At current rates

In the unfolding war of perception around fossil fuel availability, it’s always important to watch for key words and phrasings.

It’s important because they typically take two forms: “soothe and enthuse” and the “fine print.”

“Soothe and enthuse” phrases assure the public that there is plenty of resources available. In the realm of fracking and natural gas, the phrase that soothes and enthuses is “100year supply,” as in “we have a 100-year supply of natural gas in the United States.”

The inline “fine print” wording ensures plausible deniability when physical realities and/or business needs undermine assertions made in the assurance phrases, thus dampening excitement. Again, in the natural gas fracking world, the one to watch for is “at current rates.” Sometimes the current rate cited is of consumption. Other times it’s production. Either way, it’s usually closely tied to the aforementioned “100-year supply” phrase.

With this in mind, I read with interest this story about a recently issued report written by NERA Economic Consulting at the behest of the Energy Department stating that exporting U.S. natural gas would be a big booster for the domestic economy. As I summarized previously, fracking for natural gas is expensive and not currently profitable. In short, fracking produces a quick rush and then a quick fall off in flow, requiring more drilling. That’s expensive. However, that initial rush produces a glut which drops prices, making the whole process rather uneconomic.

Clearly, shipping fracked gas overseas to growing markets such as Japan and China, where prices are currently more than triple what U.S. buyers pay, would do wonders for the bottom line of the frackers. But what would it mean for that “100-year supply”?

That’s where the aforementioned fine print kicks in.

You see, “at current rates” refers to a time when the U.S. natural gas supply isn’t part of a global market; it’s all consumed here for the things natural gas has historically been used for – cooking, heating homes and water, supplying chemical manufacturers with an important feedstock, pre-heating metals in iron and steel making, generating electricity in a power plant, that sort of thing – and produced at rates commensurate with those historical uses.

Open up the U.S. gas supply to the soaring demands of growing Asian economies and you are instantly no longer consuming “at current rates.” You’re consuming at much higher rates, which increases prices. Higher prices will drive driller’s revenue and provide capital for more fracking. Soon you’re no longer producing “at current rates” because it has jumped to meet the new, higher demand.

The boom in jobs fostered by this expensive, messy frenzy of resource extraction is unlikely to focus anyone on the math that “at current rates” encourages. Rather, some day hence, certainly much sooner than a century from now, when the issue becomes more than obvious, an intrepid scribe may wonder why the 100-year promise fell so short. This movie has played out before; but sadly it was a foreign film – British, to be precise – and we don’t really pay much attention to those here in the States.