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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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The Biggest Problem Behind The U.S. Shale Boom

U.S. shale production is expected to continue to soar well into the 2020s. And that is a major problem.

Over the past decade, U.S. oil production has more than doubled, surging from 5 million barrels per day (mb/d) to close to 12 mb/d today. Natural gas also rose significantly, rising from 21 trillion cubic feet per year (Tcf/y) in 2008 to 29 Tcf/y in 2017.

Natural gas has been likened to a “bridge fuel,” allowing the U.S. to lower greenhouse gas emissions (GHG) while it transitions to cleaner energy. Cheap shale gas has killed off a lot of coal plants, and with a GHG-profile half that of coal, the switch has been a boon for the fight against climate change.

That narrative, to be sure, remains up for debate. Shale gas operations emit methane, and at some point high volumes of fugitive methane emissions completely offset the benefit that gas has over coal. Various studies, for and against, argue over exactly how much methane is and has been emitted.

But there are other reasons why the coal-to-gas narrative has been oversold. Billions of dollars of investment in gas drilling and gas-fired power plants sucks capital away from renewable energy. Cheap shale gas has also killed off nuclear power, the largest source of carbon-free electricity.

More to the point, new power plants are long-lived investments, and their owners expect to be using them for decades to come. In other words, the U.S. has been locking itself into gas, even though the science dictates a relatively short timetable for the energy transition.

Still, knocking off coal does have its benefits, and the case against gas isn’t exactly clear cut.

However, what about crude oil? The surge in oil production in the U.S. and the resulting impact on greenhouse gas emissions has not been studied all that much. A new report from Daniel Raimi of Resources For the Future (RFF) studies the impact on GHG emissions from a variety of future oil production situations. Raimi is the author of the very even-handed book, “The Fracking Debate.”

 

Raimi laid out several scenarios looking at the GHG impact of U.S. oil and gas production (higher or lower production; more or less stringent climate policies; assumptions about methane) and found that GHG emissions are the highest in all scenarios in which the U.S produces more oil relative to the EIA’s baseline reference case.

Notably, even climate policy was outweighed by the precise level of oil and gas production. The Obama administration’s Clean Power Plan, which required a significant overhaul of the electricity sector and would have shut down a number of coal-fired power plants, was a landmark policy and one of the most significant efforts by the government to accelerate the energy transition. The CPP was stayed by the Supreme Court and is being replaced by the Trump administration.

Related: 2 Reasons Why Big Oil Isn’t Rushing Into Renewables

However, according to Raimi’s study, even if we assume the full implementation of the CPP, emissions are still higher in the “high oil production” scenario, even when compared to the no CPP but lower oil and gas production.

“In other words, low levels of oil and natural gas production do more to reduce emissions than implementation of the CPP,” Raimi concluded, noting that the only caveat that undercuts this conclusion is if methane estimates have been vastly overstated.

The conclusion is worth repeating. The Obama-era CPP – President Obama’s signature climate policy, and the one at the core of the U.S.’ participation in the Paris Climate Agreement – is of less consequence to GHG emissions than the precise level of oil and gas production.

Put another way, the climate penalty in an aggressive scenario in which U.S. shale production continues to rise over the next decade more than offsets the benefit of shutting down a bunch of coal plants.

The main reason for this is not CO2, but methane. It’s not people burning more gasoline in their cars because of higher oil production. Demand is relatively inelastic in the U.S.

Instead, the major climate penalty comes from higher methane emissions associated with upstream production. CO2 emissions remain enormous and a massive problem to tackle, but these emissions don’t change all that much. Methane emissions inordinately jump relative to the reference case if oil and gas production exceeds the baseline.

Related: Is A Natural Gas Cartel Forming?

“Under a scenario with high levels of oil and natural gas production, increased methane emissions are likely to swamp the GHG effects of policies such as the CPP unless methane emissions are dramatically reduced below current levels,” Raimi warned.

Meanwhile, higher U.S. oil production has global effects, lowering prices and boosting demand. The effects are more difficult to tease out, but by 2030, the world could consume 1.6 mb/d more than it otherwise would under the high U.S. production scenario. U.S. oil is exported abroad, lowering prices and boosting demand.

The world then ends up emitting 200 to 50 MMT of CO2 more than it otherwise would, according to RFF. For context, Brazil emitted 417 MMT in 2016. In other words, higher U.S. oil and gas production could add another Brazil’s-worth of greenhouse gases by 2030.

There are plenty of uncertainties and assumptions built into any model, and that needs to be kept in mind. But the RFF study offers a stark warning. In short, the ongoing U.S. shale bonanza is calamitous for the fight against climate change.

A report last month from Oil Change International was more direct. The U.S. oil and gas industry “is gearing up to unleash the largest burst of new carbon emissions in the world between now and 2050.”

By Nick Cunningham of Oilprice.com

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Leave a comment
  • Stan F on February 17 2019 said:
    In essence, this is an entire article bemoaning cheaper energy. Cheaper energy means an increased standard of living for the world’s people. I guess this is something that those obsessed with the dubious catastrophism of “climate change” don’t concern themselves with.
  • Lee James on February 17 2019 said:
    This article is very clear that high levels of petroleum production in the U.S. is a problem -- if you believe that man's contribution of greenhouse gases is a root problem for the planet.

    Many readers will discount leaked and flared gasses as being problematic because of the many benefits derived from burning oil and gas. That's fine, we need to acknowledge the good that comes from fossil fuel. But the industry will continue to be dogged by the significant downsides of burning fossil fuel -- including the large volume of greenhouse gasses released in just getting fuel to end-users.

    Methane leakage and gas flaring were mostly overlooked before folks got concerned about warming (and to some extent, lost tax revenue).

    Net benefit of burning fossil fuel is, of course, the issue. If we just look at net benefit in the year 2019, the benefit is mostly on the side of burning oil and gas, even considering health and contribution to conflict in the world. But the pollution affect and the multiplier effect on world conflict is largely cumulative over time. Some would argue that the effect is non-linear and is accelerating.

    What will be the net benefit of burning oil and gas in 5 years? In 20 years? Wise use AND wise production of oil and gas is critical, going forward.
  • Nick Johnson on February 18 2019 said:
    " Billions of dollars of investment in gas drilling and gas-fired power plants sucks capital away from renewable energy."

    No it doesn't. Wind and solar power require 100% backup by conventional power unless you want the lights to go out on windless nights and cloudy winter days, so they don't reduce the level of investment required for conventional plants at all. At most, battery backup can only bridge single nights at great expense. No feasible number of batteries can bridge long periods of unfavorable weather.

    One of many disadvantages of solar and wind is that they require the installation of about 5 times the amount of power generation capacity as conventional power in order to produce most, but not all, electricity. That's because they only produce an average of about 25% of rated power themselves, and require the same level of backup conventional power as would be required without any solar and wind generators. That's a major reason why solar and wind are inherently more expensive than conventional power.
  • Bill Simpson on February 18 2019 said:
    Forget about climate change. That battle was lost 60 years ago. We are locked into the fossil fuels until they begin to run out, collapsing the economy, after which, most people then starve.
    What we need to do is mitigate the coming warming impact however we can, so as to reduce the suffering as much as possible, until the banks collapse after transportation fuel can no longer meet the demand, forcing the economy to continually shrink.
    Banks aren't designed to survive in a shrinking economy. They soon go under from bad debts. It came very close to happening in 2008. If you doubt that, go on YouTube and watch some of the documentaries about the 2008-9 financial crisis. Bad housing debt is a trivial problem compared to a global liquid fuel/transportation shortage. One is man made, the other is physics, which nobody can fix. It takes the energy in fuel to grow food and move everything.
    A global crash program of nuclear power plant construction with minimal safety systems to lower the cost and speed construction, might be able to save us. But too few people grasp the size of the coming liquid fuel shortage, and what will happen soon after it starts. By the time they do, it will be far too late to do anything about it. By the time the problem becomes obvious to the masses, the system will only be a few years from total collapse. And even then, the ignorant will believe that there is plenty of oil left, and that the oil companies are holding it off the market to drive up the price.
    Be glad you lived during the Petroleum Age. You were lucky.
  • atraitorlocaltrain booze on February 19 2019 said:
    breaking up news:

    USA shale oil is fake. like lunar mission.

    it is a fraud and goldman sachs is benefiting by keeping oil prices low, starving latam,africa.
    these terrorist bank must be bombed by hydrogen bombs
  • Ronald Wagner on February 22 2019 said:
    Natural gas has given America a nearly free source of clean energy. The only thing holding it back is people who make false claims about it. Natural gas is cheap in America because we allow fracking and also obtain it from conventional drilling. America is has far cleaner air than Europe because we use less coal now due to natural gas. Americans also pay about one third the price that Europeans do for their dirtier energy.

    Europeans refuse to frack because of propagandists. Russia has been the source of anti fracking propaganda from the start. They are benefitting greatly from Europe not fracking!

    We should be using natural gas for trucking and ships as well. It is far cleaner than diesel or gasoline.

    Don't let the Greenies brainwash you with their nonsense.

Leave a comment




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