Marcellus Shale and Old-Time Crude, Reviving a Region

By August 15, 2008Energy, Global Warming

The Washington Post’s lead story today reports on the energy boom under way in Appalachia, especially Pennsylvania, thanks mostly to natural gas development tied to the Marcellus Shale. As we’ve noted before, modern exploration and drilling technology — hydrofracturing — and high prices have made development of the gas-bearing Marcellus Shale profitable, especially since the natural gas deposits are close to existing East Coast infrastructure and markets.

The Post’s “Traditional Energy’s Modern Boom” also reports that Pennsylvania oil wells previously thought played out are now worth returning to, thanks to the high prices.

Anyway, good story, prominently played in a major national publication. (Written by Joel Achenbach, the talented feature writer and columnist going farther afield than normal. Newsroom staffing cuts have their effect.) One funny passage revealing the mindset of energy opponents:

Nathaniel Keohane, an economist with the Environmental Defense Fund, said higher fuel prices are creating “perverse incentives” that undermine market-driven reductions in greenhouse gas emissions. For example, if it appears that the price of oil will remain higher than, say, $80 a barrel, the coal industry may plunge headlong into coal-to-liquid technologies. The resulting product could be burned in your car — but with higher carbon emissions than burning gasoline.

And night is day and hot is cold. And economists know better. Higher fuel prices are creating what we call “market incentives.” The “market-driven reductions” that Keohane prefers are no such thing — they’re regulatory, policy and political impositions on the market. They’re the factors that produce perverse incentives.


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