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A Non-Mathematical Prelude to a Mathematical Note on 'The Shale Revolution'

Professor Ferdinand E. Banks
ferdinand.banks@telia.com
June 4th, 2013

The shale revolution is old hat to me. In my book THE POLITICAL ECONOMY OF OIL (1980), I referred to shale oil as an important part of the energy reserve of the United States (U.S.), and if I remember correctly, that remark did not ignite any criticism from the gentlemen who later regarded my progress as a teacher and researcher on energy economics as an outrage. I am thinking in particular of Professor Richard Gordon of Penn State University (U.S.), as well as a coterie of Swedish colleagues who might be described as his 'running dogs', to use one of those quaint expressions coined by the late Chairman Mao.

A few years after that astute observation about shale oil by yours truly, I attended a conference in wonderful Vienna, and during a brilliant discussion of the paper I presented, I was jovially referred to as a "fool" by an American business executive because of my belief in the ultimate extraction of large amounts for shale oil, Where shale gas was concerned, my natural gas book came later (1987), but it contained no mention of shale gas because I was singularly uninterested in being informed that I was endorsing sub-optimal theories, and maybe referred to again in an unflattering manner.

Of late every half-baked pseudo-scientist is competing for a place on what they perceive as the shale gravy train. Even the chief economic commentator of the (London) Financial Times, Mr Morse, has signed on as a supporter of that resource, even though he doesn't know the difference between gas and a hole in the ground. Somewhat more discouraging, my slightly negative comments on 'The Shale Revolution' at one of the tedious (and intellectually low-level) conferences at the Stockholm School of Economics may have cost me a starring role in the 2011 energy farce in Stockholm sponsored by the International Association of Energy Economics (IAEE). What was unfortunately not perceived was that my remarks had at least as much to do with the abysmal state of knowledge about energy economics in Sweden and many other countries, as the bunkum being presented at that conference by a posse of badly-informed lecturers.

If I were a sensitive man, I would be tempted to 'change my game' - to use the 'lingo' that became popular when shale gas suddenly moved into the spotlight - and instead of just pronouncing shale oil and shale gas valuable energy resources, which I did and still do because that is what they are, I would shout to the high heavens that at long last energy independence is in sight for many countries, and just as important, there is an antidote now available for counteracting the economic poison dispensed by OPEC, because foolishness of that sort is what this dipstick revolution is partially about. It is about tricking the rank-and-file into believing they no longer need to worry about dancing to the oil and gas music that might be orchestrated by A-rabs and I-ranians, and if they continue to buy lies and misunderstandings about the role played by OPEC and 'speculators' in the macroeconomic meltdown that began in 2008, their future will be sweet and lovely. The problem with oil and gas is not OPEC and speculators, but primarily supply and demand.

Not long ago some genius published an article on the site OilPrice.Com that I ridiculed because it proclaimed that President Obama had lied about U.S. energy resources, and in reality there was more oil on-shore and off-shore the U.S. than in the entire Middle East. The truth here is that the Commander-in-Chief knows little or nothing about energy, and his former Energy Secretary was best described as heartbreakingly inadequate. On that occasion I was not called a 'fool', but was told by the manager of OilPrice.Com - Mr James Stafford - that my work was "garbage", and as a result I was no longer qualified to be one of his contributors. I did not protest, because I think that he confused me with the Ferdinand Banks who failed everything twice during his first year in engineering school, and as a result had to serve 6 marvellous years in the U.S. Army before he regained his equilibrium.

The remainder of this paper - the part below this prelude - contains an extremely important diagram and some fairly complicated mathematics, and I hope that everyone with a modicum of interest in shale issues pours over these materials night and day, but please make no mistake. Somebody - or a number of people - wants 'people' to believe things about oil and gas that are not true and have never been true, and no diagrams or mathematics are as valuable for making this clear as common sense, alertness, making sure that you have access to the right information and staying as far away from nonsense as possible. So do yourself a favour: read the informative short article by Bob Moriarty on 321 Energy (2013), in which you get still another insight into the incessant lies and misunderstandings that pervade the great world of energy economics.

REFERENCES

Banks, Ferdinand E. (2013), Energy and Economic Theory. Singapore, London and New York: World Scientific.

______. (1987). The Political Economy of Natural Gas. London, New York and Sydney: Croom Helm.

______. (1980). The Political Economy of Oil. Lexingon (Massachusetts) and Toronto: D.C. Heath & Co.

Moriarty, Bob. (2013). 'US energy self-sufficiency nothing but feel-good ___'. 321 Energy, (May 2, 2013).

Professor Ferdinand E. Banks
ferdinand.banks@telia.com
June 4th, 2013




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