American Gas: A Response

Michael Lardelli responds to Alexander Downer’s recent column on fracking.

In his June commentary “American Gas”, Alexander Downer describes with admiration the expansion of ‘fracking’ for gas and oil in the USA and warns us that this technology will “cost us dearly” as it returns the USA to resource independence and the energy superpower status that it enjoyed in the 1970s. Commodity exporter Australia will be left behind. There is also a continuous drumbeat of hyperbole regarding fracking in The Australian, The Financial Review and even from our ABC. Meanwhile, climate change activists are beside themselves with fear at the tales of near countless billions of additional barrels of oil that fracking will deliver. But they need not worry. What we are witnessing is a concerted and very well funded oil industry campaign to convince us that our worries over peak oil and a future of declining oil production are baseless and we can look forward to economic growth “going forward” for decades to come. (Since we are desperate to believe this message we are very easily convinced!) Oil is the primary energy resource that facilitates food production and the global distribution of goods. Globalisation cannot exist without it. So it is a pity that we cannot trust authorities such as the OECD’s International Energy Agency (IEA) or the USA’s appropriately named Energy Information Agency (EIA) to give us rational predictions of future oil production. But as IEA whistleblowers revealed in 2009, “… the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources” and so for the IEA it is “imperative not to anger the Americans” with reality-based estimates of future oil production. The most comprehensive publicly-available analysis of shale oil and gas production in the USA shows quite clearly that this is a short-lived bubble of activity that will peak in 2017 and be almost over by 2020 (visit Dr David Hughes’ website Shale gas production in the USA is making huge financial losses and shale oil is barely profitable (if at all) despite the world’s persistently high oil prices (Google for commentary by petroleum geologist Art Berman for more information). I am unconcerned that we will ever see widespread adoption of shale gas or oil production in Australia because it is simply uneconomic. Some Australians may be deceived by the hype into investing in these activities, but if they don’t do their due diligence they deserve to lose their money. What does worry me as the parent of two young children is that former politician Downer and his still active colleagues on both sides of parliament continue to ignore Australia’s already severe and growing vulnerability to oil supply shocks due to our reliance on Middle Eastern crude oil refined in Singapore. Downer certainly understands how increasingly unstable the Middle East is becoming and as retired Air Vice-Marshal John Blackburn AO warned in his recent report, Australia’s Liquid Fuel Security, “… we are heavily dependent on imports of refined petroleum products and crude oil to meet our liquid fuel demand and our import dependency has increased over recent years. Any major interruption to the supply chain would significantly impact our way of life.” That’s putting it mildly! Michael Lardelli is a geneticist at the University of Adelaide. He has published numerous online essays on the topic of Peak Oil and translated into English the book, “Peeking at Peak Oil” by researcher and physicist Prof. Kjell Aleklett (Uppsala University, Sweden). Image: No Fracking Way Rally – Alex Bainbridge