I have noticed a few articles recently that cite financial results over a selected period of time to suggest that renewables are making great progress in replacing fossil fuels, and to dismiss the financial value of the shale revolution. This argument reminds me of the famous quote often attributed to Benjamin Disraeli: "There are three kinds of lies: lies, damned lies, and statistics."
Financial results over a limited period of time can be used to support just about any thesis. For example, consider the performance of the share price of Tesla, the only pure electric car manufacturer of any consequence in the world. Tesla's stock closed on March 6 at about 194. This is astounding when one considers that the closing price of Tesla was 39 two years ago, and suggests that Tesla, and electric cars generally, are poised to dominate the global automobile industry. However, it should also be noted that Tesla closed at 286 last September, and has lost a third of its value in 6 months. This could be interpreted to suggest that Tesla is on the verge of collapse, and that electric cars will only be niche vehicles in the global market.
Which view, if either, is correct? I have no idea, but I do know that selective citation of recent financial returns is a terrible way to predict the future.
Other examples of the danger of inferring long term trends from short term data are the frenzied dotcom boom of the late 1990's, and the subsequent residential real estate boom. Both of these were driven by speculation, not a consideration of the magnitude of underlying wealth creation.
This brings me to the two factors that disturb me about this article: the lack of discussion of the reason for the poor financial returns associated with shale production, and the lack of understanding of wealth creation.
The reason that recent financial returns in the shale production industry is the sharp decrease in the price of oil and gas that was a direct consequence of the technical success of the development of shale production technology. It is the cruel irony for extractive industries that their reward for technical success is often their financial destruction.
The wealth created by the shale revolution is staggering. The U.S. consumed about 7 billion barrels of oil and 26 trillion cubic feet of natural gas in 2014. I conservatively estimate that shale production in the U.S. has caused the price of oil to be at least $20 per barrel and the price of natural gas to be at least $3 per thousand cubic feet lower than they would have been without shale production. (These are "seat of the pants" estimates. If somebody has more reliable numbers, please let me know.) This equates to a savings to U.S. consumers of about $220 billion per year. This does not include royalty payments to property owners, local state and federal tax revenue, and job creation through the reshoring of manufacturing and chemical production. The article makes no mention of this.
It is enjoyable to speculate on the future of various energy sources, but the speculations are probably of no more value than preseason ranking of football teams. They're fun to talk about, but ultimately you have to wait until the games are played to learn who wins.