Continuing Conversation... Gregory Zuckerman on the Frackers and the Energy Revolution

EconTalk Extra
by Amy Willis
Gregory Zuckerman on the Frack... The Best Easterly Essays...

This week, Roberts spoke with Gregory Zuckerman about his new book, The Frackers, and the renaissance of energy production in the United States.

Use the prompts behind the fold to encourage conversation, either online or off. As always, we love to hear from you!

Check Your Knowledge:

1. Roberts and Zuckerman discuss the vastly increased output of natural gas in the United States and the potential for similar increases in oil production. Why has the impact on the price of natural gas been so much larger than the impact on the price of oil or gasoline?

2. Why is fracking easier in the United States compared to other countries?

Going Deeper:

3. About halfway through the conversation, Zuckerman and Roberts recount the incredible supply and demand story of natural gas. Try to illustrate this story in a supply and demand framework.

4. Recount the reasons Zuckerman suggests environmentalists should support fracking. How convincing is he on this score? Are there reasons he neglects to mention? What of the legitimate environmental concerns he notes? To what extent do the benefits of fracking outweigh these costs?

Extra Credit:

5. Zuckerman suggests at several points that the fracking industry would benefit from further regulation, yet he offers little in the way of specifics. What sorts of regulations do you think Zuckerman would impose on the fracking industry? How effective do you believe these might be, and why? What alternative regulations might you propose?

Comments and Sharing

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COMMENTS (4 to date)
Neil Salmond writes:

1. Gas is (mostly) piped over land, oil is barreled and shipped intercontinentally. (LNG shipping is still very pricey, although many are pursuing it.) The oil price is therefore determined by a global market (including a middle eastern cartel, but with less impact than historically) whereas gas prices are set based on pipeline network availability.

2. Landowners own below the ground. Also risk-takers. Also (by implication in the podcast) Texas is uglier than rural England.

3. Can't remember the precise moment this is referring to, but I remember the point about investing based on forecast (high) prices leading to a supply glut and so actual low prices. Such is the nature of commodity boom-bust cycles (and a big reason not to be excited by commodity booms as economic saviours).

4. Ok, this really, really bothered me. I guess I must be religious, as Russ said.

a. It's very important to distinguish local environmentalism from concern about global climate change. The american environmental movement grew out of a very local, nature is pure, do not mess with it kind of environmentalism. That's important probably, but a much easier problem to deal with: we just stop messing with nature, and it mostly grows back. See any photos of urban decay, for example, or the abundant fauna around chernobyl.

Climate change is a different beast entirely. Big timescales, big fundamental impacts (storms, starvation etc.) and causes that are deeply embedded in 'civilisation'.

b. That said, it really really bothered me that Russ implied civilisation is impossible without sitting in traffic or making electricity from nat gas. US emissions are famously stupidly high compared to other OECD countries with far higher quality of life. If Americans lived like Danes would they be less civilised?

c. Russ very precisely quoted the CO2 decrease but a) neglected to mention the 'great recession' and indeed 'peak car' b) neglected to mention offshoring of manufacturing and c) left reference to fugitive methane (a far more potent GHG) to Greg, who skipped over it very quickly later.

d. Worst of all, Greg said "USA and Europe are irrelevant, the big climate-saving impact will come from China fracking for THEIR OWN gas to displace coal". And then switched immediately to using that as an argument in favour of US fracking. Let China frack away while the US cuts the sprawl subsidies, reurbanises and pours R&D effort in solar and batteries (and sure e-robotaxis).

e. I'm actually more sympathetic to the pragmatic argument that we can't expect a country just to ignore a resource. But we can criticise how the country manages the resource: is America (or are any states) creating a Norway-style wealth fund from all the royalties to fund an Alaskan-style dividend to all citizens? Or are we still hoping for trickle-down...

5. I'm sympathetic to Russ' point that the big guys have more to lose reputationally, and Greg's point that the worst water-table poisoning was in the past, by small guys. I'm also knee-jerk anti-regulations which are likely to be lobbied-to-weaken and met in letter not spirit. The usual preferred solution is more transparency, which in this case probably means real-time methane monitoring and very solid and high profile protection of property rights, like great big lawsuits for any poisoning. Clearly BP hasn't felt a whole lot of financial pain from Deepwater Horizon, so whatever system of checks/fines we have there isn't nearly enough.

TeeJaw writes:

Mr. Zuckerman says the oil companies make lots of mistakes. He says more regulation is needed. I was waiting for him to acknowledge that because of the enormous financial investment that can so easily be lost by mistakes the oil companies have the largest financial incentive to avoid mistakes and/or to quickly correct them. That incentive is probably as effective, or more effective, than regulations.

If you own something very valuable you probably don’t want that asset to be blamed for hurting anyone.

Dallas Weaver, Ph.D. writes:

Most people have very little perspective on environmental issues. For example, both the anti-fracking activists and Zuckerman make a big deal about the 5 or so million gallons of water being used in fracking. It sounds like a lot.

Five million gallons is about 15 acre feet of water (measurement used in US agriculture for irrigation) and it takes about 3 acre feet of water per year to irrigate one acre of land in California and most places where you need irrigation (all those circles you see in the flyover states -- center pivot irrigation). That makes fracking a well equivalent to about 5 irrigated acres for one year. One center pivot irrigation system will use more water in one year than fracking 20 new wells.

Water for irrigation sells at about $10 to $20 / acre foot in California so we are talking about a $150 worth of water before shipping. Even desalinated seawater or distilled water is only in the couple of thousands per acre foot, which is less than the trucking cost.

Also, water quality is not relevant for frackers and reclaimed sewerage and most waste waters are fine.

Amy Willis writes:

@Dallas Weaver, thanks for those numbers...very helpful!

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