The Peak Oil Myth, Energy Independence and a Free, Secure and Prosperous People Doing Our Own Thing

We have had some good news on the energy front lately. Housing as well. We'll focus on energy herein.

Oil prices have declined rapidly recently. Today I went by one gas station advertising regular gas at $2.99. That made me feel good. A few minutes later, I passed another station selling gas for $2.95 per gallon. That  made me feel even better.

Lower oil prices act as tax cuts for all Americans. Lower prices also improve business prospects for a wide variety of businesses as well, including Wal-Mart and other mass retailers. Restaurants and hotels, too.

They also reduce inbound and outbound transportation costs for every business. Thus, seeing more big trucks going down the highway provides a great signal to consumers and businesses alike. And if we decide to take a plane somewhere, it's nice to know that airlines will be paying less for fuel costs as well.

{Other good news out today is the continuing recovery in home sales and pricing. We have a very long way to go to get out of the housing ditch, of course, but apparently we're no longer headed in the wrong direction. See Pending home sales climb to two-year high in May.}

But let's stay with the overall topic of energy independence and what it will mean to North America and the rest of the world, including China.

The U.S. is at long last coming to grips with the reality that we will be able to achieve energy independence in the near future. While many of us mistakenly long believed that day would never come, now I'm totally convinced that it will happen, and relatively soon. And energy independence will provide tremendous benefits to future Americans in countless ways.

Has Peak Oil Peaked? makes the "America as slow learner" a great "feel good" story in the end:

"Remember the days when a threatened hurricane and news of Syria downing a Turkish jet would send oil prices spiking?

Peak oil, the Malthusian scenario whereby global oil-supply growth has reached its limit, appears to have, er, peaked. Oil prices aren't responding to the usual stimuli....

It isn't just that demand in the Western world is down, although it is, offsetting roughly half of the gain in emerging-markets demand since 2005. The more troublesome development for peak-oil proponents is on the supply side, where recent events such as the shale-based resumption of oil-output growth in the U.S. suggest terminal decline isn't the only option.

A new report from the Harvard Kennedy School's Belfer Center for Science and International Affairs suggests the world could be capable of producing 110.6 million barrels a day by 2020, up from 93 million barrels a day now. Moreover, the report concludes more than 80% of the new oil production looks profitable at a long-term oil price of just $70 a barrel. That isn't a return to cheap oil, but it would be less than what the world has been conditioned to expect in recent years. . . .

Going long on Malthus is to effectively go short on human ingenuity and technological innovation. Belief in peak oil sows the seeds of its own refutation as it forces up prices and makes what was previously too expensive to contemplate—such as fracturing shale rocks—worth trying. It also encourages greater conservation, such as raising fuel efficiency for vehicles, meaning some of that recent decline in Western oil consumption will likely prove structural. . . .

If demand doesn't keep up beyond then for whatever reason—say, a Chinese slowdown—the second half of the decade could be a real downer for peak oilers. Long-term price expectations would follow.

But there's even more good news for Americans on the oil front. As U.S. Leaves, Oil-Hungry China Stuck in Middle East says this in part:

"Projections from the U.S. Energy Information Administration find the U.S. will drastically reduce its reliance on imported oil, in particular from the Middle East, over the next two decades, a potential victory as the U.S. has long looked to slash reliance on resources from a volatile region half a world away.

China’s story is precisely the opposite.

As the U.S. looks closer to home to satisfy energy demand, China is expected to remain heavily reliant on Middle East oil. Beijing is already carving business, diplomatic and potential military in-roads through the region in a bid to shore up ties with traditional U.S. allies like Saudi Arabia as well as emerging producers such as Iraq.

Additionally, China is looking to imports from the Middle East and elsewhere to compensate for gradually slowing growth of Iran imports and supply concerns related to potentially long-term political instability in Sudan.

In short, analysts say, even as Beijing fears a growing reliance on Middle East crude, the rate of its economic growth leaves policy makers few options. As a result, China is settling in for a long-term economic and political presence in a region that for decades has overshadowed U.S. foreign policy.

To be sure, China has taken some small steps to diversify its sources of energy away from Middle East oil. Crude imports from Venezuela, for example, more than doubled between 2009 and 2011 to about 231,000 barrels a day, according to China customs data. Additionally, China is aggressively working to exploit potentially vast deepwater reserves of oil and gas beneath the South China Sea while partnering with foreign energy companies to develop shale deposits in the country’s west.

About 50% of China’s crude imports is now sourced from the Middle East, according to customs data, and analysts say it’s unlikely that number will fall dramatically over the medium term.
China is far more dependent on foreign energy sources than the U.S. . . ."

How about one more good news oil story? Expanded Oil Drilling Helps U.S. Wean Itself From Mideast summarizes the North American outlook nicely:

"America will halve its reliance on Middle East oil by the end of this decade and could end it completely by 2035 due to declining demand and the rapid growth of new petroleum sources in the Western Hemisphere, energy analysts now anticipate.

 

The U.S. will halve its reliance on Middle East oil by the end of this decade and could end it completely by 2035 due to falling demand and growth of new petroleum sources, energy analysts say....

By 2020, nearly half of the crude oil America consumes will be produced at home, while 82% will come from this side of the Atlantic, according to the U.S. Energy Information Administration. By 2035, oil shipments from the Middle East to North America "could almost be nonexistent," the Organization of Petroleum Exporting Countries recently predicted, partly because more efficient car engines and a growing supply of renewable fuel will help curb demand.

The change achieves a long-sought goal of U.S. policy-making: to draw more oil from nearby, stable sources and less from a volatile region half a world away. "Whereas at one point there were real and serious concerns about the ability to maintain sustainable access of supplies to the United States if there were disruptions in the Middle East, that has changed," Carlos Pascual, the top energy official at the State Department, said in an interview."

Summing Up

Our long and winding road to energy independence has been continuously interrupted over the past several decades, but the goal is very much within reach now. As a result, our nation's security and general prosperity will be quite positively impacted throughout the rest of the 21st century.

Near term let's all hope and expect that our politicians won't get in the way and slow us down.

There's simply too much at stake and too many benefits to be had.

Could gas prices dip below $2.50 per gallon this autumn? Why not? Could the economy be stronger than now projected? Again, why not?

But if prices don't fall that low, let's hope it's because the U.S. economy gathered unexpected steam in the interim, thereby causing our energy consumption to increase substantially.

If that happens, $2.99 or $2.95 per gallon will still sound and feel really good to me. How about you?

Thanks. Bob.