As both candidates in the U.S. presidential campaign outdo each other with promised largesse, neither seems to be addressing the most serious threat that the new president will likely face: a major energy problem that has the potential to undermine America’s current prosperity.
The prices of both oil and natural gas have risen to unforeseen heights. We are not likely to see moderate prices anytime soon, and America now imports almost 60% of its oil. The effects are beginning to alarm economists. First, these higher prices will not only be felt by transportation and home power consumers; they will also bring higher prices for almost all manufactured goods. Second, based on June figures, the projected annual balance of payments outflow for energy products alone will be a staggering US$123 billion, and this is calculated at the price of US$26.65 per barrel of oil. Both the percentage of oil and gas imports and the amount of the dollar outflow can only be expected to increase; the reason is that, as domestic demand has increased, government has prevented exploration in almost all areas in the U.S. favourable for major new discoveries.
Beyond fuel supply problems, America’s energy infrastructure in major industrial regions, such as the northeast and California, is rapidly becoming inadequate. For example, in California, increased electrical energy supply is only sufficient to provide roughly 12% of the increased demand that has occurred since 1995. Moreover, in many areas, refinery and pipeline capacities are insufficient, so even if oil supplies increase, end-product production is limited.
The current high prices for oil and gas are not something contrived by the Organization of Petroleum Exporting Countries or by the oil companies themselves. Rather, they are the result of currently insufficient worldwide supply coincident with increased demand. While the world has extensive oil and gas reserves, and potential for many more major discoveries, large investments and time are required before these can be brought to production. The international oil industries are now producing at near-capacity with existing development.
America produces about 56% of its electricity from coal, 20% from nuclear plants, 4% from hydroelectricity and most of the remaining 20% from oil and natural gas systems.
Natural gas-powered plants are increasingly in demand. As we all know, our transportation system is almost totally fuelled by petroleum products.
Unfortunately, a large portion of the world’s oil and gas production and known reserves are situated in some of its most politically unstable countries, and most of America’s potential for major new discoveries exists in areas where current U.S. government policy makes exploration difficult if not impossible.
Oil and natural gas occur together in variable ratios. A giant deposit, in oil industry parlance, is a field containing more than 1 billion barrels (bbls) of oil-equivalent. America has enormous known reserves of coal, but only moderate proven reserves of oil and gas — respectively, about 21 bbls and 160 trillion cubic ft. About 20% of current oil and gas production comes from off-shore in the Gulf of Mexico, another 20% comes from the Alaskan North Slope, and most of the remainder comes from the old oil patch fields of the mid-continent, southwest and west.
In their heyday, several of the old oil patch fields were giants. Today, one of the largest proven undeveloped fields is off the shore of California at Point Arguello. However, it was shelved by Chevron in 1994, when a pipeline to the shore was prohibited by the state.
Some of the new deepwater Gulf of Mexico fields might reach giant status. There is undoubtedly good oil and gas exploration potential for additional new major discoveries in offshore areas in the Atlantic and the Pacific, and under the Alaskan North Slope. The largest known potential is thought to underlie that portion of the North Slope (east of the prolific Prudhoe Bay field) that comprises about one-eighth of the Arctic National Wildlife Refuge. Here, a major geological structure underlying the coastal plain is estimated by the U.S. Geological survey to contain somewhere between 5.6 and 16 bbls of oil-equivalent — a giant many times over.
Like all mineral deposits, the giant Prudhoe Bay field, in production since the late 1960s, faces diminishing production and eventual depletion. When this happens, in the not-too-distant future, and unless no new major deposits are developed, America’s reliance on foreign oil will increase to 80%.
Fortunately, most of America’s oil and gas imports come from the Western Hemisphere, but, unfortunately, the supply situation is so tight that disruptions anywhere can cause world shortages and higher prices.
The U.S. strategic petroleum reserve, about which we have recently heard much, contains about 570 bbls of oil. Its purpose is to serve as a contingency supply in the event of national emergency. At the current rate of U.S. consumption, if it were a sole source of supply, it would last only a few months.
Much has been said about alternative energy sources, and environmental organizations such as Greenpeace have declared that the only acceptable energy is solar and wind power. While progress has been made in the development of these alternatives, at present, and for the foreseeable future, they are only feasible as auxiliary power sources.
Perhaps, with improved technology, some of these alternatives might become viable major energy sources in a decade or two, but there is no certainty of this. If we dismantled our present system and went “cold turkey” into wind and solar, with current technology, the cost would be inestimable and the land would be full of wind towers and solar panels. Greenpeace would then be protesting the vast land area affected, and we would have only intermittent and insufficient energy, bringing us to a Third World living standard. Currently, the most promising of the alternative sources is the hydrogen fuel cell. This technology can be adapted to vehicular transportation, and to both small and major co-generative power plants. But, with present technology their fuel source is the ever-popular natural gas.
All energy production has environmental consequences. In regard to energy, all of it can be construed as environmentally unfriendly one way or another. The challenge is to use it as efficiently and conservatively as possible, all the time looking for better, more efficient technology.
— The author, an economic geologist, resides in Spokane, Wash.
Be the first to comment on "The Energy Crisis, Part I"