The Keystone XL pipeline odyssey has become the latest lightning rod for all manner of competing political agendas in and out of Washington, DC. The politicians and pundits have once again managed to render the issue unintelligible to the general public by making the pipeline a featured player in the many storylines competing for attention on the media stage, from “Jobs, jobs, jobs” to “Save the planet.” The underlying issues and agendas for the oil and gas industry get lost in the dense fog of obfuscating rhetoric. So what is really going on here?
Find out by reading the the full article: Starving the Beast -- Keystone XL and the Politics of Global Warming.
Recently and after years of debate, Australia passed national carbon management legislation that will begin setting a price on carbon by July 2012. Australia will soon join the ranks of the European Union and New Zealand who both have active carbon trading schemes requiring large emitters to procure and surrender permits to cover their GHG emissions. While the U.S. is busy developing and then fighting itself over implementing a patchwork of energy and environmental policies, much of the developed and developing world, including China, are forging ahead with comprehensive national carbon policies.
Just as utilities and other major emitters in the U.S. thought that the looming cloud of carbon legislation had passed, could action from some of our biggest trading partners in the race to transition to a low carbon economy be a driving force for domestic carbon and energy management legislation in the foreseeable future? It is certain that the U.S.’s lack of action to reduce its contribution to global GHG emissions may have slowed, but certainly has not stopped global action. The upcoming United Nations Climate discussions in Durban, South Africa may offer some gauge of the U.S.’ thoughts on the matter, but as we see it there are a lot of political winds that need to shift to bring back the threat of carbon legislation in the U.S. in the near-term.
Forbes Magazine recently published an interview with Pace Global CEO Tim Sutherland on the topic of Education and the True Cost of Energy. As the author of the article James Marshall Crotty explains, he sought an expert who had long been in the energy business, and who could talk in a straightforward manner about energy regulation issues, carbon mitigation & alternative energy infrastructures, and the feasibility of available energy options.
In the interview, Tim addresses many of the issues surrounding the public’s education on energy topics, understanding the risks and long-term energy infrastructure development costs that are involved, as well as the nature of global markets for various energy sources. A prevailing theme is that our own energy and economic future can in fact be influenced with proper management of large, recent natural gas discoveries, such as the Bakken Formation. Proper management moves the local economic effect from a purely services-oriented context to one that supports manufacturing and R&D jobs – though this must be supported by additional emphasis and excitement for science, engineering, and quantitative skills in our schools (i.e. the STEM skills).
Additional conversation moves toward the balance of risks that must be taken by energy stakeholders in finding the middle ground between capital investment strategies (i.e. exploring, building, sustaining energy infrastructure) and the pervasive uncertainties in energy regulatory compliance. This includes being sure the marketplace is developed appropriately to receive and support renewables, and add them to a prudent energy portfolio, before the newest technologies are actually implemented.
Read much more at Forbes Magazine’s website about Education and the True Cost of Energy.
I love this time of year. With another school year coming to an end, the new crop of interns has again arrived at the Pace Global. It is instructive to watch as they adapt their living habits and work behavior from the academic world to that of a bustling business office. For me, they provide a reaffirming harbinger of things to come for this country and for our energy sector.
Intern Season is a time of optimism. We hear it in the familiar messages of the commencement addresses that also come out this time of year as the famous and not so famous provide their words of wisdom and insights for the next generation. “Everything is possible”. “There are no limitations”. “Opportunity is there for the taking”.
Perhaps surprisingly, this is exactly how I feel about energy. I have never been so optimistic about the future of the energy industry as I am right now. More than anytime during my career, there are a multitude of viable options available that can provide a clean, safe, secure and economic energy future for the U.S. and global markets.
It seems like new energy technologies are emerging almost every day. Like the newest generation of solar PV systems that are driving higher levels of efficiency while bending the cost curve down. Then there are the new drilling and recovery techniques that have opened up vast new supplies of natural gas and petroleum…much of it right here within the borders of the U.S. The “Smart Grid” is helping utilities and energy users be more energy efficient. Who knows what tomorrow will bring…the next big idea may be right around the corner.
Still the challenges facing our industry are great. The global demand for energy is again growing and the trend will certainly continue as emerging countries like China and India mature into more consumer oriented markets. There is no one perfect form of energy that will be able to satisfy this growing global demand. It is imperative that we pursue all viable paths so that we sculpt a portfolio of energy sources and not find ourselves overly dependent on any one source. We will continue to depend heavily on fossil fuels such as petroleum, coal and natural gas for years to come and we need to be realistic about this reality. But we should also be planning on how we transition from these forms into more renewable forms that are becoming more viable every day and we should allow the market to pick the “winners” and “losers”.
Like our interns, I feel a sense of privilege to participate in whatever small way in the development the formation of our future energy profile. And also like our interns, I am keenly aware that future is uncertain and best realized by defining a thoughtful view of the future that can only be realized through good and careful short term decisions along the way.
My admonition to our Interns is less lofty than what they may have heard at commencement. But I do share with them what Vince Lombardi once said and I believe it applies both to sculpting our energy future and our Interns — “ The only place “success” comes before “work” is in the dictionary”.
I’ve been in the energy business a long time. As CEO of Pace Global Energy Services, I’ve been actively engaged in the energy industry for more than 35 years. It’s always amazing to me how the more things change, the more they stay the same. This is especially true during periods of gasoline price spikes.
It is Washington’s self serving habit to look for villains in the energy industry when gasoline prices rise. Last week several Senators introduced the “Close Big Oil Tax Loopholes Act” following President Obama’s earlier request for congress to “take immediate action to eliminate unwarranted tax breaks for the oil and gas industry and use the dollars to invest in clean energy”. Irrespective of your views on the appropriateness of these tax breaks, one doesn’t need to be an expert in Machiavellian tactics to know that these knee jerk reactions are intended to be detractions rather than purposeful.
In fairness, the stark reality is that no administration since the Nixon Administration has designed nor has been disciplined in the execution of a thoughtful energy program that would reduce our dependence on Middle Eastern oil. President Nixon’s 1973 initiative, in response to the first Arab Oil Embargo, to create the Department of Energy and announce Project Independence, was likely the most comprehensive, even though not systemic or successful.
And now, the Obama Administration’s impediment of domestic oil and gas development, the erection of regulatory barriers to the construction of the Keystone XL Pipeline to import 500,000 barrels/day of growing Canadian synthetic crude production and the aggressive actions of the EPA to impede if not altogether halt the development of vast new shale gas resources made possible by advances in drilling and completion technologies, is entirely consistent with our historic pattern of failing to be disciplined to the truth about the gravity of our current situation.
As a consequence of our chronic lack of leadership and resolve, the United States after nearly 37 years, continues to export dollars and remains content to allow our economic and political security to be subject to the market power of a small group of countries. Since 1973, in nominal dollars, we have invested over $537 billion in the Department of Energy, and have imported oil in the amount of over $3.4 trillion dollars and we are little better off than we were in 1973. And, leave no doubt about the consequences to Europe and the United States and the solutions that would need to be deployed if Saudi Arabia became destabilized.
With advancements in renewable energy technologies, the availability of domestic natural gas, access to prudent offshore drilling opportunities, and major advancements we have made in energy efficiencies, the United States is truly in a position to materially alter the equation of our dependence on imported oil and oil products.
But sadly, while these opportunities for change are now available, what is still resident seems to be the lack of leadership and resolve to develop a prudent and comprehensive plan that balances environmental risk with economic and security risk, that considers the balance of public and private sector roles and the early and proper deployment of funds to accelerate renewable energy sources that truly are stable and beneficial.
We are at a unique time in terms of our ability to enhance domestic fossil energy supply, to take advantage of our renewable energy technology, and to impede the control that Middle East oil has over world economies.
Emotions and the overall level of discord are now at super-heated levels in Washington with no exception for energy policy. I hope we all avoid looking for “villains” and seek authentic collaboration with all stakeholders. I think we all need to take a deep breath, put past differences behind us and work together to come up with an energy policy that addresses the fundamental issues that we face and to do so without all the headlines.
In recent weeks, we’ve all felt the pain at the gas pump. It seems the price of gasoline has been sky rocketing at an accelerating rate and it is not even “driving season” yet. Here in the Washington, DC area where I live the price of Regular grade gasoline is now over $4/gallon. We all know the impact this is having on family budgets.
What some people don’t realize is that diesel prices are also on a similar trajectory. Last week, the average price of diesel fuel across the US was a staggering $4.09 per gallon. And even though you may not drive a diesel powered vehicle, the price of diesel impacts the cost of virtually everything you buy.
The good news is that new technologies and the discovery of vast amounts of natural gas right here in the US provides an attractive solution to the issue of high diesel prices. As a replacement for diesel fuel in heavy duty freight trucks, liquefied natural gas (LNG) hold tremendous promise by providing significant economic, environmental and energy security benefits.
LNG – Sizing the Opportunity
First, some numbers to define the opportunity. The United States is the largest petroleum consumer in the world, consuming 18.8 million barrels per day of petroleum products in 2009. 51% of which was imported.
The transportation sector represents approximately 72% of U.S. demand for petroleum products, and after gasoline, diesel fuel represents the 2nd most important transportation fuel. On-highway diesel consumption was, by far, the largest segment of the diesel market representing more than 30 billion gallons of demand in 2009. To replace this demand for diesel would require approximately 4.7 Trillion cubic feet (Tcf) of natural gas, which is less than 0.2% of the estimated 2,552 Tcf of potential domestic natural gas resources.
A Clean Alternative to Diesel
LNG is produced via a liquefaction process that cools natural gas to temperatures of -260 degrees below zero. This process also purifies the fuel, increasing the combustible methane content to over 95%, and thus making it a very clean-burning fuel. According to the U.S. EPA, LNG can reduce particulate emissions by half, nitrogen oxide and volatile organic hydrocarbon emissions by half, carbon dioxide emissions by one quarter, carbon monoxide, toxic, and carcinogenic pollutants significantly, as compared to diesel fuel. These significant emissions reductions will improve air quality and help address global climate change.
The Cost Advantage vs. Diesel
Over the last two years oil prices have varied from a high of $140 per barrel to a low of $40 per barrel and currently sit at roughly $110 per barrel. Meanwhile, natural gas prices have stayed relatively stable and low in comparison. Due to the abundance of domestic shale gas, natural gas prices are expected to remain fairly low for the foreseeable future. A current “pump-to-pump” price comparison of diesel vs. LNG reflects these cost ratios. With current diesel prices at just over $4/ gallon versus current natural gas prices, LNG could be produced and delivered to a fueling station for less than $2 per diesel equivalent gallon, a significant cost discount to diesel.
Conclusion
While the market opportunity is still emerging, the technology is available and mature. Natural gas has been used in “diesel” engines for a long time and major engine and truck manufacturers including Cummins Westport, Peterbilt, Kenworth, and Freightliner offer natural gas products. What is lacking is infrastructure. While there are approximately 130,000 gasoline fueling stations across the United States, there are only roughly 45 LNG fueling stations currently in operation. In order to create this market, significant development of liquefaction and fueling infrastructure is needed. But with the all the uncertainty surrounding petroleum and the price of diesel, I feel the time is right for LNG.
Flip on a light switch. Press the power button to your TV. Plug your cell phone charger into the wall. Are you expecting something to happen? If the answer is ‘yes’, congratulations, you remembered to send in last month’s electric bill. But the real reason you can be confident that when you want power - you get it, is because somewhere amidst the complicated web of the “power grid” there is a baseload power plant generating a constant supply of electricity, available for your consumption anytime. In the United States, however, we are facing a growing gap between baseload power supply and demand, and both the power generators and their bankers are nervous about putting money into new power plants while the rules for how plants must operate are uncertain. How long can this impasse last before the lights start to flicker?
Coal-fired power has traditionally served as the leading source of baseload power in the United States, but many aging coal plants are facing retirements, a process accelerated by U.S. environmental policy and regulations. Some form of carbon regulation remains probable, increasing the cost to operate coal plants and creating barriers of entry for new plants. Additionally, just this year the Environmental Protection Agency (EPA) has or is expected to release four major regulations that will require much of the existing coal capacity in the U.S. to either install costly control technology or shut down. Last year, the North American Electric Reliability Corporation (NERC) predicted that as much as 70 gigawatts[1] of fossil fuel capacity could be economically vulnerable as a result of power plant regulations impacting air pollutants, coal ash disposal, and water used in cooling structures. While the most recent EPA proposed rules indicate that these projections may be on the high side, the near term retirement of our existing baseload capacity without defined near term replacements presents serious concerns for electricity reliability in the U.S.
We are not without options; it’s just that no one can seem to agree on what’s acceptable. Everyone loves renewables, but they have limitations. Solar and wind are not baseload options. You’ve heard it before: “The sun doesn’t always shine and the wind doesn’t always blow.” Traditional baseload power plants can be powered by wood waste or biomass – generally considered a renewable resource - but some environmentalists have challenged the virtues of certain biomass feedstocks, particularly their contribution to net carbon reductions, leading the EPA to initiate a three year review assessing how it should be treated.
Nuclear power emits almost no air pollutants and is generally considered a zero carbon energy source. However, it continues to face obstacles. Without speculating too much on the impacts the recent disaster in Japan will have on nuclear reactor deployment in the U.S., the fact is, it’s a technology that hasn’t been built in the last 30 years and will likely continue to face opposition over concerns about safety and nuclear waste storage. Additional safety scrutiny and new permitting and regulatory hurdles are certain to increase the already high cost of developing new nuclear plants.
So then, what fills the baseload capacity gap? The current answer seems to be natural gas combined cycle (NGCC). Natural gas produces less air pollutants and only half the carbon emissions as coal. It’s currently cheap, and there appears to be an abundant supply of it. Plants can be built relatively quickly and cheaply, but more importantly they face far less permitting and regulatory hurdles than that of other fossil fuels and nuclear.
The problem is that of nuclear, coal and natural gas, the latter faces the highest volatility when it comes to fuel prices. Historically, natural gas spot prices have seen periods of volatility, some of short duration because of weather induced events like snowstorms and hurricanes and other of longer duration because of poorly designed regulations or actual limitations on supply. This is not to say natural gas shouldn’t play a critical role in our energy future; it should. And it will. But historically, the more we relied on natural gas as an energy source for electricity, heating and transportation the more volatile gas prices became.
As I noted previously in this forum, the situation regarding natural gas in this country has changed dramatically with the discovery of massive amounts of domestic shale gas reserves. But even with this fortuitous change in our domestic supply balance for natural gas, placing all of oureggs in one basket is never a good strategy.
Our view is that true energy security is best achieved by developing an energy supply portfolio that is diversified in terms of different fuel sources, technologies and source locations. Today, we truly have the opportunity to sculpt such a diversified energy supply portfolio. And we should do so with deliberation and with a sense of urgency. If we do, we will continue to be able to flip on the light switch and know with confidence that the lights will come on.
[1] One gigawatt can power between 750,000 and 1,000,000 homes
The historic March 11 earthquake and tsunami in Japan, which cost untold number of lives and left hundreds of thousands of people homeless and mourning, was an object lesson on the unpredictable and often violent planet that we are fortunate enough to inhabit. The news media, however, quickly shifted their focus to coverage of the seemingly out-of-control situation at the crippled nuclear reactors and storage facilities at Tokyo Electric Power’s Fukushima Daiichi power station.
Video footage of the damaged power station has been seamlessly intertwined with alarmist speculation about a potential catastrophe. The object lesson of this narrative was painfully obvious to all. Energy industry and government had sold a “false bill of goods” on society: the short-term material comforts afforded by nuclear power were being purchased at the cost of a future holocaust.
Since no one can say with certainty that another Chernobyl (or something worse) is impossible, it now seems that nuclear power is back on the endangered species list. But is this the right outcome for the overall good of the planet and its inhabitants?
If this tune sounds familiar, there’s a reason: it is the background theme of a host of energy/environment controversies and newsworthy events.
- Al Gore’s apocalyptic vision on climate change energized a global campaign to rid the world of fossil fuels ASAP.
- Although the U.N.’s sixteenth climate change conference last fall in Cancun yielded only a commitment to study the problem further, the possibility of global disaster remains the impetus behind governmental crash programs to deploy carbon-free power generation technologies in Europe and here in the United States.
- The Deepwater Horizon disaster in the Gulf of Mexico became a morality play on industrial hubris and government ineptitude in the face of environmental catastrophe, eliciting passionate calls for an end to domestic oil development.
- Opponents of domestic natural gas development cite the scientifically unsustainable threat of poisoned regional water resources as reason enough to halt all drilling activity.
- Every coal-mining disaster prompts claims of irony that we are killing ourselves in order to kill ourselves.
The loss of life experienced by the Japanese is real. The economic and environmental cost of this disaster will have a ripple effect that will be measurable for a decade an in our memories for much longer. None of this should be minimized in any manner or for any purpose. However, assessing the reality of the tragedy and creating prudent corrective steps is what is required not creating irrational fears for the sake of the evening’s Twitter Blast. Irrational fear and apocalyptic dread is a constant theme and instrument of social order for human civilization over the centuries, affixing itself to each generation’s ever-changing sense of perceived threats and danger. It may be highly motivational, but it’s a lousy basis for public policy, scientific inquiry and technological progress. The societal response to every technological failure cannot be limited to a search for the guilty and a draconian plan to assure that the most recent failure can never, ever, happen again. Every accident, every undesirable outcome, is an opportunity to learn what went wrong in order to identify and deploy the means by which to minimize and manage the risk of similar future incidents.
Eliminating nuclear power and fossil fuels from our list of future energy options will not make our world a safer, happier place. The social and technological systems on which we rely for sustenance, comfort and mobility will require some mix of fossil fuels and nuclear energy, along with more benign forms of low-carbon energy, for the foreseeable future. Abating greenhouse gasses is an ongoing task for this and future generations. We will need all our available tools and ingenuity to successfully negotiate this transition. The optimum form and course of this transition can now only dimly be perceived, despite confident claims to the contrary from all sides of the issue.
Public policy and government investment should focus on testing the boundaries of efficiency, scalability, safety and environmental impact for all energy options, whether fourth-generation nuclear power plant designs, improved photovoltaic conversion efficiency or a magic bug that turns waste products into gasoline. We must seek to understand our mistakes and failures, and apply that knowledge to improving both what is and what can be. The lesson of Fukushima Daiichi is that we must persist in trying to do better.
For the past 35 years, the U.S. energy supply condition can be described as “precarious”, at best. But, over the past 5 years the Energy Sector in the US has been undergoing unprecedented change, spurred by a number of factors including a revolution in new energy technologies, rapid shifts in consumer attitudes, and the discovery of new sources of domestic energy supply in the form of shale gas. Each one of these factors by themselves has the potential to be “game changers”. But importantly, when considered collectively, these factors constitute a future for U.S. energy supply that is cleaner, more secure and within our grasp.
This energy future holds real promise for material economic growth for the United States. Economies with secure energy supplies encourage capital investment which in turn creates both manufacturing and service jobs, jobs that have been bleeding away from our economy for years. And, slowing the outflow of capital to pay for imported energy eliminates a major drag on our economic performance, not to mention the national security concerns that are attendant to dependence on foreign sources of energy.
While this future is in our grasp, it is incumbent on us that we not allow it to slip through our fingers because we failed to act or because we permitted disproportionate action by any one group of stakeholders. We need a balanced solution that considers stakeholder views on environmental, economic, public health and safety and national security viewpoints. And then, we need to move forward. If we do so, the benefits we stand to accrue will secure the future for generations of Americans to come.
At Pace Global, we believe the optimal approach for building a clean and reliable energy future is based on marrying the expanded use of natural gas with renewable energy. The interdependence of these energy resources creates a synergistic effect. Power generation from natural gas uniquely complements the different forms of renewable energy in a way that improves the reliability and performance of our energy infrastructure. The new abundance of clean, reliable and economic natural gas provides an essential element of a clean energy future for decades to come.
Natural Gas and Renewable Energy – Complementary Power Supply Options
The alignment of natural gas and renewable energy is the most effective way to service the demand for clean power in the future. Natural gas and renewables are complementary; indeed, the growth of each is supported by the other as they play different and important roles in powering our homes and workplaces.
From a cost perspective, utility scale renewable energy and natural gas power plants collectively are the best option to replace or supplement traditional power generation. They have different, but complementary cost profiles, that are proven, efficient and reasonably priced.
Renewable power, namely wind, geothermal and large solar are characterized by high upfront capital costs with very low operational costs. Wind is now generally second only to natural gas technologies in affordable installed costs, which is well below other sources of clean power generation. Natural gas power plants have comparatively low upfront capital costs with higher operational costs. Historically, gas-fired power plants had higher variable costs, but with today’s abundant supply of natural gas, price levels are low. As more renewable energy is increasingly deployed into our power markets, the intermittency of the sun and wind become more of a challenge, causing significant portions of the operating power plants on the system to have varying output. Fortunately, power system operators and participants can now hold high confidence that the intermittency of renewable power generation can be mitigated as it relates to grid reliability, due to the current and future presence of natural gas power generation. Unlike almost any other type of large-scale clean power generation, natural gas-fired power plants are able to go from a standstill to generating significant amounts of power in only a few minutes. This is due to the advanced gas turbine technology in place today that can “spin up to speed” quickly. While other technologies, such as energy storage, have been proposed as an alternative solution to backstopping the intermittency of renewable power generation, none of the alternatives are proven and cost-competitive when compared to natural gas power generation. Therefore, to scale up renewable energy generation to its potential across the nation, more national gas-fired generation will be in demand, especially as traditional coal-fired power plants are retired in response to new Environmental Protection Agency regulations.
Most importantly when it comes to capital deployment, reliance on natural gas and renewable energy generation will be characterized by investment in assets in this country and not by an outflow of dollars overseas. Natural gas and renewable energy are domestic energy resources in abundant supply throughout the U.S. They are a secure domestic supply of energy. Their development has driven, and will continue to drive, significant job and economic growth here in the U.S. Reliance on these fuels will improve America’s trade imbalance and allow us to create more goods and services and put the “Made in America” stamp back in global prominence.
Natural Gas and Renewable Energy – A Balanced Portfolio
Today with the advent of massive new shale gas discoveries, the United States possesses more natural gas reserves than any other country in the world. Shale gas is now expected to enable the U.S., the world’s largest consumer of natural gas, to be self-sufficient for decades with natural gas reserves estimated to be well over 80 years.
It is always prudent to have a balanced portfolio of power generation plants. By deploying more renewable energy generation in lockstep with increasing natural gas generation, a more balanced portfolio is achieved. For both natural gas and renewable energy to fulfill their potential they need to grow together. Only through the understanding of the interdependence of these industries will we begin to realize the vision for aligned growth of these domestic energy resources and how America’s Clean Energy Future can be achieved in our power sector.
Americans have watched the recent unfolding drama of political and social change in the Middle East with deep ambivalence. Our better selves find hope and some measure of gratification in the collective expression of shared aspirations for individual autonomy and economic opportunity: these ordinary people clearly deserve better.
Of course, our keen interest in Middle Eastern political developments does not derive exclusively, or even primarily, from our beliefs about human dignity and social justice. One eye is always fixed on the price we pay for transportation fuels, sourced in part from this region and OPEC in general. Social chaos and rapid political change can potentially wreak havoc on the stability and security of the long, vulnerable supply chain that brings this fuel to our shores.
Commodity markets are much more focused on – if no more capable of - valuing the risk of imminent social chaos than the long-term benefits of an enfranchised citizenry. The crude oil market is perhaps the poster child for this phenomenon. While the U.S. Department of Commerce deems energy prices too volatile to merit inclusion in its monthly estimate of “core inflation,” most of us intuitively gauge the purchasing power of the U.S. dollar through our regular visits to the gas pump. Lately we’ve had reason to worry: oil prices rose sharply in February in reaction to the uncertain circumstances surrounding future Middle East crude production and availability. The future price path for crude oil can be charitably characterized as uncertain.
Recall, however, that oil prices had already doubled over the past two years without any help from the Arab street. Bankers, finance ministers and financial speculators around the world suspect the U.S. dollar is in long-term decline and are reacting accordingly. An abrupt and enduring crude oil shortage would only exacerbate the financial woes that our current and anticipated national trade and budget imbalances already have caused.
Our reactions to heightened oil supply instability, as individuals and as a nation, are and will be as disparate, conflicting and complex as the contributing causes. Mature Western economies, including our own, are on a long-term path to reduce and eventually supplant our reliance on insecure hydrocarbon fuel supplies and the environmental hazards they pose. We now recognize the environmental impact of releasing carbon accumulated and stored over hundreds of millions of years in the relative blink of an eye: a mere couple of centuries. Today, however, and for several decades to come, the global economy and our continuing shared prosperity will be critically reliant on petroleum, an abundant, concentrated and easily transportable energy source.
Public and governmental recognition of these problems, plus the technological evolution of our species, will combine to create and gradually deploy cleaner and more environmentally benign substitutes for this miracle product that takes us farther and faster than our ancestors could even conceive. This cannot and should not be achieved through a massive scale-up of liquid substitutes for oil-derived fuels available today. We have seen the consequences of rushing into subsidies to produce ethanol, which is now widely recognized as an unwise substitute for gasoline and diesel fuels, because of the amount of energy it takes to produce and the consequence that it has for commodity prices. Truly sustainable and affordable petroleum substitutes for the gas tank will only be forthcoming from the application of the future fruits of human inquiry, such as the controlled genetic manipulation of prolific and highly efficient natural solar collectors such as algae to produce energy-rich liquids we can directly substitute for petroleum products.
In the interim, we must muddle through. Oil supply disruptions from the Middle East will no doubt occur sporadically as the political geography of the region continues to lurch forward in fits and starts. The world is not “running out” of petroleum-based fuels in any meaningful sense. We have consumed roughly a third of the Earth’s allotment of the recoverable conventional crude oil resource base. Lower quality and technically challenging resources such as oil shale and tar sands can extend the remaining supply for many decades if necessary.
Other hydrocarbon substitutes – primarily the abundant global and domestic reserves of natural gas – can play a much larger role in our nation’s transportation fuel mix and reduce carbon emissions in the process. Electric vehicles can and will play a growing role in urban mobility. Along with higher petroleum prices, the appeal (and range limits) of electric vehicles will encourage changes in the way we choose to live and work, slowly reducing transportation fuel demands and the resulting roadway congestion that alone causes us to waste billions of gallons of motor fuel each year.
Despite all these gradual adaptations, the only short-term accommodation to major disruptions in oil imports is price-based supply allocation. These periodic accommodations will strain the already frayed American social compact balancing individual economic opportunity against the inevitable resulting wealth disparities. Airplane ticket prices will periodically soar, reducing the travel options for many middle-class Americans. People who value the personal mobility of the automobile will be economically compelled to seek mass transit and car-pooling alternatives. We will grumble but adapt.
The ongoing and generally positive political overhaul in the Middle East will no doubt be messy, discomforting and prolonged, but does not signal the abrupt or protracted cessation of regional oil exports. As each domino fits into place, whoever assumes political control of that region of the Middle Eastern or other OPEC oil reserves will still need and want the income derived from oil exports to fund new political agendas for good or ill. We can and will continue to invent and deploy workable substitutes to petroleum for transportation fuels. We will muddle through as always, but not without some rude shocks. Considering what the world has been through over the past century or so, this should hardly come as a surprise or insurmountable challenge; neither is it a reason to predict inevitable national decline or to announce a mandate to compel the massive deployment of immature and problematic alternatives. Rather, it is another powerful nudge to change some bad habits we can no longer afford and ultimately, through our own ingenuity, will not miss.