Thinking about hurricane devastation on the Gulf Coast and its industrial impact on the national energy future prompts me to think that those who do not understand the scope or nature of the problems (politicians, bureaucrats, media) cannot be indulged in the luxury of legitimacy or veracity to comment on solutions. America's dilemma is too critical to allow the "Doofus Factor." With many oil and gas production platforms and pipelines disabled and refining capacity damaged by the storm--and in this "inelastic" world of energy supply--the tenuous demand-supply chain desperately needs repair, and new or improved sources take decades to build, and only at staggering costs.
At the beginning of 2005, the U.S. had 21.9 billion barrels (bbl) proven petroleum reserves, but crude oil production is at a 50-year low from the 500,000 wells, the vast majority being marginal "strippers." Total net imports of crude and refined products are now 58% of demand. There has been a steep decline in number of domestic refineries, from 324 in 1981 to 149 at the start of 2005, those remaining and aging are all working at the highest capacity (up to 97%) in history. This is happening when demand is projected to continue growing at 1.4% annually from 2005 for 20 years through 2025; it takes years to build each refinery and none have been built in America for nearly 30 years. Those who talk about the Strategic Petroleum Reserve overlook that the 700 Mbbl cache would be 84% consumed in 180 days if drawn-down at the maximum possible rate ranging from 1.3 to 4.3 Mbbl against daily national consumption of 20.4 Mbbl. Projected oil supply should reverse the trend, to decline in 2009 and continue to fall through 2025 while U.S. production is forecast to decline after 2009 by 24% through 2025, assuming the current national malaise continues.
Natural gas demand increased 3.7% in 2005 over 2004 with industry (37%) and electricity generation (22%) the largest users; consumption (now 24% of national energy use) is forecast to rise an average 1.5% a year through 2025 with wellhead prices being essentially constant or increasing after 2010 by 20% through 2025. Domestic production should grow gradually (19.1 to 21.8 trillion cubic feet annually) over the period.
In electric power generation, coal fired plant output is 53% of the total followed by nuclear (21%), gas (15%), hydro (7%) and oil (3%); sources like wind and solar are cumulatively under 1% with generation historically rising 1.8% annually and projected to continue over the next 20 years, ranging to as high as 2.2%. Coal output should grow at a 1.5% annual rate to 1,488 million tons in 2025 with 90% going to domestic utility fuel at nearly constant minemouth prices between today's $17/ton and $18.26/ton in 2025. The result is a net decline in electricity prices over the next 20 years. All of this does not address the bad news of constantly increasing carbon-dioxide emissions, forecast to reach 5,985 M metric tons in 2005, a 22% U.S. increase in the last 15 years and now over 25% of the world total atmospheric annual load. It also did not mention the good news that industrial energy consumption, while predicted to climb 1% annually over the next 20 years, will offset "energy intensity measure," consumption per dollar of GDP output, at a 1.9% annual reduction. With demand increasing (remember that strong world energy demand from emerging economies like China is a major contributor to price rise) but U.S. supplies and capacity to process fuels peaking and beginning decline, this country has problems that cannot be further distorted by inept politicians. Those two billion people in the world that have zero electricity will change our American claims on energy supply, as today the nation is vulnerable to their interest and our national dependency on supply-demand conditions that are going in the wrong direction.
There are several ways to improve this national ill. First it is imperative for industry leaders to lead the way into politicians' offices and pocketbooks, to speak bluntly about problems, to insist they remove impediments to energy production such as drilling and restrictive permitting and regulations that prevent building facilities to process fuels. Second, the public can benefit greatly by having enhanced nuclear facilities, this year operating at 92.1% of capacity by103 reactors that are projected to produce 99.2 GWt in 2005 with a perfect safety record and 102.7 GWt in 2025. Certainly, waste management is an issue to receive perpetual care and study but scare tactics by nutcases who have no understanding of nuclear utilities cannot be allowed to stand unchallenged (see first paragraph above).
Some good may come from Katrina's visit, blowing a wake-up call into the ear of bureaucrats and politicians that, when the lights go out, won't make it to heaven due to their irresponsible behavior in not addressing these very real problems. IH