Amazingly, in the just-concluded presidential campaign, both candidates outdid each other with promised largess. There was little mention of the most serious threat that the new president will likely face: a major energy problem which has the potential to undermine America's current prosperity.
The prices of both oil and natural gas have risen to heights not dreamt of just a year ago. We are not likely to see moderate prices any time soon, and America now imports nearly 60 percent of its oil. The effects are beginning to alarm economists. 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.
And the supply side of the problem is only half the story, as America's energy infrastructure in major industrial regions, like the Northeast and California, is rapidly becoming inadequate. So even if oil supplies increase, production is limited.
Some Facts
The current high oil and gas prices are not something contrived by OPEC or by oil companies. Rather, they are the result of current tight 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 they can be productive. The international oil industries are now producing at near capacity with existing development.
America produces about 56 percent of its electricity from coal, 22 percent from nuclear plants, about 10 percent from hydropower and most of the remaining 12 percent from oil and/or natural gas systems. Natural gas powered plants are increasingly in demand. As we all know, our transportation system is almost totally fueled by petroleum products.
Major mineral deposits are very rare accidents of nature, and their occurrences are dictated by geology, not human convenience. Unfortunately, a large portion of world oil/gas production and known reserves are located in some of its most politically unstable countries, and most of America's potential for major new discoveries is in areas where current U.S. government policy negates any exploration.
Oil and natural gas occur together in variable ratios. A giant deposit in oil industry parlance is a field containing more than one billion barrels of oil equivalent. America has enormous known reserves of coal, but only moderate proven reserves of oil and gas. About 20 percent of current oil/gas production comes from offshore Gulf of Mexico, another 20 percent from the Alaskan north slope and most of the remainder from the old "oil patch" fields of the mid-continent, Southwest and West.
A number of the old "oil patch" fields were, in their heyday, giants, but the best remaining developments in these fields will likely yield deposits only in the realm of a few hundreds of millions of barrels each. One of the largest proven undeveloped fields is offshore California at Point Arguello, but it was shelved by Chevron in 1994, when a pipeline to shore was not allowed by state government. Some of the new deep water Gulf of Mexico fields might reach giant status. But the largest known potential is thought to underlie that portion of the Alaskan north slope east of the prolific Prudhoe Bay field, which comprises about one eighth of the ANWR (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 billion barrels -- a giant many times over.
Like all mineral deposits, the super 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, if no new major deposits are developed, America's reliance on foreign oil will increase to 80 percent.
Fortunately, most of America's oil/gas imports come from the Western Hemisphere, but, unfortunately, the supply situation is so tight that any disruptions anywhere can cause world shortages and even higher prices.
The U.S. strategic petroleum reserve, which we have recently heard much about, contains about 570 million barrels of oil in storage. 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 to them 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.
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 power plants. But, with present technology, their fuel source is the ever-popular natural gas.
All energy production and usage, like all other human activity, has environmental consequences. In regard to energy, all of it can be construed as environmentally unfriendly one way or another. This, of course, does not mean environmental destruction, as some would have us believe. The challenge is to use it as efficiently and conservatively as possible, all the time looking for better, more efficient technology.
How Did We Get Here?
Unfortunately, the Clinton administration has been unduly influenced by organizations like the Union of Concerned Scientists, which has long and erroneously predicted that there would be little increase in future electricity consumption. In reality, the world is still very much dependent upon fossil fuel energy, and we are faced with a time gap of unknown length to when we might realistically wean ourselves away from fossil fuels. So, during a long period of increasing energy demand, the U.S. government has blocked most new domestic fossil fuel development as well as new conventional energy infrastructure.
Beyond being economically absurd and suicidal, the prevailing American energy policy is environmentally bankrupt, and represents a most cynical nimbyism. What is one to think about a government, which while complaining about high world oil and gas prices and begging foreign countries to increase production, dictates no domestic oil/gas development in any of the in-country localities where major new discoveries might be made? But at the same time, it heartily endorses major development off the coast of the Canadian Maritime Provinces, in the Niger Delta and under the Caspian Sea. All of these areas are equally or more environmentally sensitive than the favorable domestic localities.
So how can we mitigate this incipient crisis? Unfortunately, because this problem has been allowed to fester over such a long period, there are no meaningful short-term solutions. The long-term answers are fairly obvious, and should all be embraced in a new energy policy. To accomplish this, the federal government must create a Department of Energy that is something more than the butt of jokes. It should be run by non-political energy experts, and should plan meaningful overall energy strategies, as follows.
We must strive for maximum energy efficiency and conservation, both by improving old technologies and developing new ones. Where new technologies are feasible, they should be put to use. For example, in southern California, solar panels in homes can provide an alternative to conventional power.
Most essential, America must increase domestic energy fuel production. To accomplish this, favorable areas off the Atlantic and Pacific coasts must be reopened for oil/gas exploration, as should favorable areas in the Rocky Mountain states. These areas all offer good potential for large conventional discoveries of the much-favored natural gas. Moreover, there is potential in some undersea areas for huge deposits of hydrated gas, which may provide an important future resource.
And at the risk of heresy and being struck down by lightning, let's consider the ANWR. It is, of course, environmentally sensitive, but in reality not very different from the Prudhoe Bay area to the west, where major production for three decades has not brought environmental disaster, nor has it hurt the caribou herds that frequent the region. When considering U.S. government policy, it is interesting to make an environmental sensitivity comparison of the ANWR coastal plain where it forbids exploration to the Caspian Basin or the Newfoundland Grand Banks, both places where it blesses and encourages oil/gas development. On a scale of one to 10, 10 being most sensitive, I would give the Caspian, the world's largest fresh water body, a 10, the Grand Banks a nine, and the ANWR coastal plain a five.
And what might be gained by developing the ANWR geological structure? If the go-ahead were given now for exploration, and results are favorable, this field could be in production within this decade. Assuming the median reserve figure of 10.3 billion barrels and a production life of 20 years, this field would produce 515 million barrels a year. This amount of production could reduce our current import level by nearly 20 percent. This development would also inject a few hundred million dollars into the U.S. economy over its life. Without it, America will be unnecessarily exporting important jobs and services out of the country.
& & & lt;i & M. A. Kaufman is a Spokane-based economic geologist. & lt;/i & & lt;/center &
