Remember peak oil? For those not familiar, “peak oil” posited that the world’s known oil reserves had peaked and were in terminal decline. If current trends continued, analysts predicted the world would begin to run out of crude as soon as 2020.
Except current trends hardly ever continue.
Which brings us to today’s reason for being thankful: Technology. Thanks to a new technology – hydraulic fracturing (fracking), America will soon surpass Saudi Arabia as the leading source of crude oil and natural gas. This increased supply of crude has blunted the main reason for speculation-caused price spikes: shortages and rumors of shortages.
According to Marketwatch, in 2005, the U.S. produced about 5 million barrels of oil a day, in a market of about 90 million barrels a day then dominated by OPEC. Fracking has made it possible to extract ever more oil from shale rock. According to Marketwatch, soon the US and Canada will be able to produce 6.5 million barrels a day from shale alone by 2020 with more coming from traditional wells. The estimate for shale alone is now up to 12.1 million barrels a day.
Good news for the environment
Fracking has also increased the availability of vast new supplies of cheap natural gas – so cheap that it is now economically feasible for utility companies to switch from coal to natural gas for electric power generation. Natural gas burns much more cleanly than a high-carbon content fuel like coal. And that’s a good thing.
Good news for the economy
The world’s economy runs on energy, and cost of energy ripples through the economy in ways that are not always obvious. When gasoline prices are high, it costs more to fill your cars tank. It also costs the farmer more to run his tractor when he plows his field and harvests crops. It also costs the trucker more to bring those crops to market. It costs more for the supermarket to run the refrigeration units that keep food from spoiling. All those costs are baked into the price you pay for groceries.
Good news for auto makers
In 2008, gasoline prices spiked to over $4.00/gallon and caused SUV and pickup truck sales to crater. Unfortunately for GM, Chrysler and Ford, those companies didn’t have much to offer panicked consumers in the way of high mileage products. Making matters worse, the compact cars the domestics did produce were marginally profitable, so they didn’t contribute to the bottom line like SUVs and pickups. For GM and Chrysler, the gasoline price spike was a tipping point and those two companies went bankrupt. Ford came within a hair’s breadth of going belly-up. Thousands of auto workers lost their jobs.
Good news for Ford
In Dearborn, Ford executives are closely monitoring the price of gasoline and sales of their two hot new products, the aluminum-bodied 2015 F-150 Pickup and the redesigned 2015 Mustang. If the price of gasoline remains low or continues to drop, this bodes well for long term success of these two critical products in Ford’s portfolio.
Even if gasoline prices climb, however, this would put Ford’s F-150 in an even stronger competitive position because of the fuel economy gains realized by EcoBoost technology and the extensive use of weight-saving aluminum for the F-150’s body and pickup bed.
Horse manure problem
This isn’t the first time a new technology has helped to solve a seemingly insolvable problem. At the turn of the last century, for example, America was transforming from an agricultural economy to an industrial one. Millions of people moved from farms to cities to work in factories. Along with the people, came horses.
In 1903, the year Ford Motor Company was founded, horses were the primary mode of transportation, and a major byproduct of horses is manure. Not a problem on the farm. In crowded cities – it became a major problem. City planners grappled with ways to deal with mountains of horse manure when a new technology came along in the form of Henry Ford’s automobile. Overnight a major environmental and public health threat disappeared.
Today, the automobile has created an environmental problem in the form of hydrocarbon emissions, but read on…
Transition to hydrogen
The late author Michael Crichton observed that industrialized nations have been transitioning from high carbon to low carbon sources of energy for over 125 years. Crichton believed the day would come when hydrogen would be a major source of energy and someday replace fossil fuels.
When (not if) electric cars, hydrogen-powered cars and fuel cells become feasible, a lot of our current environmental problems will go away, too.
Just like the horse manure problem.
This holiday season, give thanks to the improvements in your quality of life made possible by technology and the creativity and ingenuity of American entrepreneurs, scientists and engineers.