Don’t Take Shale Gas and Tar Sands for Granted

Montreal, Canada

Conventional wisdom in the energy markets has long discounted a gusher of future natural gas supplies from the fracking process, or hydraulic fracturing, sending gas prices to the basement since 2008.

Despite ruining the environment in the process, including contaminating the water supply for those living nearby, companies have embraced this technology and continue to find mountains of gas. Natural gas prices peaked back in 2005 when Hurricane Katrina ransacked the Gulf of Mexico; prices have since crashed a cumulative 73%.

But it’s not just natural gas that’s in bountiful supply. The shales also have a big underground reserve of Black Gold, or oil, in the United States. Some projections point to more than 300 years’ worth of reserves lying in Colorado and elsewhere, possibly making the United States the world’s largest or second-largest oil-producing country.

Let’s not get too excited. I’m not so sure fracking will endure without some sort of fight from the EPA (Environmental Protection Agency), green lobbyists and several state legislatures are already putting pressure on Congress to restrict or even ban this process entirely.

A recent report on 60 Minutes last winter depicted several families in the Northeast sickened by contaminated drinking water from a nearby shale operation. That’s not the sort of thing the gas industry needs to boost its image.

Also, the province of Alberta launched the first firing salvo against the tar sands operators under pressure by foreign governments and the green lobby for sanctioning “Dirty Oil” all of these years. The province has made a killing on tar sands revenues.

Still, the pressure is on to clean the tar sands’ image. Alberta is seizing 20% of tar sands property from exploration companies and turning these areas into recreational parks. You can imagine the oil giants operating in the region aren’t exactly lighting firecrackers.

Shale gas, shale oil and the tar sands are real modern day sources of traditional fossil fuels that the world desperately needs. Global oil consumption has already exceeded demand since 2005 and most countries and companies cannot replace their annual production, hence the term “Peak Oil.” High oil prices are here to stay and that legitimizes shale gas extraction – even if it means destroying the environment. Or does it?

The markets have long taken for granted the abundance of shale gas and tar sands oil supplies. Yet, I suspect the greens and local governments are gaining an upper hand in Canada and possibly, in the United States. Any drilling restrictions placed on shale or tar sands production will only send crude oil prices even higher. Either way, Peak Oil is here to stay.

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