The administration of US President George W. Bush deserves credit for two aspects of its push for hydrogen as vehicle fuel. The initiative is ambitious. And it draws useful attention to questions that must have answers if the ambition is to come true.
Should the oil and gas industry consider itself threatened by this promotion of a hydrogen economy, on behalf of which Energy Sec. Spencer Abraham recently appealed for international cooperation? Two answers: no and yes.
No market threat
The industry should not feel threatened by market loss. Hydrogen will not soon replace oil and natural gas. Its considerable advantages—abundance, pollution-free combustion, and role as energy carrier in efficient fuel-cell engines—attract eager attention, including from oil companies. But the advantages don't yet outweigh hydrogen's technical and economic drawbacks. For starters, producing hydrogen means decomposing water or hydrocarbons, which involves unrequited expenditure of energy and money. Also, if vehicles are to make use of hydrogen produced at central plants, the fuel must be transported and stored in an expensive system that doesn't now exist. And hydrogen is very flammable, so safety is a big issue.
Overcoming these challenges requires more than political will and taxpayer-funded research. It requires major technical advance and enormous investment. And if hydrogen does enter the market for vehicle fuel while oil and gas remain abundant, it won't replace hydrocarbons; instead, it will divert them to use as hydrogen feedstock and fuel for the generation of electricity.
The threat about which oil and gas companies should worry is the motivation for spending public money to accelerate an evolution that might occur naturally: the appeal hydrogen possesses for not being oil. Abraham was explicit about this when he described the hydrogen program to the Detroit Economic Club last Feb. 7: "The concept for this initiative is simple yet profound—create automotive operating systems that run on hydrogen rather than gasoline." Abraham's statement aligns ironically with former Vice-Pres. Al Gore's recommendation for the forced extinction of the reciprocating engine within 25 years.
The core assumption in this line of reasoning is that using oil is irredeemably harmful. If that were so, reducing the use of oil would be a fitting target of policy. In fact, harm attributable to petroleum is persistently exaggerated. Yet the consequently overstated case against oil works like a high principle of energy policy-making. It produces generous government incentives and market mandates for uneconomic fuels. It helps sustain opposition to oil and gas leasing of federal land. And it ignores the overwhelming convenience and affordability that make markets—that is, people buying energy—prefer petroleum products.
The case against oil proceeds mainly from five assertions advanced with unmerited certitude in public discourse:
- The global endowment of oil is nearly depleted. This isn't so. Production of easily accessible—and therefore relatively inexpensive—oil might soon reach a natural peak. That's not the same as exhaustion of the resource. Production will continue for decades beyond the peak, whenever it occurs. And it will be supplemented by production of technically more-challenging oil, which exists in abundance. The Age of Petroleum will not soon end; the Age of Cheap Petroleum might.
- The consumption and production of oil spoil the environment. They affect the environment, yes; spoil it, no. The effects—including air pollution from combustion—diminish as technology progresses and practices improve.
- Reliance on the Middle East for oil supply is dangerous. It's no more so than reliance on Nigeria or Venezuela for oil supply or on general trade for economic health.
- Oil prices are volatile. So are prices of other commodities.
- Burning oil causes global warming. This remains hypothesis, unsubstantiated by observation yet overwhelmingly accepted. If burning oil does elevate measured temperature, the effect is probably less than natural variability. This means people can't influence global average temperature much by curbing their use of oil.
Debate needed
With its hydrogen initiative, the Bush administration seems to endorse the case against oil. This represents an important change in strategy, public debate over which is essential. Or is the hydrogen program just blind ambition?
A predisposition against oil in politics can't hurt oil much in the energy market. But it can generate repetitive errors of energy policy by governments that never learn.