The Future of Energy in America

Jeff Carter of the ‘Points and Figures’ web log has a very interesting post about the results of his attending the Chicago Booth Graduate School of Business Management Conference last Friday (all by way of the omnipresent Instapundit).  Mr Carter found the candid comments from two panelists, Bill Reinert of Toyota (maker of the most all-American cars) and Michael K Wirth of Chevron, most elucidating.  Some examples:

Did you know that Chevron spends $33 billion a year just to keep the doors open and the lights on?  Amazing operating budget.  For that 33 billion spend, they control 2% of the worldwide oil market. 

Conclusion: Running an oil company isn’t cheap and has a lot of fixed costs. 

Question: Why do we demonize, regulate and tax the crap out of them? 

Another data point they offered was that in the next ten years, the world will need 40% more energy to operate.  Demand is going up.  The reason?  In America, when we go through our daily lives, we implicitly trust that lights will go on, air conditioning and heating will work.  We know if we plug something in, the electricity will power it.  We use cell networks.  We don’t walk and bike everywhere, and generally get to place to place using some form of powered transportation. 

Well guess what?  The rising middle class in the rest of the world wants the same thing.  As China, India, Brazil and other countries increase their standards of living, they will demand more energy.

They introduce the concept of ‘energy density’ of energy sources, measured in terms of mega-joules per kilogram.  For those green aficionados, the first comparison to notice is that solar energy is ten to fifteen times less dense than wood.  The most efficient would be nuclear energy, by more than several magnitudes.

There was a section of the discussion that pertained to “green energy”. Currently, 2% of the entire supply curve for energy in the world is green.  There is plenty of research and development on green energy, but there is no exponential “Moore’s Law” that holds true when it comes to energy.  The world will use 3% green energy ten years from now.

They discussed why natural gas is a much better alternative source but also listed the political and infrastructure obstacles to its more widespread use and development.  For best use of automotive energy, engines are continuing to become more efficient, and that is where the smart money should go.

We don’t need CAFE standards to stimulate car companies to create better cars. Economic incentives create them.  There is no secret car that gets 90 MPG that car companies are withholding from the market.  If they had it, you could buy it on a lot.

What about high speed rail?

Give up on high speed rail.  It’s not going to be possible under the current political environment, or economic environment.

As far as batteries are concerned, we have reached a current dead end in improving on energy efficiency.  “[T]he battery-only cars on the market weren’t game changers. . . . They are science experiments.”

This is a very interesting post to read in its entirety.  Avail yourself of the opportunity.

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Update:  On a related note, the outlook for biofuels is beyond bleak, particularly in the cellulosic biofuel production.

But in 2007, Congress vastly overestimated the government's ability to create a market for cellulosic biofuels, which remain much more expensive to produce than corn ethanol.  There was no commercial production of cellulosic fuel in 2010 or 2011 – even though the 2007 law originally called for 100 million and 250 million gallons, respectively, for those years (the requirements were subsequently scaled back to around 6.5 million gallons for each year).

Anyone want to continue to place their trust in Congress and the Green lobby?  They at least realized that corn ethanol has a significant impact on food prices (there were riots in Mexico City some years ago), so a cap of 15 billion gallons by 2015 was put in place by the EPA’s 2007 Renewable Fuel Standard.  They are going to have to scramble to meet even their greatly reduced goals.

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Update: It has been a busy day for energy articles.  Now 'Power Line' has a post entitled, appropriately enough, “We Are Swimming in Oil”.

On Thursday, a representative of the Government Accountability Office testified before the House Science Subcommittee on Energy and Environment that the Green River Formation alone – it is located at the intersection of the states of Colorado, Utah and Wyoming, and mostly underlies federal lands – contains as much oil as the entire proven reserves of the rest of the world combined. [emphasis in original]

John Hinderaker goes on to ask if Obama will continue to insist that we only have 2% of the world’s proven reserves, and will he continue to block development of these resources if (God forbid) he is re-elected?  While the administration continues to advertise that oil production has increased under its watch, the fact is that this increase has taken place almost exclusively on private and state lands – federal leases under this administration have practically ceased.

The story about this remarkable testimony was promptly ignored by the main stream media.

Mind you, this testimony was only in regard to the Green River Formation.  There are also enormous deposits in the Bakken Formation being developed in North Dakota, which is just a minor portion of the field which is primarily in Canada (developed through new Canadian technology in extraction) and whose exports to the US are blocked by the administration’s refusal to build the Keystone XL pipeline.  There is also the enormous Marcellus Formation under West Virginia and Pennsylvania and surrounding areas such as eastern Ohio and southern New York; the various fields throughout historically energy rich Texas, with the deposits throughout the Permian Basin (including the Barnett and Barnett-Woodford Formations) and the Eagle Ford Formation in the southeast, plus the Woodford and Floyd Neal Formations which Texas shares with Oklahoma and Louisiana respectively; the Antrim Formation in Michigan; Fayetteville in Arkansas; and the Chattanooga/Conasauga in Mississippi and Alabama – to name just the larger ones.  Then, of course, there is Alaska, and offshore deposits sitting idle and undeveloped.

This does not take into account the fact that it is difficult to keep up with the industry and its discoveries which occur so rapidly now. What will the potential look like just a few months from now?  More importantly, what will it look like when we have an administration that will allow this enormous potential to be developed?