The Daily Cartoon and Live Briefing: Friday, November 22, 2024

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1. Ray W, says

   November 22, 2024 at 12:16 pm

   The Wall Street Journal has an interesting perspective on President-elect Trump’s promise to drill for more oil. In a story, not an editorial column, titled, “Trump’s Oil and Gas Donors Don’t Really Want to ‘Drill, Baby, Drill'”, the reporter writes that Trump’s “fossil-fuel benefactors have a different agenda.”

   Here are a few bullet points about their differing agenda:

   – “Many of the tycoons who backed the Republican’s victorious campaign (I note that the author did not use either the term “mandate” or “landslide”) say what they need with is shoring up demand for their products — not pumping more fossils fuels, which they have little incentive to do.

   “They are pushing for policies that would lock in fossil fuel use, such as easier permitting for pipelines and terminals to shuttle fossil fuels to new markets (I note that yesterday Trump said that on his first day in office he would reinstate the XL Pipeline project). They also favor eliminating Biden administration policies meant to put more electric vehicles on the road.”

   – The author acknowledged that under Biden administration guidance “shale companies produced record amounts of oil and natural gas as crude prices rebounded from the pandemic’s depths and then soared after Russia’s invasion of Ukraine. But the industry is also confronting the early stages of a long-term shift away from fossil fuels, as well as concerns that gasoline consumption has peaked in the U.S.”

   – This past summer, the CEO of Canary, an oil-field services company, Dan Eberhart, told Trump at a fundraiser to push back against the EIA’s prediction that oil demand would likely peak by the end of this decade. Eberhart later told a reporter that the EIA needs “to stop acting like fossil fuels are the devil.”

   – “Many of Trump’s oil and natural-gas supporters favor easing regulations that govern drilling. The changes would include scrapping rules targeting methane emissions, getting new permits to frack on federal land and eliminating climate disclosure rules.

   “But some donors grimace when they hear Trump promise that under his watch, crude-oil producers would open the floodgates. He has also promised to cut American’s energy costs by 50% or more.

   “Oil backer’s skepticism stems from the fact that Wall Street has successfully pressured chronically indebted frackers to stop burning through cash, and return it to shareholders via buybacks and dividends instead of reinvesting it to frack more wells.

   “‘Our stocks will be absolutely crushed if we start growing our production the way is talking about it,’ said Bryan Sheffield, a Texas oilman who contributed more than $1 million to Trump’s latest campaign.”

   – The author argues that geology, meaning the ability to continue to find new sources of cheap oil (the proverbial low-hanging fruit), may limit future expansion in crude oil production.

   – On the subject of natural gas, the author notes that the Biden administration imposed a moratorium on issuing new permits to build LNG exporting facilities. Trump has promised that on his first day he will retract the moratorium.

   – The author notes that while domestic demand for natural gas has had an “uptick” in recent years, shale companies produce far more natural gas than American consumers need. The shale companies have been “shipping gargantuan amounts of liquefied natural gas to Europe and Asia, making the U.S. the largest natural-gas exporter in the world.”

   – Matthew Ramsey, with pipeline company Energy Transfer reinterpreted Drill, Baby, Drill for the reporter: “I think ‘drill, baby, drill’ means we open up a lot more markets that have otherwise been closed to us.”

   Make of this what you will.

   Me?

   Crude oil producers like the prices their product now commands on the world marketplace. If they have to choose between producing more oil and losing profit because today’s glut of oil becomes an even greater glut or producing the same amount and keeping their profit level, I argue that they will not produce more oil. Instead, they will quietly lobby for deregulation that will best lower their extraction costs.

   The professional lying class of one of our two political parties will continue it efforts to deceive the gullible among us that Trump is the only energy king, when Obama was the first energy king during the Shale Revolution and Biden followed Obama’s and Trump’s path and became the new energy king.

   But the question remains: Will the world transition to clean energy or not? Current predictions do have the world’s demand for fossil fuels peaking around 2030.

   If this is true, drill, baby, drill will go down in history on one of many great political deceptions.

   If oil companies have their way, perhaps we will forego cheaper and more efficient forms of renewable energy in favor of oil and natural gas profits. After all, current solar technology already offers new sources of electrical energy production at half the amortized cost of any form of carbon-based electricity production.

   In an economy based on capitalism, the answer would be clear. Transition to far cheaper new sources of clean energy. Battery technology is rapidly becoming cleaner and cheaper. Solar technology offers far more future gains than does oil or gas.

   As an aside, I commented on this some time ago, after I read an EIA article that had concluded that with so many worldwide LNG facilities under construction right now, if they are all completed, an “overhang” in capacity would soon form, meaning that so much more worldwide LNG export capacity is about to be added to already-existing capacity that LNG facilities all over the world will no longer be able to operate at full efficiency due to too much gas and too few buyers.

   If this is true, Trump issuing a permit to build yet another LNG export facility will mean that the company, when it opens in seven years, will be operating in a world of partial efficiency due to a glut of capacity.

   As I recall without looking it up again, we already have eight operational LNG export facilities. In January 2016, we had zero such plants. Two of the eight are still expanding in total capacity toward full permitted buildout. A ninth is in the initial phases of opening. Two more are in construction and expected to become operational at some point in 2025. We already have enough capacity in the works to double today’s exports of LNG. Adding yet another facility in seven years may not prove to be economically feasible, just as today’s nearly completed plants may never reach full efficiency.

   Then again, the political issue is not whether the new plants will or should ever be built. The political issue is the opportunity to claim to the gullible among us that more permits are being issued.

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