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Shale Gas, Oil Reserves and Energy Prices

This story today reports that there may be more Shale Gas in Northern England than was previously thought. Within the report it says:
"But it could take two years to see if the gas is commercially viable."

Realistically no one knows with any great certainty what fossil fuels remain under ground. It is important to remember that it takes energy to get fossil fuels out of the ground. The harder to get hydrocarbons take more energy. That is a key factor in whether the fields are "commercially viable".

On the right hand side of this blog I display the Oil prices for West Texas Intermediate and Brent. The difference between the two historically was low. Shale gas production in the USA drove down the WTI price (gas could not then be exported from the USA). What is happening now is that the prices are coming together (or moreso WTI is going up to Brent).

The conventional wisdom is that with the USA becoming an oil exporter again and additional oil from Iraq and Iran that prices will go down. That is not happening now, but we shall see. I would be interested in a continuation of Chris Skrebowski's forecasts as they operate over a 5 year time scale, but I have not seen a recent production of those.

None of this changes the need to get more energy efficient. Energy prices do, however, underpin economic activity and if we see a big jump then that will pull back the worlds economies. If there is a big drop then the worlds economies will pick up further.

We also must not forget the issue of climatic change. I recently read a paper written by G S Callendar published in 1938 which is interesting in the context of current debates. I can email a copy of the PDF to anyone who is interested in the science of the issue.

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