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U.S. energy options
Question of the Day
The 117th meeting of the National Petroleum Council (NPC) will convene tomorrow in Washington to unveil a new report outlining future challenges the United States faces in ensuring sufficient supplies of energy. Many of the report’s recommendations concerning global energy supplies and future U.S. energy strategies are suitable, timely and practical. Unfortunately, the positive aspects of this report are overshadowed by its most glaring omission: It fails to address likely supply shortfalls and makes no mention of the consequences that America would suffer in such an event.
This failure is dangerous because it masks critical facts that would otherwise make obvious the requirement for immediate action. A continued failure to face the hard truth today will result in severe economic disruptions for America tomorrow.
I hesitate using such strong language because most often such gloom-and-doom proclamations are dismissed out of hand as being overly pessimistic. But the facts in this case argue persuasively that such words are both accurate and necessary. The NPC report, “Facing the Hard Truths about Energy,” explains that supplying energy to a growing global economy through 2030 will be very “challenging” and recommends five strategic goals that involve various aspects of increasing energy efficiency and diversifying supply.
Tellingly, however, the media and public have comfortingly latched onto a key passage from the report that states, “The world is not running out of energy resources, but there are accumulating risks” to energy production. It is on this point that the NPC study fails America. From an advanced copy of the executive summary I obtained, the report includes a graph (Figure ES-5) depicting NPC projections for total petroleum liquid supply to the year 2030. The projection lists several categories of oil that will enable total global production to rise from today’s 84 million barrels of oil per day (mbd) to almost 120 mbd. The two largest categories — exploration potential and enhanced oil recovery — together account for a staggering 55 mbd of increase in production (almost 65 percent more than today’s daily total).
To put this astounding 55 mbd claim into perspective, that would mean in just the next 23 years, the world would have to discover and produce new sources of oil that would equal the combined total daily production of: Saudi Arabia, Iran, Kuwait, Iraq, Oman, Qatar, Syria, the UAE, the Russian Federation, the United States, Canada, Norway, Brazil, Libya and Venezuela. Such claims clearly strain credibility, particularly when considering that in the past 23 years global production has increased only 26.5 mbd.
To further illustrate the dubious nature of the claim, the NPC report estimates that 35 of the 55 mbd will come from exploration potential. What they do not explain, however, is how the past 40 years of decline in discovery rates will be radically reversed: In 1965, 59 billion barrels of oil was discovered globally; in 2005, only 5 billion. The danger this portends is not simply about reaching questionable conclusions, but on the consequences that result. If the NPC tells Energy Secretary Samuel W. Bodman that there are “challenges” to future growth but that there is still plenty of resource available, no sense of urgency is communicated and almost certainly no real action will result. A report issued two years ago, however, did quantify the danger such poorly based projections represent.
In June 2005, no less an authority than Defense Secretary Robert Gates (then-president of Texas A&M; University) led a group of former White House officials in an exercise to simulate a presidential cabinet designed to examine the potential security and economic consequences of an oil supply crisis. This event was called the “Oil Shockwave.” After playing out three disruption-related scenarios, the group arrived at two key conclusions. In the report introduction Mr. Gates wrote: “First, the economic and national security risks of our dependence on oil — and especially on foreign oil — have reached unprecedented levels. The threat is real and urgent, requiring immediate and sustained attention at the highest levels of government. Second, if we wait until a crisis occurs to act, the nation will have access to few, if any, effective short-term remedies.”
Despite these stark warnings regarding our country’s vulnerability to oil-supply reductions and his clarion call to action, the government did nothing. If it is clear that a disruption in supply would have profound impacts on our country, and both evidence and common sense indicate that in the near future the supply of oil will fall markedly below demand, a mitigating action plan must be an immediate, non-negotiable requirement.
In a special report published today on the Web site for the Association for the Study of Peak Oil and Gas — USA (www.aspo-usa.com), I list a series of prudent recommendations for both the government and energy industry to begin implementing immediately. In this report, I lay out in detail why optimistic projections such as those found in the NPC report have virtually no chance of being realized.
After his “Shockwave” experience, Mr. Gates conceded, “Even among individuals who have spent years contending with security and energy issues, it was surprising to learn the extent to which seemingly small disruptions in world oil supplies could inflict serious economic damage and alter the global security environment.” What a tragedy it would be if we discover the truth of his words as a result of our failure to act when sufficient time and knowledge were available. Already two years have passed since his warning, resulting in no meaningful government or industry action.
This may be our last chance.
Maj. Daniel L. Davis is a Cavalry officer who fought in Desert Storm in 1991 and served in Afghanistan in 2005.
By Ted Cruz
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