Our Current Energy Scenario

 

Our Current Energy Scenario:

.....Obviously this is a very complex topic that will require a very complex, structured, long term approach to solve, but solve it we must, as our children’s future is at stake here. Due to the global economy that we now live in and the resulting competition we face with other developing countries for the natural resources to fuel economic growth, we must address our lack of a national energy security policy. Our fundamental American Dream relies on continued economic growth and we must have the energy to drive that growth. I will address three areas to help you understand our energy scenario and they are: 1) the background and the reasons we are in the mess we are currently in, 2) where we are right now, and 3) what needs to be done to begin digging America out of the hole we are in and how to begin moving toward a permanent solution.

The Background:
.....Unfortunately, we do not control our energy requirements domestically, and therefore we must import energy (namely crude oil) from foreign sources. The goal to “reduce our dependence on foreign crude oil” has been an objective of each administration for the past 3 decades, but we have obviously been unsuccessful. The reason for this is twofold: 1) we must stop taking two steps forward and three steps back each time we make an attempt at doing something because the net effect of all of our efforts is to effectively have done nothing at all, and 2) we must stop skipping the second step in the three step process of solving a problem and stop throwing out political solutions without understanding the problem or the consequences of the proposed solution.
.....Part one above is, when I talk about taking two steps forward and then three steps back with regards to our energy policies in the US over the past 3 decades, I am talking about specific examples of policies that have led us to where we are now and have had the net effect of doing nothing. These examples have all been directly related to policies that were favored by particular special interest groups. In the early 70’s Congress outlawed generating electricity with natural gas because America had vast domestic natural gas reserves and Congress knew it should be reserved as a heating fuel where it is about 90% efficient. The 90% efficiency means that 90% of the energy (measured in BTU’s) contained in the natural gas would be converted to usable heat and 10% would be waste byproducts exhausted into the atmosphere as waste heat and byproducts of combustion (CO, CO2, etc). Senator Pete Domenici went on record in the late 70’s saying in effect that generating electricity with natural gas was a dumb thing to do. The reason he said this was because the process of generating electricity with natural gas is about a 30 to 40 percent efficient process. Meaning that about 50 % of the energy value is lost to waste heat and byproducts of combustion instead of only 10% when used in residential or commercial heating applications.
.....At that time only 2% of America’s electricity was generated with natural gas--now that number stands at almost 20% and we are now having to import liquefied natural gas to supplement our domestic supplies because we have squandered them by wasting 50% of the energy value in the conversion to electricity. Therefore, we are becoming more reliant on foreign sources of energy. Generating electricity with natural gas was pushed as necessary due to the negative perception surrounding nuclear power and was heavily favored by the gulf coast energy lobby. Obviously, they wanted to sell vast quantities of natural gas and electric generation consumes enormous amounts of it. So why did Congress make an about face on the natural gas to electricity generation issue? They decided to listen to a small environmental voice that said no more nuclear power and the electricity had to come from somewhere.
.....Another example of two steps forward and three steps back is CAFE standards that were passed some 20 years ago and then allowed to remain stagnant instead of steadily increasing as they were originally intended. Keeping CAFE standards low was a focus of the Detroit motor lobby. The most recent example of this flawed energy policy is the recent corn based ethanol mandates that was obviously an agenda for the Midwest corn lobby. Ethanol can be a good thing, but it needs to be based on sugarcane or switchgrass. A little analytical thinking about cause and effect beforehand would have uncovered the notion that requiring 25% of the corn grown in the US to be quickly turned into a fuel supply would cause food prices to escalate quickly and would inexorably link our food costs to the cost of crude oil. Americans have been thankful for so many years that we controlled our own food supply and disappointed that we didn’t control our energy supply. Why would our elected officials think that linking our food supply (through corn based ethanol) to crude oil would lower the cost of crude oil (by reducing demand) and not increase the cost of food (by increasing demand)? Which market is larger and stronger--the energy commodity market or the food commodity market? Obviously we now know it’s the energy market, but a reasonable person could have come to that conclusion before ethanol mandates were passed.
.....Part two above is, the 3 steps to solving a problem; step 1 is to recognize there is a problem, step 2 is to understand the problem, and step 3 is to breakdown the problem into its simplest form and begin examining solutions. Politicians seem to always skip step 2 and go right to throwing out solutions without truly understanding the problem or without regards to thinking about cause and effect. How many times have we talked with our children about reading the problem first and really understanding what the question is before you start writing an answer? We simply must have some elected officials in Washington that are able to think beyond traditional politics to solve problems. That is the background on why we are where we’re at with regards to having no meaningful national energy policy and is what has put America in this very difficult position of quickly escalating energy prices.

Where We Are Right Now:
.....I could write a lengthy dissertation on this topic but in the interest of space I am going to try to be brief and counsel the reader to simply go online and do some research into recent articles on the subject of crude oil production and the world crude oil demand outlook. Some very good information is published by the Department of Energy’s (DOE), the Energy Information Administration (EIA), and by the International Energy Agency (IEA).
.....As an engineer, I understand the complete process of exploration and development of crude oil supply and also how it is used in so many products that are essential to our lifestyles. But for our purposes here, suffice it to say that crude oil is not found everywhere and is very expensive and difficult to find. Once found it is very expensive and time consuming to begin producing at a meaningful flow rate, and once this flow rate begins and reaches full capacity it will begin a long steady decline. Crude oil, its derivatives, and natural gas are a staple of virtually everything Americans touch from plastic, to the roads we drive on, to the cars we drive on them, to the fuel we cook food with, to the electricity we see with.
.....The fact of the matter is that in times past an energy price spike was relieved by an increase in supply. Unfortunately, due to a number of factors, there simply is not enough crude oil supply to fix the current price spike with an increase in supply as we have done so many times before. These factors include old oil wells that are experiencing rapidly declining production rates, new oil well production rates being brought online that have lagged behind the decline rate of existing wells, very difficult exploration environments for oil companies that include frigid arctic areas, very deep ocean and below ground areas, very hostile and dangerous civil environments, and the nationalization of the oil industry that is now dominated by state owned oil companies that derive a majority of their tax dollars from the oil industry, etc.
.....The world uses crude oil at a rate of approximately 87 million barrels per day (mbpd) and that is about what the world has been producing for the past 2 years. Production rates for crude had been on a steady upward trek for decades to stay ahead of demand but production rates have reached a plateau over the past 2 years yet demand has continued its steady trek upward due primarily to the expanding global economies of India and China. The IEA reports that the natural decline of existing oil wells is about 4.5 mbpd so the world must find and develop at least that amount to simply stay even with current production rates and that is precisely what has happened over the past 2 years. The growth in the global economy requires an additional 1 to 2 mbpd of additional production to meet that demand as well, so an overall annual production increase of about 5 to 6 mbpd is required. Producers simply haven’t been able to do this, and therefore, a tightening of supply has occurred and an increase in cost is the result.
.....For example, the Alaska pipeline project in its peak year produced a bit over 2 mbpd and currently produces a bit less than 1 mbpd (although politicians reported the pipeline would supply about 4 mbpd when it was originally proposed). Therefore, the world needs to find and develop the equivalent of a few Alaska pipelines each year and it just hasn’t been happening. Due to the length of time it takes to find and develop oil fields and the rate at which the global economy continues to grow, America, and the world, will not be able to drill its way out of this problem so there is no supply side solution as there has been in the past. Therefore, the only long term solution is going to involve not only the supply side, but the demand side as well. This is why the energy problem America currently faces is different from previous energy glitches and requires a serious, determined approach.

What Needs To Be Done:
.....The solutions to reducing the energy demands and increasing the energy supply for Americans will involve many small facets as there is no big silver bullet to solve this problem. The bottom line is it is time to begin seriously researching and developing ways to produce electricity and utilize it in our transportation infrastructure. Developing ways to utilize electricity as a transportation energy source is the key to reducing our demand for crude oil. To further reduce this demand, we must develop ethanol sensibly and reverse the damage done with corn based ethanol mandates by repealing the requirements and slowly moving them to switchgrass or sugarcane. We must also explore all avenues to improving efficiency standards for appliances, lights, cars, etc. and begin moving away from producing electricity from natural gas.
.....We knew what the answer to energy independence was 3 decades ago and we are now back to clamoring for more nuclear power because it is the most efficient and environmentally friendly way to meet our energy needs long term. Yes, there are significant issues that must be addressed regarding fission based nuclear power such as finishing the Yucca mountain waste repository (which Democratic Senator Harry Reid from Nevada is adamantly opposed to), developing a “cookie cutter” design for a standard nuclear facility so that we are not building a custom plant on each site, and speeding up the process of approval through the NRC. These are manageable issues that can be addressed with permanent solutions so that we have substantial electric resources.
.....We must also refocus the scientist and engineers we have at NASA and other federal resources such as Lawrence Livermore, Los Alamos, etc. to work on projects such as harnessing the power of nuclear fusion instead of nuclear fission, electric battery technology, and solar power technology. Current nuclear plants operate on the principal of nuclear fission, which is to split a very heavy atom and gain the resulting release of energy explained by the equation ∆E=∆MC². The resulting energy release also produces large quantities of harmful radiation. Nuclear fusion, on the other hand, involves joining two light atoms together and gaining the resulting energy release also explained by the equation ∆E=∆MC². Nuclear fusion is the source of the sun’s energy and results in much less harmful radiation, but the technology is at least 30 years away from commercial application. There are also significant advancements in battery technology that can be developed as well as solar energy advancements that hold significant potential for small scale and large scale electric generation. Solar energy is the energy that the earth harnessed millions of years ago in the form of what we now call crude oil and holds significant potential for advancements to make large quantities of electricity with no environmental effects. We also must not ignore the large domestic coal reserves in the US and continue to develop clean coal technologies to take advantage of this domestic resource in the near term.
.....One thing we must NOT do is to allow carbon credits legislation to move forward for two reasons. First, no one knows what the cause and effect will be on the American consumer and our economy and the attitude that we should just do it and let the free market economy work its way out is the same lack of carefully considering the consequences that resulted in ethanol mandates and outrageous food prices. Secondly, the energy problem all Americans face is crippling our economy and we must address the energy problem as the primary problem, and address the environment as the secondary problem within the context of solving America’s energy problem.

Thank you,

Paul V. Norris, P.E.