Mar 292012

Few days ago an article in the New York Times stated that the USA is inching towards energy independence with recent increase in oil production, but I sincerely doubt this can be maintained with our current “drill baby drill” approach where these inches forward can quickly turn into steps backward. The current increase in oil production in the USA is a short and symptomatic remedy of the constantly increasing energy shortage and it’s successful only in entrenching us deeper in fossil fuel dependency and away from cleaner and renewable energy solutions. It does not address or fix the root cause of our energy dependence problem, our inability to get on the alternative energy wagon, and it adds risk for future disasters and problems.

Coincidentally, also reading about the current huge explosive gas leak problem on Shell’s rig in the North Sea (by UK) combined with known facts about BP’s Deepwater Horizon oil spill disaster in the Gulf made me wonder whether oil companies at current profit levels are more apt to gamble with hazardous situations and insufficient precautionary measures to protect both human life and the environment. I also wonder whether some of the accidents happen just because they can afford some of the risks involved instead of investing in eliminating some of them. In other words, perhaps nobody is making incidents involving loss of life, injuries and pollution expensive enough for them. I hope this is just my bad speculation, but if they reasoned like this they would just pay some reparations to the families of dead workers, delay and contest fines for disrupting businesses and environmental damages and just add it into the anticipated expenses of drilling without change if business as usual is cheaper. A multinational corporation won’t receive death penalty or “life imprisonment” if it kills some of its workers with negligence and pollutes the world and the seven seas. This is the danger of the growing importance of the corporate persona – when it gets as large as these oil giants, it’s virtually indestructible.

Moreover, just like in the above mentioned North Sea situation where they chose to exploit the dangerous “well from hell” with high pressure from the undersea reservoirs, or with the disastrous events on the Deepwater Horizon oil rig in the Gulf where 11 workers died and 17 were injured in the initial explosion that preceeded the disastrous oil spill, are big oil companies undertaking more risky endeavors and cutting more corners while their profits are going through the roof? All of a sudden there are so many wells where more problematic and dangerous technologies are adding more burden to the already bad consequences of the oil exploitation on our planet.

The newly perfected drilling technology called Fracking (hydraulic fracturing) uses big amounts of water to extract oil from places where drilling was previously considered unprofitable, but it has already been banned in a number of states and countries after causing serious problems such as polluted water wells and devastated environment, or earthquakes originating in vicinity of fracking activity. This dirty and hazardous technology is suddenly becoming feasible because of higher oil prices, and thanks to it the US oil production is rising and adding more burden to our future.

Let me restate the obvious: In spite of all the efforts to discredit science when its research presents the inconvenient truth, oil together with coal is the major cause of carbon (co2) emissions and increase in greenhouse effect that is accellerating global warming and threatening to seriously endanger the future of Humanity. Interestingly enough, the rest of the planet is so ahead of us in acknowledging the global warming problem and investing in preparations that the UK Department of Energy is actually called “The Department of Energy and Climate Change” as mentioned in the gas leak article.

What complicates things more, production methods get more hazardous at higher levels of market demand. With rising prices, the technologies and wells that were never exploited or previously abandoned as unfeasible and too dangerous are suddenly getting back in the game. Just like our fracking, I bet UK will soon increase drilling in the Northern Sea.

Most people understand the laws of supply and demand and how the oil market works, but this is often either simplified or mystified, while some believe that the president and the ruling parties (or the CIA or Vatican or the little green men, you name it) are controlling the prices of oil in the USA. Although there have always been some efforts to keep the prices where they seemingly benefit the nation or those able to influence the price (particularly when our president and vice president were from the oil industry), oil prices went out of control in the year 2000 when oil speculation began on Wall Street.

The only effort we can expect from the oil lobby is to keep the prices beyond control, and the only hickups in the price gallop to beyond $5 per gallon happen when prices rise too quickly and change global profitability math which kills some businesses (huge amounts worldwide), and temporarily lowers the demand and consumption, sometimes even bringing the price temporarily back to a bearable level (like in 2008 when the gas price in the US slid from close to $5 to under $2 per gallon). But these are just rebounding waves of a rising tide and in this world cheap gas will soon be found only in our dreams of the past, but perhaps that’s not so bad.

The global demand for energy is constantly increasing because of worldwide industrialization and also because the Indian and Chinese middle class now want their long-deserved “American” dream of owning a car and a house. I am an optimist because their rising standards of living will make gas prices rise far beyond the current $5 per gallon in the USA or $10 in Europe. Yes, if you didn’t know, Europeans pay about twice as much as Americans for gas and that’s why they may become energy independent far earlier than us. Believe or not, I smile when I see the gas prices grow. Why? Do I own an oil rig?

No, I smile because the enormous economic pressure and growing demand for cheaper energy may finally give alternative energy solutions the boost they need to prevail. This kind of energy can’t be very cheap in the beginning, but all it needs is to become more profitable than oil and capital will start pouring in in huge investments, driving more innovations and breakthroughs. If we start burning hydrogen instead of gas, the combustion in our cars will produce harmless steam instead of carbon and sulfur dioxide. Or if we power all roads with electricity, they can be fed from a variety of sources and it will get us to zero emissions. If Humanity succeeds in widespread harnessing of clean and cheaper renewable energy, we hopefully won’t deliver a future death sentence to our offspring with excessive carbon emissions.

But these are only hopes of a concerned dad and there’s still too much money and too many subsidies in the oil game, making it seemingly cheaper. The problem with oil-focused innovators, economists, industrial executives, lobbyists and governments is that they don’t know how to think out of their seemingly cozy box and their only solution to energy shortages is still just “drill baby drill”! Reminds me of the old saying – if you only have a hammer, every problem looks like a nail.