Ridley on Energy Efficiency

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Anyhow, the forces that have driven energy prices up in recent years appear to be fading. Consider some of the reasons that oil and gas prices rose in 2011, the year energy companies pushed up prices even more than this year. Japan suffered a terrible tsunami, shut down its nuclear industry and began scouring the world for gas imports to keep its lights on. At about the same time Libya was plunged into civil war, cutting off a key supplier of gas. Add in simmering tension over Iran, Germany’s sudden decision to turn its back on nuclear power, the legacy of a couple of cold winters and the lingering depressive effect on oil and gas exploration of low energy prices from much of the previous decade, and it is little surprise that oil and gas producers pushed up prices.

Contrast that with today. Several years of high prices have driven a surge of new exploration. Deep offshore technology is advancing rapidly and huge gas fields have been found in the Mediterranean and in the Indian and Atlantic oceans. In the United States, the shale revolution has glutted both gas and oil markets, displacing imports. Iran is coming in from the cold, Libya is back on stream and Australia is preparing to export huge volumes of gas. Should the rest of the world start producing shale gas — China, Argentina, Poland and others are on the brink, even Britain might one day deign to join them — that would further add to supply.

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Meanwhile, the argument that the running out of fossil fuels is what has been driving up prices has been proven once again, for the third time in my lifetime, to be bunk. America, the most explored and depleted oil and gas field in the world, is now increasing its oil and gas production at such a rate of knots that it is heading towards self-sufficiency. If an oil field as gigantic as the Eagle Ford can be found (through technological innovation) in Texas, think how much awaits explorers in the rest of the world. Even five years ago, gas was thought likely to be the first of the fossil fuels to run out. Nobody thinks that now.


Source: Matt Ridley, "Gas and Oil Prices May Soon Fall," therationaloptimist.com,December 07, 2013