This month’s discussion involves a book entitledGusher of Lies – The Dangerous Delusions of “Energy Independence”written by Robert Bryce. We will also discuss the future of the Obama Energy Policy based on previously stated goals and objectives. The future is now as it relates to the new administration’s policies. We should be prepared to take a stand if/when government policies conflict with sound business practices.
Bryce’s thesis is that U.S. energy independence cannot happen. Given that we have been a net importer of oil since 1913 and are the world’s single-largest energy consumer, the idea of being independent from the $6 trillion-per-year energy sector – the world’s single-biggest industry – is “ludicrous on its face,” according to Bryce. The energy sector is truly a global market, with the U.S. importing oil from 90 countries and exporting it to 73.
One of president-elect Obama’s positions is that he wants ALL new cars to be capable of burning high-ethanol fuel blends. Does this make much sense in light of Bryce’s contention that “even if all of the corn grown in America were turned into ethanol, it would supply less than 6% of our total oil needs”? Lest we forget, other types of bio-generated ethanol suffers from the same constraint – arable land.
I have heard from some that Obama will make the rest of the world respect us again. Whether anyone can actually perform this miracle is dubious, but Bryce indicates that three of the most powerful people in the global energy business, speaking at the World Petroleum Congress in Madrid, all said that the U.S. should start drilling in its offshore areas. They all agreed, “we think that part of this constraint on supply right now comes from areas that you cannot go. And the U.S. is one area that is limited to increased exploration.” Bryce contends that until the U.S. opens its offshore waters to oil drilling it will be seen as the world’s worst energy hypocrite. Not the best way to make the world love us.
As a further encouragement to domestic exploration, our known Alaskan oil and gas reserves could supply the entire U.S. with enough oil for seven years and enough natural gas for eight. While that certainly would never be the plan, we could definitely reduce our foreign oil dependence by fully utilizing our domestic natural resources. We should support releasing 2,000 of the 20 million acres of ANWR – a footprint smaller than LAX – to further reduce our dependence on foreign oil. An estimated one million barrels per day can be produced from this small natural resource.
Another of Obama’s stated energy objectives is a requirement that 25% of our electricity come from renewable energy. How will we do this? Certainly, wind and solar energy are huge right now. In 2007, global investment in these technologies was $116 billion. The challenge with both of these technologies, however, is the ability to store large amounts of electricity in a safe, affordable and decentralized system. Bryce contends that without this, wind and solar cannot provide much more than small percentages of our overall energy needs.
Geothermal, on the other hand, received just $6 billion in investments in 2007, and it is not a technology we hear much about. This is in spite of the fact that there is 50,000 times more heat energy contained in the first six miles of the Earth’s crust than in all of the combined oil and natural gas resources. Pricewise, geothermal is competitive with wind power, and it is much more economical than solar. In order to achieve anywhere near Obama’s stated 25% from renewable energy, I predict geothermal will rise in prominence in the coming years. Watch for technology called enhanced geothermal systems (EGS). Experts believe that EGS “is indeed the sleeping giant of renewable energy.”
Obama also supports a cap-and-trade system for emissions reduction. He believes the goal should be an absolute reduction in emissions of 80% below 1990 levels by 2050. We have regularly supported the goal of reduced energy intensity, which is the reduction in energy to produce a unit of product (e.g., a ton of steel). We cannot support absolute reductions because as Bryce says, “It is axiomatic: As energy use rises, people get richer. It’s true always, everywhere.”
If this is true, as Bryce indicates, Obama’s energy/emission reduction plan of 80% will destroy our industry and our economy. This is not a policy we can support nor change we can accept.IH