Plan War and The Hubbert Curve  

Posted by Big Gav

ZMag has an interview with Richard Heinberg this month. Most of it has been said before, but his comments on the Natural Gas situation in North America are interesting.

Q:The Hubbert oil peak is predicted to occur in five to ten years. You’ve written that natural gas will go through the same peak in supply even sooner.

A: In North America, it’s happening right now. We’re in the middle of a natural gas crisis, but you have to read the business pages of the newspaper to find the evidence for that. Alan Greenspan has gone before Congress twice now to say that we have a big problem and that he doesn’t have the solution to it. Last summer, Energy Secretary Spencer Abraham convened a blue ribbon panel in Washington to address this. Abraham essentially, said, “Look folks, I need some short-term solutions.” The rest of the day, people from industry offered long-term partial solutions, but nothing that could make much difference in the next couple of years.

Currently, the market is dealing with the gas shortage through what’s called “demand destruction.” That means that prices rise sufficiently—and natural gas prices are about twice what they were a year and a half ago—to drive whole industries out of the market so that the folks can heat their houses in the winter. Currently, 20 percent of the fertilizer industry in the U.S.—which uses natural gas to make ammonia-based fertilizers—is gone. Another 30 percent is closed down temporarily until gas prices go down, which they probably won’t. So around half the fertilizer industry is gone. The chemical industries and a lot of manufacturers are teetering on the brink right now because they can’t afford natural gas at current prices.

So what’s going to happen? All those industries are going to go overseas. Fertilizer will be made for us in the Middle East, Trinidad, and other places that have natural gas and then it will be shipped here. But even so, the natural gas situation is going to get worse because we’re generating a lot of our electricity with gas-fired power plants and it’s entirely possible that we may start to experience brown-outs or rolling blackouts.

Next summer is likely to be a lot worse because, as I said, there’s no short-term solution to this. The U.S. has already peaked in natural gas production and Canada—we’ve been importing 16 percent of our natural gas from Canada—has peaked this year too. They’re forecasting that their natural gas production will be down 3 percent from last year.

So we’re looking at a big problem and it’s not going to be solved by importing liquefied natural gas in tankers. That will help, but it’s expensive and years are required to build all the new tankers, the new special off-loading terminals, etc. The natural gas industry’s solution is to get more permits from the government to drill in Colorado, offshore, etc., but it’s unlikely that enough natural gas will be found in those places to make that much of a difference. In Colorado, there’s coal-bed methane, which causes huge environmental problems to extract. Offshore of California and Florida, the estimates of what’s actually there are not all that encouraging.

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