Free Markets, Free People

Chris Nelder

Energy Policy – “10 Inconvenient Truths”

Sometimes the little surprises life hands you are the most pleasant. While in Houston at the Offshore Technology Conference, my trip sponsored by API, I happened to meet another blogger who introduced himself to me as a “raging liberal”. In the course of three days and a few good beers, Chris Nelder and I had some very enjoyable and interesting conversations. And, interestingly, Chris and I agree on where the policy debate stands as it pertains to energy. Chris wrote an outstanding article detailing his observations about the current situation, and, for the most part, I agree completely with his well thought out assessment. Here is his list of “10 Inconvenient Truths” that he feels all policy makers must understand before they can effectively plan for the future:

1. We have extracted nearly all of the world’s easy, cheap oil and gas, and now we’re getting down to the difficult, expensive stuff. The largest untapped resources that remain are in extreme places like deepwater and the Arctic, and marginal formations like shale. As a result, global oil production has for all intents and purposes peaked. Natural gas production will also peak in 10 to 15 years. Neither technology nor high prices will change that. Therefore we must begin to replace those fuels with renewables, and use what remains much more efficiently, with the expectation that most of the world’s oil and gas will be gone by the end of this century.

While I agree with Chris’s point about renewables, I’m not quite ready to buy into the idea that “most” of the world’s gas and oil will be gone by the end of the century, especially if we make progress developing cheap, renewable and clean alternatives. That’s not to say he might not be right, but I continue to look at the improvements in technology and the fact that the same sort of predictions have been made for decades and here we are. But on the main point of gearing up renewables, we agree completely. We must prepare for the possibility Chris is right and we need to do that now.

2. Drilling for oil and gas drilling in the OCS and ANWR must and will be done; our need for those fuels is simply too great to pass them up. An additional 2-3 mbpd will put a dent in the roughly 12 mbpd we now import, but if we drill for it now, it won’t come to market for 10 years or more. By that time, it probably won’t even compensate for the depletion of conventional oil in North America, nor will it do much to reduce prices. But it will be crucially necessary, and producing it won’t make an ugly mess of the environment.

You see someone on the left here who has studied the problem, understands the processes used and has formed an opinion that is outside his side’s political mainstream. He understands that technology has advanced to the point that the oil and gas industry can drill for oil and gas safely and with a very small footprint. In fact, advances in sub sea technology are almost to the point where the entire process can be safely and productively located under the waves. So, in a “comprehensive” scheme, the left has got to drop its almost knee-jerk resistance to such drilling and understand it must be a part of an overall energy solution.

3. Renewables are clearly the long-term answer, as is an all-electric infrastructure that runs on its clean power. However, it will likely take over 30 years for renewables to ramp up from a less than 2% share of primary energy today to 20% or more. They probably won’t even be able to fill the gap created by the decline of fossil fuels. Oil and gas currently provide about 58% of the world’s primary energy, and they will remain our primary fuels for a long time to come.

To believe “green fuels”/renewables are the immediate and total answer to today’s energy needs is to deny reality. We have to remember that there is going to be a growing energy gap as more and more nations come on-line in the first-world and demand more energy as a result. Oil, gas, nuclear and coal are going to play a large and significant part of bridging that gap even as we work to develop renewables. As a nation we cannot afford that sort of short-sighted thinking. It is critical that everyone understand that while the preference is for renewable, clean fuels, the reality is they’re still quite a ways off, while the energy demand continues to grow unabated and certainly with no concern for our personal energy preferences.

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