Former Ulster prop set for ‘long recovery journey’ after undergoing major surgery
A Closer Look at 7 Analyst Recommendations For Noble CorpEditor’s note : Chris Wright has been nominated by President-elect Donald Trump to serve as Energy secretary and this column is reprinted from March 27, 2022. The energy transition is not happening. Or not nearly at the pace that everyone believes or wishes. At rates the “transition” is set to finish in the mid-2600s. The U.N. Rio Convention and subsequent Kyoto Protocol launched the energy transition drive in 1992. Global energy consumption from hydrocarbons has grown massively since then, with market share only declining by four percentage points over the last 30 years from 87% in 1992 to 83% in 2022. I am not celebrating this fact as I have spent years working on energy transition technologies. The energy transition isn’t failing for lack of earnest effort. It is failing because energy is hard, and 3 billion people living in energy poverty are desperate for reliable and scalable energy sources. Meanwhile, 1 billion energy-rich people are resistant to diminishing their standard of living with higher cost and an increasingly unreliable energy diet. There is no “climate crisis” either. If there is a term more at odds with the exhaustive literature surveys of the Intergovernmental Panel on Climate Change than “climate crisis,” I have not heard it. Climate change is a real global challenge that is extensively studied. Unfortunately, the facts and rational dialogue about the myriad trade-offs aren’t reaching policymakers, the media or activist groups. Or are they are simply ignoring these inconvenient truths? For example, we hear endlessly about the rise in frequency and intensity of extreme weather. This narrative is highly effective at scaring people and driving political action. It is also false. The reality is detailed in countless publications and summarized in the Intergovernmental Panel on Climate Change reports. Deaths from extreme weather have plunged over the last century, reaching new all-time lows last year, an outcome to be celebrated. This is not because extreme weather has declined. In fact, extreme weather shows no meaningful trend at all. Deaths from extreme weather events have declined because highly energized, wealthier societies are much better prepared to survive nature’s wrath. You are not supposed to say out loud that there is no climate crisis or that the energy transition is proceeding at a glacial pace. These are unfashionable and, to many, offensive facts. But let’s be honest. Energy transition ambitions must recognize reality. Otherwise, poor investment decisions and regulatory frameworks will lead to surging global-energy and food prices. This is exactly what is happening. We are here today in large part because energy transition efforts that previously encompassed solely aggressive support of alternative energy policies, economics be damned, have recently supplemented this strategy with growing efforts to obstruct fossil fuel development. Fossil fuels make the modern world possible. The real crisis today is an energy crisis. It began to reveal itself last fall with a severe shortage in globally traded Liquified Natural Gas (LNG). The LNG crisis has not abated, and it gives Russia’s Vladimir Putin tremendous leverage over Europe. Without Russian gas, the lights in Europe go out. Amid war, public outrage, and intense sanctions, Russian gas flows to Europe remain unchanged. Russian oil exports have continued with minimal interruption. The world can talk tough about sanctioning Russian energy exports, but those exports are vitally needed; hence they continue. Energy security equals national security. The world energy system, critical to human well-being, requires meaningful spare capacity to handle inevitable bumps in the road. In the electricity sector, which represents only 20% of global energy but 40% in wealthy countries, this is called reserve capacity. In the oil market, spare production capacity today is shrinking and concentrated in OPEC nations like Saudi Arabia and the United Arab Emirates. Also, there is a massive global storage network in surface tanks and underground caverns. In natural gas markets, there are extensive underground storage reservoirs and typically spare export capacity through pipelines and large industrial LNG export and import facilities. The last several years have seen this spare capacity whittled away due partly to lower commodity prices and poor corporate returns shrinking the appetite to invest. Excess capacity has also shrunk due to regulatory blockage of critical energy infrastructure like pipelines and export terminals. Roadblocks for well permitting and leasing on federal lands, together with a mass public miseducation campaign on energy and climate alarmism, are also stymying hydrocarbon development. Investment capital is further constrained by a corporate Environment, Social and Governance movement, and divestment campaigns. These factors are shrinking hydrocarbon investment below what it otherwise would be in response to price signals and outlook for supply and demand. The net result is a constrained supply of oil, natural gas, and coal, which means higher prices and greater risk of market dislocations like the one unfolding today. High energy and food price inflation is the cruelest form of tax on the poor. After a few specific examples, I’ll return to what we should do now to reverse these damaging and deeply inequitable trends. Why does the world today suffer from a severe shortage of LNG? Demand for natural gas has been growing strongly for decades. It provides a much cleaner substitute for coal in electricity production, home heating, and a myriad industrial and petrochemical uses. Rising displacement of coal by natural gas has been the largest source of greenhouse gas emission reductions. Unfortunately, the aforementioned factors have prevented supply from keeping pace with rising demand. Energy shortages drive rapid prices rises and have cascading impacts on everything else. Energy is foundational to everything humans do. Everything. Perhaps the most critical use of natural gas is nitrogen fertilizer production. Roughly a century ago, two German chemists, both subsequently awarded Nobel Prizes, developed a process to produce nitrogen fertilizer on an industrial scale. Before the Haber-Bosch process innovation, nitrogen content in soil was a major constraint on crop productivity. Existing nitrogen sources from bird guano, manure, and rotating cultivation of pea crops were limited. Today, elimination of natural gas-synthesized nitrogen fertilizer would cut global food production in half. The LNG crisis translates into a worldwide food crisis as skyrocketing fertilizer prices are cascading into much higher food prices. Wheat prices are at a record high and will likely head higher as spring plantings suffer from under fertilization. Global LNG markets are tight because rising demand has outrun the growth in LNG export capacity in the United States, now the largest LNG exporter. We have an abundance of natural gas in the United States. Unfortunately, we have a shortage of pipelines to transport this gas and LNG export terminals, preventing us from relieving the energy crisis in Europe and around the world. These pipeline and export terminal shortages are due in large part to regulatory blockage. The result is that natural gas prices in the United States and Canada are five to 10 times lower than in Asia and Europe. This deeply disadvantages consumers and factories (like fertilizer factories) in Europe and Asia that rely on LNG imports to fulfill their needs. Russia’s invasion of Ukraine did not cause today’s energy crisis. Quite the reverse. Today’s energy crisis is likely an important factor in why Russia chose to invade Ukraine. Europe’s energy situation is tenuous and highly dependent on Russian imports. Russia is the second-largest oil and natural gas producer after the United States. Russia is the largest exporter of natural gas, supplying over 40% of Europe’s total demand. Additionally, Russia is the largest source of imported oil and coal to Europe. Europe put itself in this unenviable position by pursuing unrealistic, politically-driven policies attempting to rapidly transition its energy sources to combat climate change. Europe’s energy pivot has been a massive failure on all fronts: higher energy costs, grave energy insecurity, and negligible climate impacts. Germany is the poster child of this failure. In 2000, Germany set out to decarbonize its energy system, spending hundreds of billions of dollars on this effort over the last 20 years. Germany only marginally reduced its dependence on hydrocarbons from 84% in 2000 to 78% today. The United States matched this 6% decline in hydrocarbon market share from 86% in 2000 to 80% today. Unlike in the U.S., Germany more than doubled its electricity prices — before the recent massive additional price increases — by creating a second electric grid. This second grid is comprised of massive wind and solar electric generating sources that only deliver 20% of nameplate capacity on average, and often less than 5% for days at a time. The sun doesn’t always shine and the wind doesn’t always blow. Hence, Germany could only shrink legacy coal, gas and nuclear capacity by 15%. It now must pay to maintain both grids. The legacy grid must always be flexing up and down in a wildly inefficient manner to keep the lights on, hospitals functioning, homes heated, and factories powered. Outside the electricity sector, Germany’s energy system is largely unchanged. It has long had high taxes on gasoline and diesel for transportation, and lower energy taxes on industry. Germany subsidizes industrial energy prices attempting to avoid the near-complete de-industrialization that the UK has suffered due to expensive energy policies across the board. Over the last 20 years, the United States has seen two shale revolutions, first in natural gas and then in oil. The net result has been the U.S. producing greater energy than consumed in 2019 and 2020 for the first time since the 1950s. The U.S. went from the largest importer of natural gas to the second-largest exporter in less than 15 years, all with private capital and innovation. The shale revolution lowered domestic and global energy prices due to surging growth in U.S. production. Surging U.S. propane exports are reducing the cost and raising the availability of clean cooking and heating fuels for those in dire energy poverty still burning wood, dung, and agricultural waste to cook their daily meals. U.S. Greenhouse gas emissions also plunged to the lowest level on a per capita basis since 1960. Imagine the world’s energy situation today with the American shale revolution. We are starting to hamstring and squander the enormous benefits of the shale revolution. The same misinformed anti-hydrocarbon crusade that impoverished Europe and made it heavily dependent on Russia is now sweeping the US. California and New England had adopted European-style energy policies driving up electricity prices, reducing grid reliability, and driving manufacturing and other energy-intensive, blue-collar jobs out of their states. Colorado is not far behind. California, a state with a plenitude of blessings, managed to create the highest adjusted poverty rate in the nation with an expensive, unstable power grid increasingly reliant on coal-powered electricity imports from Nevada and Utah. New England’s proximity to Pennsylvania’s clean low-cost natural gas resources was a stroke of luck. But it refused to expand the natural gas pipelines running from Pennsylvania, leaving it chronically short of natural gas, its largest source of electricity and cleanest option for home heating. Instead, it remains heavily reliant on fuel oil for home heating and occasionally imports LNG from Russia to keep the lights on. Last winter New England burned copious amounts of fuel oil to produce electricity which went out of fashion in the 1970s elsewhere in the US. Texas has not been immune from energy illiteracy and collateral damage. Texas’ poorly designed electric grid, structured to encourage investment in renewables, led to hundreds dying in the 2021 Uri cold spell. No one would pay the same price for an Uber that showed up whenever convenient for the driver and dropped you off wherever they desired. But that is what Texas does with electricity: paying the same price for reliable electricity that balances the grid as they do for unreliable, unpredictable electricity. No wonder the reliability of the Texas grid has declined and is headed for more trouble. The common thread in these cases is unrealistic beliefs in how rapidly new energy systems can replace demand for hydrocarbons, currently at all-time highs. Political intervention and miscalculation have led to overinvestment in unreliable energy sources and, far worse, underinvestment in reliable energy sources and infrastructure. The full costs of this colossal mal-investment have been somewhat hidden from view as spare capacity in the global energy network has mostly kept the train on the tracks. Now that excess capacity has shrunk to a critically low level, more impacts are hitting home. Like the disease, the cure takes years to run its course. But that longer time frame is no excuse not to act now in a thoughtful fashion to begin rectifying historical blunders. Steel, cement, plastics and fertilizer are the four building blocks of the modern world and all are highly reliant on hydrocarbons. Most critically this means removing the growing myriad obstacles to hydrocarbon development, justified in the name of fighting climate change. This is nonsense. Overly cumbersome hurdles to hydrocarbon development in the U.S. do nothing to change oil and gas demand. They simply displace U.S. production overseas where production practices are less stringent and less ethical. Resulting in increased greenhouse gas emissions and other air pollutants, reduced economic opportunities for Americans, and increased geopolitical leverage of Russia and OPEC — see the invasion of Ukraine. Climate change is a long-term problem best addressed with technologies cost-effective today like natural gas, energy efficiency, and nuclear. The solution requires combining today’s commercial low-carbon energy sources with research and technology development in carbon sequestration, next-generation geothermal, and economical energy storage to make solar and wind more viable. Today the price mechanism must destroy energy demand to bring it in line with short-term supply. This reduces the quality of living, especially for low-income families. The price mechanism will also incentivize new supply to the extent possible in the face of growing regulatory hurdles, infrastructure shortages, and capital starvation. A revaluation of all three of these factors is urgently needed. Is the overarching goal “energy transition” at all costs? Or is it humane policies that better human lives and expand opportunities for all? We need to replace the former mindset with the latter. Chris Wright is chairman and CEO of Liberty Energy, a Denver-based hydraulic fracturing company.