Hats off to the Gray Lady, a.k.a. The New York Times, that much maligned relic of the pre-Internet world. Yesterday it held a one-day conference devoted to "Energy for Tomorrow" that was exceptional in every way. With moderators drawn from the paper's star columnists and reporters, and 37 expert panelists ranging from U.S. Energy Secretary Steven Chu to IEEE Executive Director James Prendergast, the meeting developed a small set of well-selected themes and delivered a powerful message. A special energy section appearing in the paper the same day both couched and amplified what the conference had to say.
The message in a nutshell: Despite chronic concern about U.S. oil dependence and current concern about sky-high gasoline prices, basically the United States is awash in abundant and inexpensive energy resources. And what that implies in this faltering and fierce global economy is that the United States is at a significant competitive advantage. These are the most important particulars:
• Natural gas. Not only is it available in super-abundance because of the revolution in hydraulic fracturing, not only is it steadily replacing dirtier coal in power generation, and not only is it poised to replace diesel in heavy trucking (as the President and T. Boone Pickens have proposed), Americans are buying natural gas at small fraction of what people are paying overseas. U.S. prices are now below $2 per million BTUs, the energy equivalent of oil at $12 per barrel. Natural gas bought in Europe, where it is usually linked to average oil prices in long-term contracts, is selling for four-five times as high a price as in the United States; and LNG delivered to Asia is seven to eight times more expensive.
• Petroleum. U.S. production, stimulated by high global prices, is up 20 percent from 2008; as a result of "tight oil" development in the Bakken Field formation, North Dakota has surpassed California as the nation's third largest producing state, as energy guru Daniel Yergin pointed out in the conference keynote speech. The United States now imports only about half its oil, down from two thirds, and only about a fifth of what it imports comes from the Middle East. What is even more important and generally overlooked is that the United States is producing a much larger fraction of the oil it consumes than most of its major European and Asian competitors. Thus, although Americans are paying the high global price for the oil they consume, about half the proceeds are going to American producers, not to producers overseas.
• Wind. The unsurprising expert consensus is that it is no longer an "alternative" or exotic or niche resource; it's plain and simply one of the major sources. Lester Brown, founder of Worldwatch and the Earth Policy Institute, where he is president, noted that 8 gigantic wind farms with capacities in excess of 10 GW are now under construction in China—as big or bigger, even taking intermittency into account, as large coal-fired and nuclear power plant complexes. In Germany, said Brown, several of the northern states are generating 40 to 60 percent of their electricity from wind. The implication is that the United States, where development of offshore wind is only barely beginning, has enormous untapped resources. In most of northern Europe, where the wind revolution started in the 1990s, most of the attractive on-land sites are occupied; in the United States, with many fine sites available, wind development will be cheaper in the next years.
Solar energy got relatively short shrift at the conference, and most of the attention it did get was in a disputatious final session devoted to renewable energy subsidies. The Solyndra bankruptcy and the ongoing solar shakeout naturally shadowed the proceedings. But on the bright side, low-cost Chinese production—however disruptive—has brought down the cost of photovoltaic arrays enormously; and, as IEEE’s Prendergast observed, the United States has relatively huge untapped solar resources, big enough in principle to meet all its energy needs.
All of this is not to say, of course, that challenging decisions are absent. As natural gas and wind displace coal in the United States, for example, the country will be tempted to start exporting large quantities to China; but in light of coal's high carbon content and ill effects on public health, is that a desirable thing to do? Similar concerns hang over the development of Canadian oil sands, which is why a go-ahead decision of the hugely controversial XL Pipeline is hanging fire.
But dilemmas like that arise from a plethora of blessings, not a shortage thereof. Basically, the abundance of relatively inexpensive energy resources is going to be a major U.S. strength in the coming decades. According to a Citigroup report cited in the Times special energy section yesterday “as many as 3.6 million new jobs might be created by 2020 thanks to the energy boom. The current trade deficit might fall by 60 percent by the end of the decade from today's level … and the dollar could appreciate by as much as 5.4 percent as imports shrink." Citigroup’s Ed Morse, a long-time leading oil industry analyst, told the Times that North America has the potential to become a "new Middle East."