Monday, September 29, 2008

Presidential Debate: Energy Issues

In a presidential debate focused on foreign policy and the ongoing financial crisis, it was entirely appropriate that the subject of energy came up as often as it did. The two Senators discussed energy in at least three different contexts: the consequences of past energy legislation, policies to promote future energy independence, and the geopolitics of energy. Both expressed support for a broad mix of alternatives, fossil fuels, and nuclear power. The differences in their priorities might have been clearer, had either provided more details of his respective energy programs. Surprisingly, however, only Senator Obama referred directly to energy independence, a goal both men have mentioned frequently throughout their campaigns.

Longtime readers of this blog know that I regard energy independence, in its strictest definition, as an unattainable distraction from sound national energy policy in an inter-connected world. That concern is less relevant here, because the scope of Senator Obama's vision for energy independence appears to have been reduced to a goal of freeing ourselves from "dependence on Middle Eastern oil" within 10 years. Numerically, at least, that might just be feasible, since oil from the Persian Gulf accounted for only one-fifth of net US oil imports last year. The 17 billion gallons per year of additional biofuel mandated by 2018 under the current Renewable Fuels Standard would get us more than a third of the way there, after factoring in differences in energy content and refining efficiency. The phase-in of higher fuel economy standards over that period might deliver the rest, with a bit of help from the lifestyle changes that have contributed to this year's drop in demand. But that assumes that domestic US oil production would not continue to drop in the meantime. That is far from certain, and it has as much to do with government policies as it does with geology.

Between 1997 and 2007, US production of crude oil and natural gas liquids fell by 1.1 million barrels per day, an average net decline of 1.5% per year. Over the next decade, the continuation of that trend could slice another million barrels per day from our current output, making the achievement of Senator Obama's goal much harder, possibly putting it out of reach. That's why this year's drilling debate and the proposed new taxes on the oil industry are so important. Even if we can't drill our way to energy independence, we can certainly non-drill our way into even greater dependence, despite our best efforts on alternatives and fuel economy.

Senator Obama's citation Friday of the oft-quoted, though highly-misleading "3% of reserves but 25% of consumption" factoid suggests that he and his advisers should examine the dynamics of US oil production a little more closely. Perhaps they are encouraged by DOE forecasts of a modest resurgence of oil production, though history suggests those might be as optimistic as the same agency's estimate of only 200,000 barrels per day of production from the off-limits portions of the offshore seems overly pessimistic. But whether we are considering the production potential of current leases or the prospects of the estimated 18 billion barrels of additional oil that have been placed off-limits, the US oil industry's task of maintaining output at levels at least comparable to today's--amounting to 10% of the world's supply, not 3%--will be much harder, if it faces lawsuits attempting to block every new lease, or if it is subjected to new excise or windfall-profits taxes.

I look forward to hearing more about the candidates' visions for energy in the debates ahead, including more details from Senator McCain on the cost and feasibility of constructing another 45 nuclear power plants in this country. I'd also like to learn more about the role each of them sees for energy conservation, which I didn't hear mentioned last Friday. In addition, in the next few weeks I intend to take another look at each Senator's published energy plans, since I haven't reviewed these (McCain; Obama) since the primaries.

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