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Thursday, 23 March 2017
 

Focus: Energy Nostalgia and the Path to Hell (4-5)

Take the competition between coal and natural gas in powering


America’s electrical plants.  As a result of the widespread deployment of fracking technology in the nation’s prolific shale fields, the U.S. gas output has skyrocketed in recent years, jumping from 18.1 trillion cubic feet in 2005 to 27.1 trillion in 2015.  With so much additional gas on the market, prices have naturally declined -- a boon for the electrical utility companies, which have converted many of their plants from coal to gas-combustion in order to benefit from the low prices.  More than anything else, this is responsible for the decline of coal use, with total consumption dropping by 10% in 2015 alone. In his speech to the Marcellus Coalition, Trump promised to facilitate the expanded output of both fuels.  In particular, he pledged to eliminate federal regulations that, he claimed, “remain a major restriction to shale production.” (Presumably, this was a reference to Obama administration measures aimed at reducing the excessive leakage of methane, a major greenhouse gas, from fracking operations on federal lands.) At the same time, he vowed to “end the war on coal and the war on miners.”

As Trump imagines the situation, that “war on coal” is a White
House-orchestrated drive to suppress its production and consumption through excessive regulation, especially the Clean Power Plan.  But while that plan, if ever fully put into operation, would result in the accelerated decommissioning of existing coal plants, the real war against coal is being conducted by the very frackers Trump seeks to unleash.  By encouraging the unrestrained production of natural gas, he will ensure continued low gas prices and so a depressed market for coal.

A similar contradiction lies at the heart of Trump’s approach to oil:
rather than seeking to bolster core segments of the industry, he
favors a supersaturated market approach that will end up hurting many domestic producers.  Right now, in fact, the single biggest impediment to oil company growth and profitability is the low price environment brought on by a global glut of crude -- itself largely a consequence of the explosion of shale oil production in the United States.  With more petroleum entering the market all the time and insufficient world demand to soak it up, prices have remained at depressed levels for more than two years, severely affecting fracking operations as well. Many U.S. frackers, including some in the Bakken formation, have found themselves forced to suspend operations or declare bankruptcy because each new barrel of fracked oil costs more to produce than it can be sold for.

Trump’s approach to this predicament -- pump out as much oil as
possible here and in Canada -- is potentially disastrous, even in
energy industry terms.  He has, for instance, threatened to open up yet more federal lands, onshore and off, for yet more oil drilling, including presumably areas previously protected on environmental grounds like the Arctic National Wildlife Refuge and the seabeds off the Atlantic and Pacific coasts.  In addition, the construction of pipelines like the embattled one in North Dakota and other infrastructure needed to bring these added resources to market will clearly be approved and facilitated.