Streetwise Professor

November 20, 2019

Proponents of a Fracking Ban Are Seriously Fracked Up

Filed under: Climate Change,Commodities,Economics,Energy,Politics,Regulation — cpirrong @ 6:31 pm

Elizabeth Warren, among other Democratic candidates, have promised to eliminate fracking in the US. The WSJ has a dialog between pro-ban and anti-ban advocates. It demonstrates just how unmoored from reality the fracking ban side is.

The anti-ban participant, Sam Ori, executive director of the Energy Policy Institute at the University of Chicago, points out that as a result of the fracking revolution, US production accounts for 8 percent of the world total, and eliminating this would dramatically increase prices:

One year after the implementation of a ban, shale-oil production would be down by more than a third. After two years, production would be down 55%. You’re talking about triple-digit oil prices and a possible global economic shock

To which the ban supporter, Kassie Siegel, director of the Climate Law Institute at the nonprofit Center for Biological Diversity, replied: What? Me worry? My magical thinking will save the day!

I think an oil-price prediction is largely a red herring, because I am not talking about banning fracking in a vacuum. My organization and others propose a fracking ban along with other smartly designed programs to speed the development and deployment of clean technologies, support local communities, and offset oil and gas price increases. Government policies that drive a rapid just transition to clean-energy technology can create the largest economic stimulus since World War II.

I’m talking about policies like accelerated clean car and truck standards that rapidly decrease oil consumption in the transport sector and moving the power sector to 100% renewable energy. Other policies like reinstating the crude-oil export ban would also counteract price increases from banning fracking and restricting the supply of oil and gas.

Well-designed government policy in other areas, like tobacco and asbestos, addresses both supply and demand. Climate policy must do the same. The barrier to this is opposition from the fossil-fuel industry, not any insurmountable economic or policy problem.

And don’t you think we need to be a little bit skeptical of anyone’s ability to accurately predict oil prices?

Unpacking this idiocy in its entirety would exhaust my time and my patience. So just a few comments.

“Well-designed government policy” and “smartly designed programs.” Such a comedian! Because we know government programs are always well-designed and smartly designed. Did I say “always”? Sorry. I meant “never.”

Case in point. The brilliant European strategy to reduce CO2 by forcing the replacement of gasoline engines with diesel. Whoops! Not only was it colossally expensive, it was a major mistake because (a) it barely affected emissions of CO2, and (b) greatly increased auto emissions of harmful particulates.

Further, since China is the largest emitter, and the largest growing emitter, of CO2, Ms. Siegel is relying upon the wise beneficence of the CCP to achieve her goals.

Need I say more?

“Accelerated clean car and truck standards that rapidly decrease oil consumption in the transport sector.” First, this is costly, not just directly in terms of replacing a huge stock of existing capital, but indirectly by forcing people to drive lower-quality automobiles. How do we know they are lower quality? Because people don’t buy them voluntarily: they have to be compelled.

Second, auto emissions are a drop in the CO2 bucket.

“Moving the power sector to 100% renewable energy.”

Excuse me a minute. I have to walk my unicorn.

OK. I’m back. One-hundred percent renewables is utterly unrealistic and enormously costly, including in terms of reliability and transmission–and fires started (in places by California) by transmission needed to support renewables generation. Fires which, by the way, emit massive amounts of CO2.

Look at Germany, which I wrote about a few days ago. They are running into a renewables wall well short of 100 percent, and have incurred massive costs (imposed on energy consumers) to get this far.

I note that Ms. Siegel doesn’t mention cement, or steel, or other industrial emitters (which put autos in the shade, btw).

Not to mention that fracking oil has f-all to do with power generation, and fracking gas that supplants coal reduces CO2 emissions.

“Other policies like reinstating the crude-oil export ban would also counteract price increases from banning fracking and restricting the supply of oil and gas.”

Yo. Einstein. We have oil and gas to export because of fracking. If we ban fracking, we’ll have no exports, and the export ban will have zero, zip, nada impact on prices.

Further, export bans reduce the price in the exporting country, but raise prices in the importing country. So I guess Ms. Siegel is an economic nationalist. I bet she looks stunning in her MAGA hat.

“And don’t you think we need to be a little bit skeptical of anyone’s ability to accurately predict oil prices?”

Yo. Von Neuman. This has nothing to do with predicting the level of oil prices. Demand curves slope down. You reduce production, prices go up. In fact, oil demand curves slope very steeply, so if you reduce production a little prices go up a lot.

Not rocket science. Just the law of demand.

And these are the brainiacs who are going to make sure that we have “well-designed” and “smartly designed” government policies.

God save us.

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  1. Boris has already banned fracking, without any public debate or seeming input from intelligent people whatsoever. If he thought it would help him win the upcoming election, he would push his own mother under the bus.

    Comment by Michael van der Riet — November 21, 2019 @ 12:29 am

  2. Yes, banned in the UK, completely out of the blue. Probably to try and win some votes from the green nutters who have become very vocal of late. People who should be told in no uncertain terms where to go, not be appeased with costly and dangerous nonsense that panders to their abundant ignorance

    Comment by Bucko — November 21, 2019 @ 7:54 am

  3. Boris is our less-bad option by a country mile. His performance as London Mayor was unremarkable until you compare it to the lawless multicultural hell-hole that our capital has become under Khan. He can hardly fail to do a better job as PM that his loathsome predecessors.

    That doesn’t mean he’s not a shameless opportunist (as are 95% of politicians anywhere), Michaels observation is 100% accurate.

    Comment by John — November 21, 2019 @ 8:20 am

  4. Nutters like Warren, Sanders and the fact that people like Kassie Siegel will populate any new Democrat administration will probably get me to cast my first vote for Trump.

    Comment by JavelinaTex — November 21, 2019 @ 9:18 am

  5. @Bucko, you would be surprised how many conservatives in the US might be in favor of a fracking ban. When the City of Denton, Texas, put a fracking ban on the ballot (that passed). Math would indicate that roughly 30% of Republicans voted in favor of the ban.

    Bring up banning the use of eminent domain for energy infrastructure (pipelines, power lines, etc.) among conservatives and you will get a surprising share (or should it be an unsurprising?) in favor of that.

    The New Democrat agenda is to ban all of this. Not just fracking, but new leases and development on federal “lands” (including existing areas offshore Gulf of Mexico), eminent domain for not just new pipelines.

    Comment by JavelinaTex — November 21, 2019 @ 9:26 am

  6. Then, having banned fracking, complain about dependence on foreign oil and sue oil companies for gouging on prices. It’s hilarious (NOT!) how detached from reality and consequences many people are. They honestly see NO relationship between inputs or decisions and outcomes.

    Comment by The Pilot — November 21, 2019 @ 9:44 am

  7. Ach, fracking hasn’t been banned in the UK – yet. Given we’re in election mode its simply a manifesto pledge (is it even in the Tory manifesto?). As for a lack of ‘intelligent debate’, Johnson’s move was in part a consequence of the NAO report into the sector. Also, the likes of Cuadrilla were given strict operational conditions which they repeatedly breached. If they can’t play in the market and be a good neighbour then they should up sticks and go elsewhere.

    Personally I’m as ambivalent about fracking as I am about pretty much every other mode of energy extraction/electricity generation. I wouldn’t want them to do it under my house, but then again I wouldn’t want a wind turbine or solar farm out back either.

    Craig – your comment about electric cars being of low quality is rather unsophisticated. People don’t want to buy them for a variety of reasons, chief amongst them being range anxiety, the speed of charging, and their comparative high price.

    @John: Nice segue about Khan. You just couldn’t help yourself.

    Comment by David Mercer — November 21, 2019 @ 10:14 am

  8. @David Mercer–I wasn’t talking about electric cars. Nor was Siegel. She was talking about fuel economy standards for ICE cars and trucks. Read before you reply.

    Comment by cpirrong — November 21, 2019 @ 10:51 am

  9. @David Mercer

    “rather unsophisticated”…”range anxiety, the speed of charging” – in other words, low quality. Verbosity is not the same thing as sophistication, as it turns out.

    Comment by Ivan — November 21, 2019 @ 2:14 pm

  10. @David Mercer. Congratulations, you’re the first to admit that trade-offs are necessary and you don’t want them. You want energy, but NIMBY. Germany has been falling way short (like only a eighth of what’s needed) in installing wind power to meet their renewable goals. Why short? NIMBYism in local governments that want unicorns—energy without the trade-offs.

    Comment by The Pilot — November 21, 2019 @ 3:31 pm

  11. Craig – yes, you were. Scroll up.

    @Ivan – err, mention low quality to any car buyer and I guarantee they won’t assume you’re talking about range or recharging. BTW There’s been plenty of press coverage as to why people are still reluctant to buy electric cars.

    @The Pilot. Ta very much. You got there in one. I’m guessing even the most hardened climate denier might object to the ground beneath their family home being fracked (especially if they mistakenly believed they owned the rights to any mineral & FF resources down there).

    Comment by David Mercer — November 22, 2019 @ 4:09 am

  12. David Mercer

    Fracking has been suspended in the UK.

    No, this is not in the Conservatives Manifesto, which, you might have noticed, has not been published yet. The announcement was made by HM Government in the pre-election purdah period.

    It is entirely a political move. Claiming that Cuadrilla have been playing’”fast and loose” would have more resonance were the regulations not so farcical: seismic events at orders of magnitude lower than currently allowed for other activities causing them to be in breach. Real world, evidence based policy it ain’t.

    Comment by Recusant — November 22, 2019 @ 3:01 pm

  13. Outside purdah not “in”.

    Comment by Recusant — November 22, 2019 @ 3:07 pm

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