Monday, January 2, 2012

Countdown Completed: The Number One Fact Of 2011

2011 was an extraordinary energy year, with booms in natural gas, domestic oil production, wind generation, biodiesel fuel, solar power. Lots of rain and snow melt also meant 2011 was a big year for hydro power. Energy conservation also boomed, making the US economy progressivley more energy efficient and competitive. Oil imports declined, US coal consumption and power production fell, US oil consumption decreased, and US carbon emissions dropped for the 4th time in the last 6 years, while Chinese carbon pollution is now 50% greater than Uncle Sam's total.

The US energy boom is a significan reason why the US economy has grown every quarter since July 1, 2009, when a Depression was prevented, and why 2.5 million jobs have been created since early 2010. Economic growth has resumed, even though world oil prices spiked to over $120 during 2011 and on a rolling 12 month average basis hit record highs last year.

Indeed, during the second quarter, high oil prices and $4 gasoline came close to pushing the US economy back into recession. And that brings us to the Biggest Energy and Environment Fact of 2011.

Three dollar natural gas or to be precise $2.98 for a thousand cubic feet on December 30, 2011 natural gas was the biggest, most powerful energy and environment fact of 2011. As oil and coal prices increased, gas prices fell about another 25% in 2011. Why the low prices?

Shale gas production that amounted to about 16% of total gas production at the beginning of 2011 and 34% by the end of 2011 is the one and only reason for $3 natural gas during a winter.

Yes, winter pricing of $3 gas makes the 2011 price move in gas even bigger and more powerful.

One consequence of the 2011 natural gas price decrease was no broad energy shock in the USA and no return to recession. Low-price natural gas amounts to 25% of all energy used in the USA, and residential natural gas consumers have seen annual savings on gas bills of $500 and another $500 savings on electric bills, as a result of gas price declines since 2008. Gas has delivered a $1,000 stimulus to families just when it is most needed.

Another consequence of low-price natural gas is intense competition with coal and displacement of coal by gas. Plants that can burn either coal or natural gas burnt gas during 2011. Natural gas plants ran much more frequently in competitive markets and reduced the dispatch of many coal plants. Electricity generation executives increasingly believe that gas pricing will be stable, due to huge shale gas resources, and are sometimes replacing coal with new, efficient gas combine cycle plants.

According to EEI, the electricity utility trade group, 231 coal units will be closed by 2022. But the rise of gas as a ready substitute for old coal plants was identified by the EPA as a major reason why the combination of the Air Toxics Rule and the Cross State Air Pollution Rule did not threaten grid reliability. Gas plants meet the tougher air rules, as does 90% of current generation capacity, while about 100,000 megawatts of pre-1970, smaller coal plants do not.

At the end of 2011 coal's share of the power market had fallen to about 43%, gas' share had risen above 25%, and EIA projected coal would decline 4% more in 2012. Low-priced gas is changing how America keeps the lights on.

As well as the energy efficiency and renewables booms, gas displacing coal is a major reason why US carbon emissions have fallen in 4 of the last 6 years. By the end of 2011 at least 6 studies confirmed that gas emits on a life cycle basis just half the carbon pollution as burning coal does without carbon capture technology, thereby debunking the infamous Howarth study.

America produces more natural gas than any nation, and 2011 was probably a record year for US natural gas production, yielding $3 gas as increases in gas demand did not come close to matching increases in gas supply.

Three dollar gas in 2011 refutes the malicious Ponzi scheme charge spread by the NYT, created intense gas versus coal competition for power generation market share, contributed to reducing US carbon emissions, bolstered the EPA's ability to tighten air regulations, prevented a broad energy price shock to the economy, and delivered a $1,000 stimulus in the form of energy savings to consumers.

For all these reasons, $3 gas is the Number One energy fact of 2011.


  1. It is amazing the changes that are happening. The U.S. becomong an energy exporter, energy prices dropping in some markets. With renewables and a little patriotism we can break the forgein oil grip. Thank you and happy new year.

  2. John, this is great, and a real service. thank you. Jim Choukas-Bradley

  3. The combination of increased domestic oil production, increased efficiency in using oil, substitutes for oil like natural gas, biofuels, and electric vehicles do amount to a real means to end oil imports within 10 years. Nothing would do more for our national and economic security.

  4. Concerned ScientistJanuary 3, 2012 at 9:41 AM

    Right On John - I like your whole list of energy stories. Your priorities should be the priorities for everyone who cares about the environment and cares about the future of our country. I'd love to see you in high office again.

    Happy New Year

  5. I appreciate your keeping up with the many energy issues. I am interested in the global warming effect issue of gas and the implications it has for energy policy. Could you look at this and give your thoughts? Thank you.

  6. There are a number of issues with the Wigley study. I will not here do an exhaustive response but make some key points.

    The UN has said that to stabilize concentrations of heat trapping pollution at 450ppm carbon pollution must be reduced by 50% by 2050.

    Gas emits 50% less carbon than coal. It is also less carbon intensive than oil (about 25%). Gas is not zero carbon but it is lower carbon than coal and oil that provide 55% of all US energy and even more of the world's total energy. Gas, therefore, can be an economical way of reducing carbon that is available at huge scale right now. It is by no means all or even most of the solution. Energy Efficiency is vital. Renewables and probably nuclear are indispensable. Moving from oil to lower carbon alternatives like electricity and gas for transportation are needed. Many, many things are needed.

    And to be clear, I am a climate pessimist. I doubt that emissions will be reduced to prevent carbon concentrations from reaching 500ppm or even 600ppm. I am a pessimist in part because some deny the problem and others insist just about every practical, economic lower carbon option available right now just is not good enough.

    Do you really want to oppose replacing a coal plant with a gas plant and cutting right now carbon emissions by 50%? Some say yes. Because it is not good enough.

    The deniers and the perfectionists make me a pessimist.

    The Quigley study starts with the point that gas replacing coal removes soot from the air. Soot in the air is a cooling force and removing soot, all other things being equal, raises temperatures.

    Of course, renewables would remove soot from the air, as would nuclear energy, and would have the same impact as gas in the periods that Quigley looked at.

    The Quigley study looks at an assumption that gas replaced 50% of coal. Why not 100% of coal? Too little of anything helpful won't do enough good. Too little renewables would have the same problem.

    The study has a number of assumptions about methane leakage and time periods and other factors that move the results.

    It is a modeling exercise and its assumptions are crucial.

    But the bottom line for me is that all options that can economically reduce carbon right now should be used. Energy Efficiency, gas, some renewables can do so. Nuclear in some parts of the world can also help.