America's Energy Future (Part One): Is the President on the Right Track?

On Tuesday, January 25, 2011, President Barak Obama delivered his second State of the Union Address to a symbollically more conciliatory congress.  Similar to his 2010 address, the president called for increased investment in so-called 'green energy' technology and jobs.  Then surprisingly, the president challenged America to attain an 85% green energy economy by 2035.  Currently less than 15% of the U.S. economy is dependent on non-fossil fuels, and if nuclear energy is taken out of the equation, the number is less than 7% (Institute for Energy Research).  Political and media reactions to the president's address the following day were mixed, but most focused on either trivial aspects of the speech or the president's call for increased federal spending in spite of the massive debt America has already accrued.  Still, the president's energy remarks are worth a second look.

One can interpret the president's insistence upon 'green energy' as a recognition that this nation is at a critical crossroad.  As the president remarked, America has a choice; we may continue to depend on the energy of the past or find ways to create energy technology for the future.  President Obama's trivial "winning the future" slogan aside, his emphasis on an aggressive policy of transitioning to new forms of energy is well founded and should be heeded.  Like many others in our country, I am deeply concerned about government debt, both federally and locally.  America is in a huge financial crisis and massive government spending, even in the energy sector, is foolish.  However, this does not mean that private companies and individuals cannot take the lead in developing viable energy alternatives to America's current dependence upon fossil fuels.

Here is our dilemma.  The vast majority of energy consumption in the U.S. comes from fossil fuels, namely oil, natural gas and coal.  Without considering the ecological impact of this, America must wake up to the fact that current and projected oil reserves across the globe are dwindling at an alarming rate.  Virtually all estimates suggest that, at current rates of consumption, the world has approximately 40-50 years of oil left.  Given that China and India's economies alone are growing at an exponential rate, and will require much more oil than they do currently, current rates of fossil fuel consumption are expected to grow at a rate much, much higher than they are now. 

Add to this fact that, according to economist Ian Bremmer, a handful of countries – China, Russia, Saudi Arabia, Iran, U.A.E., Venezula, Brazil and Malaysia – control 75% of global oil reserves, and these countries directly control these reserves through state-owned and operated oil companies.  Clearly, America has a looming predicament to consider.  Think about it.  America has no 'state-owned oil company.'  Nor does Western Europe.  The largest oil companies are all multi-national corporations whose profitability is dependent upon share-holder faith and expectations.  Most important, for all the president's bloviating about 'big oil', the top sixteen privately-owned oil companies (Exxon-Mobil, Shell, BP, etc.) own or control less than 3% of the world's oil reserves today.  While they continue to earn huge profits, it is soley because they are much more efficient at oil extraction, and the simple fact that these companies control much of the refining capacity around the globe.  But as their technical expertise and productive efficiency no longer give them the competitive edge, their profits will dwindle and in a few decades most of these companies will either be extinct or have found some other way to survive. 

This is no small problem.  Most estimates I have seen, including data provided by the U.S. Energy Information Administration, suggest that 60-75% of all oil and gas consumption in the U.S. comes from transportation.  Think about this.  If oil consumption estimates are correct, within the next twenty-five to forty years, NO CARS will run on gasoline, because there will be little to no gasoline upon which to operate them.  We might be able to stretch this number by quickly transitioning to a larger percentage of electricity-based cars, and perhaps bio-fuel cars, but this must be done quickly if we are going to make a significant dent in the rate of decline in global oil reserves.  Such a move, however, would put a drastic burden upon America's electric utility companies, requiring them to invest in much more coal consumption, since the vast bulk of America's electricity production is coal based.  

We cannot transition entirely to bio-fuels for cars, because the effect on food production would be catastrophic.  We can switch to natural gas powered cars, but this would affect the rate of decline in natural gas reserves.  While current estimates suggest that we have at least 100 years of natural gas remaining, these estimates are based upon current consumption rates.  Who knows what switching to natural gas as a transportation strategy will do to the rate of decline in gas reserves?  No matter what we do as a country with regard to energy consumption, America and the world are facing difficult decisions, and these are coming faster than most people realize.

The president is right to focus on this problem, and his current strategies, while not the ultimate solution to the coming energy crisis, may forestall the crisis for several decades beyond the 50 or so years we have left.  Of course, all this disaster talk is based on current projections with regard to global energy reserves, and it is true that some industry experts don't quite agree on the rate at which oil and gas reserves will be depleted.  For instance, two of my sources in the oil industry (anonymous) agree that oil reserves are dwindling, but that we probably have more than the 40-50 year window that seems to be the majority view these days.  But when pressed regarding how much more time we have, my sources are reluctant to project much beyond these estimates. 

Even if we have 100 years of oil and 150 years of natural gas remaining, we need to address this problem now.  Why?  In short, currently, we have no technology other than that which uses fossil fuels for energy that can power large transcontinental and intercontinental aircraft, like passenger and cargo jets.  We can use nuclear power for large ocean going vessels, but not for aircraft.  The world depends heavily upon the ability to move quickly between states, countries and continents.  At this point, we can use renewable energy for home heating, even cars, but not those mighty metal birds of the sky that move people in large numbers across even larger distances.  Without this ability, long distance travel will be greatly hampered, and the time it takes to go from, let's say, New York to Los Angeles or Paris will increase from hours to days.  And this does not account for the fact that, according to the Energy Information Administration, the U.S. military is the largest single consumer of oil and gas in our country, and sustaining such a large military force would be impossible if oil and gas reserves are severely depleted.

If we do not address the fossil fuel crisis in time, fossil fuels, as a practical source of energy, will no longer be viable, and this may happen sooner than we think.  It may be that this disaster scenario is far fetched, but if the experts are right, it won't be too long before the price of gas at the pump will be the least of our worries.  For all the cries about global warming and ecological disaster with regard to fossil fuel consumption, we need not appeal to climate change to insist on the urgency of dealing with our dependency upon fossil fuels.  America needs to face this problem now, not tomorrow.  The crisis may not come in my lifetime, but it will certainly come in my daughter's lifetime, and by the time she has grandchildren, the world may be living in the dark, literally.  Let's avoid a second 'dark ages' please.

David Adcock, Managing Editor  (January 30, 2011)