One month after President Obama was sworn into office the price of crude oil for West Texas Intermediate (WTI) was $33/barrel. Many thought it an anomaly, but it was a much truer reflection of the real price of oil on a genuine supply demand criteria than oil's price today.
The last few weeks we have witnessed the beginnings of the rout of the oil speculators, together with their comrades in arms, the Organization of Petroleum Exporting Counties (OPEC) who have forever been pushing up the price of oil (and in turn that of gasoline) on the commodity exchange casinos such as the New York Merc and the Atlanta based ICE. Prices have eroded some 24% over the past few weeks to $84/barrel on Friday (but still some $50 over the price in February 2009 of $33/barrel), and that should only be the beginning.
Consider the following: new drilling techniques have located vast new reservoirs of what is designated as "shale natural gas" making us fully gas independent (up to just a few years ago we were importing natural gas at LNG at terminals along the Eastern Seaboard at much much higher prices per mmbtu). Natural gas is priced today at less than $2.50 per mmbtu. At that price the energy deliverable at $2.50 per mmbtu would require WTI crude oil to be priced at $15 per barrel in order to be competitive, less than half the price of $33/barrel at the outset of the Obama administration, thereby raising the emerging prospect of compressed natural gas as a transportation fuel replacing gasoline, first in trucks and then in a growing fleet of flex-fuel cars, in a not very distant future.
And yet, largely unbeknownst and certainly barely heralded by the press, nor our deeply somnolent Department of Energy is the realization that our riches in "shale oil" surpass by far those of our newfound bounty of "shale gas." Even without a federal government program of support, our shale oil deposits are already being accessed through the oil industry's initiative in such locales as North Dakota with its rapidly growing oil production and its resulting and startling economic boom.
Some three weeks ago, on May 10, staggeringly eye-opening testimony was delivered by Annu K. Mittal the GAO's director of natural resource and environment to the House Science Subcommittee on Energy and Environment:
"The U.S. Geological Survey (USGS) estimates that the Green River Formation contains about 3 trillion barrels of oil. And about half of this may be recoverable, depending on available technology and economic conditions. The Rand Corporation, a nonprofit research organization, estimates 30 to 60 percent of the oil shale in the Green River Formation can be recovered. At the mid of this estimate almost half of the 3 trillion barrels would be recoverable. This is an amount about equal to the entire world's proven oil reserves."
In her oral statement before the subcommittee Mittal pointed out what should have been immediately apparent to the administration, the press and the financial community that developing the shale oil "would create wealth and jobs for the country."
The testimony also bore out that most of the Green River shale oil deposits were on Federal Land. That being said and understood, can anyone think of a more formidable national undertaking than the creation of a Green River Authority akin to the brilliant New Deal program, the Tennessee Valley Authority, a national undertaking harnessing the river energy of an entire region of the country and being key to bringing much of the Southern economy out of the Great Depression. As our economic crisis continues to deepen, what better undertaking than a program that would make the entire nation not only energy independent, but have it regain its place a an energy leader. The resulting lower energy prices would be a core stimulant to an economy in dire need of help. Yes, there are and will be issues of environmental impact, but the experience of North Dakota and the successful development shale natural gas throughout much of the nation show that it can be done.
President Obama, President Roosevelt is beckoning.
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