WRITTEN BY CHRISS W. STREET
President Obama at his June 25thGeorgetown University climate change speech threw the coal, solar and wind energy interests under the bus and politically triangulated to embrace natural gas fracking. Faced with collapsing poll numbers due to multiple scandals, President Barack Obama is abandoning his environmentalist constituency and embracing his conservative opponents’ pro-fracking agenda. Obama’s move as a liberal Democrat is similar to President Richard Nixon political somersault as a conservative Republican, when he triangulated away from his pro-business constituency to embrace his opponents’ environmentalist agenda.
President Obama’s political advisors have studied how Richard Nixon in the early 1970s passed legislation established the Environmental Protection Agency and passed the Clean Air Act and Clean Water Act to improve his poll numbers that were being hammered by multiple scandals. Nixon co-opted what had been a major election advantage for his Democratic opponent and scored a historic Presidential victory in 1972. By capturing 47 million votes to 29 million for Senator George McGovern, Nixon carried 49 states and 520 of the 537 Electoral College votes.
Hydraulic fracking is a 60 year old drilling technique that involves injecting large volumes of fluids at high pressure into underground shale formations to fracture the rock into fissures that release the suspended oil and gas. New horizontal drilling technology pioneered in America combined with adding fluid bactericides, buffers, stabilizers, fluid-loss additives, and surfactants, to injected water generate higher profit yields and prevent damage to the shale formation. Fracking accounted 50% of natural gas wells drilled last year and supplied 46% of U.S. gas. Since 2000, natural gas prices in America fell from $15 per thousand cubic feet (“Mcf”) to around $3 mcf today.
From 1870 through the 1970, America dominated world oil markets by producing and selling plentiful amounts of oil an average price of $2 a barrel. America became the dominant manufacture in the world and its workers enjoy high wages, because as a percentage manufacturing cost, energy averages 13.5% versus only 8.5% for the cost for labor. At the end of WWI, British War Minister Viscount Curzon famously said: “the Allies floated to victory on a wave of oil.” In 1924, President Coolidge wrote, “the supremacy of nations may be determined by the possession of available petroleum and its products.” During WWII, half the tonnage of supplies shipped overseas was petroleum products. U.S. output of gasoline for military use rose 18 times and aviation fuel production rose by 80 fold, while the cost per barrel of oil remained at around $1.
Between December 1972 and February 1981, Nixon’s regulatory restrictions on energy production and refining caused the U.S. dollar to fall and the price of oil per barrel to skyrocket by almost 1100% to $38.34. Once American manufacturers lost their energy cost advantage, manufacturing jobs were outsourced to lower cost labor in Asia. By 2006, 63.5% of total U.S. oil consumption was imported, making America the world’s largest customer for foreign oil. As the cost of imported oil rose, high paying production jobs shrank to 17% of private employment and low paying service jobs rose to 75%.
But beginning in 2007, new fracking technology pioneered in North Dakota and Texas began reversing America’s failed environmentalist experiment. U.S. oil production rose by 20% last year and I predict by 2020 America will end our dependence on imported liquid fuels. In a blow to OPEC, the U.S. has already become a net energy exporter — competitor — with oil now our top export product. Nigeria Oil Minister Diezani Alison-Madueke recently declared U.S. shale oil is “a grave concern,” as U.S. imports from African nations fell 41% last year.
The biggest payoff from fracking will be a surge in production of natural gas. Growth of domestic natural gas was restricted to only a 20% gain over the last five years due to lack of pipeline distribution capacity. California has 66% share of America’s proven shale oil and gas reserves, but politics has prevented the tapping of this pro-labor resource. California utilities charge industrial users 88% higher electric rates than Texas, which encourages fracking and has an extensive pipeline system. Higher costs in California pay for a carbon tax and subsidize solar and wind power. This explains why Texas has four of the top growth areas, while California has three of the worst.
President Obama’s advisors are already triangulating to improve Obama’s poll numbers as the champion of natural gas fracking. On April 10th, the U.S. Senate confirmed Sally Jewell, a former petroleum engineer and energy banker, as the new Interior Secretary by 87-11. On May 16th she proposed the first updated “fracking” rule since 1982 as a “common-sense update” to expand drilling on “millions of acres of America’s public lands for oil and gas development.” Five days later, the Senate confirmed Ernest Moniz, former head of energy industry funded Cyprus Institute, as Energy Director by 97-0. The Belfer Center for Science and International Affairs, Harvard Kennedy School, often a faithful servant of the Administration, forecasts U.S. shale oil output will triple.
In his Georgetown speech, Barack Obama used the word “we” 218 times, “climate change” 15 times, “natural gas” 9 times, but “sustainable” only once. He credited fracking as the best strategy to fight global climate change: “We should strengthen our position as the top natural gas producer because, in the medium term at least, it not only can provide safe, cheap power, but it can also help reduce our carbon emissions.” New leases for oil and gas drilling granted on federal lands declined 42.4% under President Obama versus President Bush. Thanks to new triangulation on climate change, we are learning: “Obama is Fracking Awesome.”
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