Gas price roller coaster always peaks higher

I would only add that each ridiculous low will be caused not by great new finds of cheap fossil fuels, but by wrenching economic contractions caused by the previous unimaginable highs.

“. . . [N]atural gas prices will reach unimaginable highs and ridiculous lows in the next decade.”

— Dave Russum, AJM Petroleum Consultants (Calgary)

I would only add that each ridiculous low will be caused not by great new finds of cheap fossil fuels, but by wrenching economic contractions caused by the previous unimaginable highs.

In January of this year, Russum made a presentation at the Unconventional Oil and Gas Conference in Toronto, and like all of his presentations, it had easily understandable graphs and a hint of gallows humour.

AJM doesn’t sugar coat things, like the NEB (National Energy Board) and the AEUB (Alberta Energy and Utilities Board) tend to do. There is always a hint of worry, backed up by a fair number of downward sloping graphs (the pdf files are available online at www.ajmpetroleumconsultants.com).

In the case of natural gas, the main worry is that we are in an era of “basin maturity.”

We are rapidly running out of relatively cheap conventional sources and are now forced to turn to relatively expensive unconventional sources (such as coal bed methane and shale gas).

The main source of unconventional natural gas that has been affecting North American prices over the last year is shale gas, which is natural gas that is trapped deep underground in the tiny pores of shale rock.

In the good old days, drillers would just stick a huge straw into the ground and the gas would come up fairly easily. But now, they have to stick a huge straw into the ground, pump down a mix of water, sand, and some rather unhealthy chemicals, and then pressurize it with 20,000 horsepower pumps so that the natural pores in the shale are opened up a bit more (allowing the gas to flow out more easily).

I should note that the unhealthy chemicals have occasionally been posing a bit of an issue, where some landowners close to drilling activity have complained about things like toluene (a chemical used in explosives and paint strippers) in their drinking water.

The shale gas strata are generally much deeper than the aquifers that the water wells tap, and the drill holes are usually encased in cement so as to block any contaminants from reaching the aquifers, but since the exact composition of the chemical brews are considered proprietary information, it has been difficult to unequivocally state that the evil brew coming out of Granny’s tap is related to the evil brew that the natural gas industry has been pumping underground.

What is certain, however, is that this new source of natural gas is significantly more expensive than the old. Not only do drillers have to go through the sequence mentioned above (called “hydraulic fracturing” or simply “fracing”), but once set up, the wells tend to dry up much faster than conventional natural gas wells. With the latter, a well might produce significant amounts for a decade or more. But with shale gas, the useful life of a well is closer to two to five years.

All of these factors mean that it will only get more and more expensive to heat our homes. And as Russum noted above, there will be a roller-coaster ride. Prices rise (like in 2008), generating investment. Production, in turn, goes up. The market gets saturated. As a result, prices plummet (like now). Investment then dries up. Then production plummets. In response, prices spike yet again. And on it goes. The cycle continues. But unlike a roller coaster at the fair, the peaks on this one only get higher and higher as we ride along into the future. Welcome to the world of finite resources.

Evan Bedford is a local environmentalist. Direct comments, questions and suggestions to wyddfa23@telus.net.

Just Posted

Fire investigators comb through industrial fire wreckage looking for answers

Industrial building in north Red Deer was completely gutted in Wednesday morning fire

Time for a central Albertan in cabinet, says chamber of commerce

Central Alberta had no cabinet ministers in last government

Trump Russia probe finally delivers some answers

WASHINGTON — After nearly two years of waiting, America is getting some… Continue reading

Trans Mountain Pipeline deadline extended

OTTAWA — The federal government is delaying a decision on the Trans… Continue reading

WATCH video of Innisfail resident creating the world’s biggest caricature

Watch as Innisfail resident Dean Foster creates the world’s biggest caricature of… Continue reading

CRA’s automatic benefit registrations give retirees reason to file on time

TORONTO — This is the time of year when procrastinators begin to… Continue reading

Study: Genetic test predicts middle-aged obesity risk

NEW YORK — Can a genetic test identify newborns at risk of… Continue reading

Downtown Red Deer Co-op Plaza Food store closing

Central Alberta Co-op is closing its downtown Red Deer Plaza food store… Continue reading

Earth, meet Polo: Ralph Lauren unveils plastic bottle shirt

NEW YORK — Earth, meet Polo. Polo Ralph Lauren on Thursday launched… Continue reading

Statistics Canada reports retail sales rose 0.8 per cent in February

OTTAWA — Statistics Canada says retail sales rose 0.8 per cent in… Continue reading

Inflation rises 1.9% on higher prices for fresh vegetables, mortgage costs

OTTAWA — Canada’s annual inflation was up last month as price pressures… Continue reading

Netflix adds 9.6M subscribers in 1Q as competition heats up

SAN FRANCISCO — Netflix kicked off the year with the biggest subscriber… Continue reading

Liberals find anti-Trudeau sentiment on campaign trail in Prince Edward Island

OTTAWA — When voters in Prince Edward Island go to the polls… Continue reading

Most Read