The Agenda

Britain’s Energy Future — and Ours

Euan Mearns makes the case for being at least mildly nervous about the capacity of energy-importing OECD states to make it through the next decade or two without facing steep price increases. Actually, he is completely alarmed. I assume that we’ll adjust. But Mearns takes aim at “happy talk” about shale gas and other would-be energy saviors:

[M]any pure (dry) shale gas plays in the US are losing money at the low prices that cause such a high level of consumer optimism in the US. Because of this, shale gas drilling in the US has more or less halved since 2008 and new drilling this year is focused on areas where the gas comes up with lots of much more profitable, associated hydrocarbon liquids. 

Given the looming energy shortages, it is of course important to look for and where feasible extract shale gas. This would be worth doing at almost any cost so as to reduce Europe’s increasing and potentially crippling reliance on large and near-monopolistic gas exporters like Russia, Qatar and Algeria. These suppliers have no rational interest in reducing the price of their gas and every reason to pursue and maintain their target of price parity with oil. 

But Europe must remain clear-eyed. The shale gas technology is not cheap when all its external (in particular, environmental) costs are fully taken into account. So the future of shale gas as a world and UK source of primary energy must, for planning purposes, be regarded as marginal at best, until its full costs of extraction and use are better understood. 

Any idea of a gas surplus is premature, to say the least. Note that the US remains a net importer of natural gas and is likely to be for many years to come. Also noteworthy, in the chart below, is how fast its truly cheap, conventional natural gas resource is depleting. 

I found the post illuminating.

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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