Friday, September 23, 2005

Storm Symptoms

It's oddly seductive to watch the gradual progress of another major hurricane moving across the Gulf Coast, on its way to a landfall in America's energy heartland. CNBC's coverage yesterday afternoon was dominated by discussions of "Worst Case Scenarios." Rather than speculating further on the possible impacts Rita, I think it's important to remind ourselves that although Katrina did significant damage to the oil and gas production and refining system, as may Rita, these are short-term effects. While they draw attention to some serious issues, the vulnerability of our energy infrastructure to weather-related disruptions is only a symptom of a larger set of fundamental problems. These include:

  • The unintended consequences of a loophole in the federal Corporate Average Fuel Economy (CAFE) standards have transformed the US automobile fleet with a wave of SUVs, stalling fuel economy improvements and amplifying the demand increases associated with more cars driving further every year.
  • In recent years gasoline demand has outstripped the ability of US refineries to supply, even when operating near 100% of nameplate capacity. This puts more stress on lean inventories and increases our imports of refined products, making fuel prices more volatile.
  • We have handcuffed our cleanest and most efficient fossil fuel, natural gas, with poorly-considered land-use restrictions and bans on offshore drilling. These rules ignore the significant downstream environmental benefits of using gas and push us towards higher use of coal and imported oil.
  • At the same time, we've erected numerous roadblocks in the way of importing gas in the form of LNG. The combination of these two factors has pushed natural gas prices to all-time highs (nearly six times the historical average,) and put power supplies, winter heating, and entire segments of the fertilizer and petrochemical industries at risk.
  • Finally, our current energy mix and the way it is growing contribute to increases in the atmospheric greenhouse gases that are changing the climate in unpredictable ways, with consequences that are extremely unlikely to be beneficial.

At a minimum, Rita has shut down most of the Gulf Coast energy facilities that escaped harm from Katrina. Even without serious damage, the markets will be in turmoil for weeks, and the prices of gasoline, heating oil, and natural gas are going to go up even further. This is drawing attention to an energy sector that for years has been taken for granted and treated as an inconvenient necessity. Now that energy has everyone's attention, it is time to start talking about the dangerous contradictions embedded in our lifestyles and attitudes. We cannot continue to increase our use of energy without also expanding the infrastructure for producing and processing it. Nor can we expect the industry to maintain adequate inventories to handle disruptions such as Katrina and Rita, while imposing tax and accounting penalties on it for holding those inventories. For years, people like me have been predicting that something will have to give. Two hurricanes have brought that day into the present.

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