Hard Truths About Energy - Can They Get the Public's Notice

Abstract: Exxon Mobil president Lee Raymond made a speech to the Woodrow Wilson International Center for Scholars on June 7. "Facing some of the hard truths about energy." It needs wide attention.

Analysis: Raymond's speech was serious, factual, to the point, and focused on long-term energy security. It dealt with the realities of global energy demand, the growth of supplies required by 2020, the potential roles of conventional and alternative energy sources in meeting those needs, and the steps the United States needs to take to prepare for the future.

It told the scholars what they needed to know about energy and the energy future. It's a shame it wasn't on national TV.

No US Resource Base
Raymond recommended the US come to grips with the real world of energy in order to take steps to position the country for its energy future. Perhaps the key of Raymond's hard truths is that the US simply does not have the resource base to achieve energy independence. While it should develop all the fossil energy it can, it must compete among consuming nations for energy.

The week before Raymond spoke to the scholars, the Gallup poll released a survey of American consumers. Gallup asked them to identify, off the top of their heads, what they believe are the main reasons behind the rising gas prices. The results indicate that relatively few Americans blame supply and demand. Instead, the public tends to blame big oil, the war in Iraq, and OPEC. Specifically, 22% of Americans say that big business, oil companies, and price gouging are the main culprits for the higher gas prices. An additional 19% say the war in Iraq is causing the increases, 9% blame OPEC or Saudi Arabia, 8% blame general supply and demand for gasoline, and 7% generally blame the government. Only 5% of those surveyed mention President George W. Bush specifically as the cause for the soaring gas prices. Two percent say gas prices typically go up around this time every year.

Earlier in June the California Field Poll asked 489 adult residents: How serious a problem have the recent gasoline price increases been for you and your household? Forty four percent said very, 30% said somewhat and 26% said not serious. Perhaps more instructive was the second question: is the gas price increase mainly the result of legitimate changes in market conditions or the result of oil companies trying to increase their profits? Changes in market conditions garnered only 14%. Companies trying to increase profits got 77% of the vote.

There were no questions on either poll about long-term energy needs.

Can The Twain Meet?
Polls such as the Gallup and Field results above are not new. There has long been a public mistrust of oil companies – and energy companies in general, aggravated by Enron and other business scandals. The truth is that in times of scarcity, oil companies do make some money, and that seems to be the only time the public, fuming at their gas pumps, pays attention. When gas is plentiful and cheap, the public doesn't give energy a thought.

And equally in times of scarcity and times of plenty, the public at large pays no attention to the long-term outlook for energy.

In fact energy security is so unromantic a topic that the polling organizations don't even ask questions of the public about it. There is a total disconnect between energy facts and the public perception of energy companies.

That leaves us with a real problem, because perhaps the key one of Raymond's hard truths is that the US simply does not have the resource base to achieve energy independence. It must compete among consuming nations for energy. And plan and act accordingly. That is likely to require some hard choices ahead. No poll is likely to find that a very popular course. Yet it is necessary.

Raymond listed these things that need doing.

  • Identify and understand the facts and realities of national and global energy markets.
  • Adjust policies to reflect those facts and realities
  • Avoid wishful thinking
  • Commit to practical steps to address the energy future
  • Take a long-term view.

  • Here are some of the facts and realties that need to be taken into account.

    Overall global energy use will grow by about 40 percent by 2020, as demand rises from about 215 million oil equivalent barrels per day to almost 300 million barrels of oil equivalent per day. That 300 million barrels daily total is a huge amount of energy. It is nearly 13 billion gallons per day.

    And, inevitably, most of the energy that will be used for many decades will continue to be from fossil fuels: coal, oil and natural gas.

    Alternative fuels, much desired and backed by many people, can only reach limited production and face problems that will prevent them from taking on much of the energy load by 2020.

    Nuclear and water power face site based limitations on growth. Wind and solar energy will grow rapidly, but start from such a small base that even with extremely rapid growth will only supply about one-half of one percent of the world's energy in 2020. Hydrogen and biomass face individual problems

    Hydrogen is not a primary source of energy. It is expensive to prepare it from oil, gas or water. And an infrastructure for delivering it would have to be built from scratch.

    The other alternatives have their own development problems.

    Take ethanol, for example.

    Currently, ethanol from corn is neither an economic or energy-efficient choice, as it can require more energy to produce than it generates in the end. And it relies upon using significant land areas, land that would otherwise go to food crops or forest cover.

    If we tried to replace just 10 percent of the gasoline the U.S. will use in 2020 with corn-based ethanol, we would need to plant an area equivalent to Illinois, Indiana and Ohio solely to grow the grain needed as feedstock. The difficulty of that can be appreciated when you realize that this area is about one-sixth of the land we currently use in the United States for growing all our crops.

    Solar and wind face challenges, too. Wind power is usually more expensive than fossil fuels, though its costs can be competitive under ideal conditions. It is site limited, intermittent and subject to growing objections due to its visual and noise impacts on the landscape.

    Solar power is of course an energy source of significant potential, but it is currently far more expensive than fossil fuels. It needs work.

    Hydrogen has considerable promise, but decades in the future. It is not a primary energy source – does not exist freely in nature. It must be separated from petroleum or natural gas or water. This is expensive. The process requires considerable energy.

    Additionally, use of hydrogen by the consuming public would be risky and needs to be evaluated to ensure safe use. Raymond says it could take decades to overcome these issues, if they can be overcome at all.

    What's to be done now?
    First and foremost, the rest of the world and the U.S. will increasingly need energy from the Middle East. This is not a matter of ideology or politics Raymond said -- it is simply inevitable. About 50 percent of proved worldwide oil and gas reserves reside in the Middle East, with Saudi Arabia alone having about one-fifth of the world's oil reserves.

    The key to hedging the risks for America's and the world's energy future remains broadening the base of geographic locations from which we get our oil and gas. We should not fall into the trap of imagining that the U.S. can divorce itself from global energy markets.

    Periodically calls for U.S. energy independence are heard, as if this were a real option. The fact is that the United States does not have the resource base to be energy independent. Even if we develop more petroleum supplies here, we will still be far, far short of our needs and simply cannot avoid significant reliance on oil and gas from the Middle East because the world's supply pool is highly dependent upon the Middle East.

    The United States therefore needs to continue a commitment to policies that recognize the challenges faced by many important oil and gas producing countries, policies that can play a significant role in addressing such challenges.

    We will need to muster the political will, based on a realistic energy outlook, to allow further development of the energy resources to be found in the United States. This includes those that may be offshore California and Florida, in the Rocky Mountains and in northern Alaska. The energy investments required to meet fund these projects will be huge. The International Energy Agency last year estimated that an average of $200 billion, or its equivalent in inflated dollars, would need to be invested each year to develop and supply the oil and gas that the world will need out to 2030.

    Carbon Emissions
    In the decades ahead, carbon dioxide emissions from greater fossil fuel use will climb. We simply do not yet have the economical solutions or technologies that would permit us to meet future energy demands without carbon emissions growth. And, as important, we do not know how to increase economic growth without increasing energy use.

    This reality is one that many people recoil from accepting, but the United States and other industrial nations will continue to increase carbon emissions for some time, regardless of Kyoto. And because in all likelihood the developing world will experience faster economic growth than we will see in the OECD countries, carbon emission increases there will be responsible for the majority of the growth in global emissions.

    Long Term Research
    Finally, in Raymond's view, the most sensible and most fundamental avenue to meet rising energy needs throughout the world as well as to address greenhouse gas emissions is through a long-term effort in energy research and development. There must be several fundamental objectives of such research:

  • It must improve our ability to discover and produce the increasing amounts of oil and gas the world will need.
  • It must enhance our capabilities to reduce the environmental effects of fossil fuel use.
  • It must lead to the development of new ways to generate energy for the long-term.

  • Finally, the long-term research has to be attentive to real costs and to the practical ability of the developing world to use the new technology.

  • Raymond also said it is in the US's interest to continue to support international financial institution participation in energy projects in these areas.

    Gaining Awareness
    Raymond's looking realistically out to the years 2020 gives the US a chance to get energy policy right. His hard facts boosted by information available from other sources can provide good guidance for policy makers. The problem is getting them to pay attention

    We've all seen what happens in the absence of a long-term point of view and hard facts like Raymond espouses. We get last year's failed Energy Bill, the one John McCain called a tax-dollar-stuffed turkey. But when they don't get any input from the public that understands a need for long-term policy based on reality, politicians will bend to the pressure and salt in whatever the lobbyists ask for. We were only saved from that one narrowly because the pork was just too over the top even for Washington.

    The challenge is what to do now. Prices at the pump appear to be dropping this past week with OPEC's latest production boost. In a few weeks we may be back to business as usual. The public will forget about energy again. And we'll all drift along.

    Oil and gas people have tried without much success to get attention to Raymond's kinds of hard facts for a long time. And the public has never paid much heed except in times of crisis. Can we get the public's attention? Can the pollsters be urged to ask the public energy policy questions? Will you pass along Raymond's speech to your elected representatives? Do you have an idea what should be done? Call your congressman if you do.