in the United States is largely due to the industry’s ability to access gas trapped in shale formations. We can now get at that gas because horizontal drilling technology has evolved to the point that it’s economically viable to get at those deep, but relatively “thin” formations in a cost effective manner. Once producers put horizontal pipes into place in a shale formation, they can then get at the gas trapped in the formation using the age-old technique known as hydraulic fracturing, or “fracking”. This technology, which dates back to the late forties, involves injecting a lot of water, along with a bit of sand and a tiny amount of chemicals in order to fracture the shale and release the trapped natural gas.
There is nothing more sinister about drilling for shale gas than there is about any of the other myriad of ways that we drill into the earth for a variety of other reasons. Unless, of course, one happens to be an eco-activist. In that case, there has to be something horrible about shale gas drilling, since it involves fossil fuels and because people are making money while doing it.
With that history as a backdrop, last Friday President Obama signed an Executive Order coordinating federal oversight of domestic natural-gas development. If Obama were a President who both understood and believed in free markets, that would be a good thing. There is much in the way of overlapping state and federal authority when it comes to natural exploration and production. If “coordinating” equated to “streamlining” that would be welcome news indeed. Unfortunately, the history of this administration suggests that every regulatory review of this sort will inevitable result in the creation of more onerous regulatory obstacles in the free market.
More than any other factor, energy availability, energy prices and energy policy drive this nation’s – or any nation’s – economic future. In the past week the President of the most powerful nation on earth has demonstrated that he neither understands nor cares to understand the realities that drive global energy markets. It’s hard to imagine that Obama could contrive of ways to prove that he is even more out of touch with reality, but he has once again manage to exceed America’s lowest expectations.
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