Monthly Archives: February 2023

Half the USA rigs running today are running in the Permian basin. The Permian cannot do it all. Further, the rigs are seeking oil yet the Delaware and other parts of the Permian play are gas basins, not oil. The use of fracking and horizontal drilling is getting some oil, but these wells can quickly degenerate into mostly gas wells. As a result all this “associated” gas is glutting the market. The result is a crush of gas onto a market that has more traditional gas sources supplying it.

Basically the Permian glut of gas has destroyed the Barnett and Fayetteville plays which are predominately gas plays. Even the Haynesville play is seeing the operators pulling back. And western Oklahoma gas prices are often no more than $1.50/MCF. With the Marcellus and Appalachian plays providing all the gas needed to the east, there is simply no place for Permian gas to go and flaring that gas is not only wasteful on the face of it, but reduces the formation pressures which likely results in a reduction of the recoverable reserves of the mineral owner.

This is a consequence of bad policy that has stifled drilling on federal lands. Drillers are going where they can drill. There is no use wasting their resources in court to free up federal lands.

The environmentalists believe that carbon dioxide is so evil they are in a mad rush to develop electric vehicles (EVs) and replace all gas engines by 2035. I have news for them.  EVs are not going to cut it.  They have a lot of disadvantages. First, they are not all that green. The breakeven point considering all the necessary inputs to build the car means the EV will take up to 10 years or 100,000 miles to repay the carbon consumed…and then you are about ready for a new battery. EVs are relatively delicate hence unsuitable for dirt roads. They are a fire hazard and should not be stored in a garage. But these are rather minor problems. There is both a gorilla and an elephant in the room. One is where do we get the rare earths and metals we need to build out a fleet 10x as large as the present output? And lastly, how will we power EVs?

The USA is Nimby country and there is no expectation that any new lithium mines will be opened in the coming years. There is very little nickel mined here, copper, cobalt, chromium, etc. all mined elsewhere, often by children as near slave labor. These minerals are imported and the biggest sources are often controlled by people who don’t like us very much. Further, price will necessarily increase exponentially. Add to that, the huge problem of recycling these materials which currently isn’t very cost effective.

Next the power grid will need to be doubled. That means new powerplants, more bird chopping eco-crucifixes, and huge swathes of ground covered in solar panels that only work in sunlight. Solar is completely useless in cloudy parts of the nation. So solar is limited to the sunny southwest.  Wind turbines, again, only work in the windy part of the world, which is a hit and miss proposition.  So base load can only be provided by hydroelectric (who will allow more dams to be built); fossil fuels; or, finally, nuclear.  And we’ve not approved a nuke since 2016.  We are down to 93 nuclear plants, less than half what we had in the 1990s.

Further, the grid needs larger lines, more robust power poles to hold up those lines and every transformer and substation will need an upgrade. Meanwhile, we still need fossil fuels. We still need asphalt for highways unless you want to go back to gravel roads – need I remind you that low slung Tesla isn’t built to withstand rocks in its undercarriage, etc.

The fix is to let the market determine the speed and style of developing the new future energy systems, not crammed down the consumer’s throat by governments.