With the always simmering politics of energy and the environment headed for the boil in a US presidential election year, the oil and gas industry should stay ready to assert perspective when threats emerge. One such threat will develop as the major parties complete their nomination formalities and the candidates square off on specific issues. It is the urge to mandate absolute reductions in consumption of energy, especially energy from hydrocarbons.
Vice-Pres. Al Gore makes no effort to hide his antagonism toward fossil energy. And his Republican opponent, Texas Gov. George W. Bush, must tread carefully on energy issues. Especially after selecting Dick Cheney, chairman and chief executive officer of Halliburton Co. as his running mate, Bush will be accused of favoring "Big Oil" whenever he addresses energy issues. The oil and gas industry should expect no favors.
No favors needed
It should need no favors, in any case. What it should expect is progress by politicians and officials away from the assumption that policy should discourage energy consumption. In isolated and absolute terms, energy use means very little.
The question relevant to US politics and policy-making is how much energy the economy needs to maintain growth. By this score, reported recently in Oil & Gas Journal's Midyear Forecast, the news is good (see table, OGJ, July 24, 2000, p. 80). Energy consumption as a function of economic growth has fallen steadily through the recent economic expansion in a pattern that began in the early 1970s.
OGJ estimates total energy consumption this year at 10,200 btu/$ of gross domestic product, adjusted for inflation with 1996 as the index year. That's a 2.9% improvement in energy-use efficiency in a year during which the economy is expected to grow by 4.3%. And it reflects 15.7% improvement from the level of 1990. Against the peak year of 1970, energy use per unit of economic growth is down 48%.
The improvement is even more pronounced for oil alone, consumption of which OGJ expects this year to average 4,000 btu/$ (1996) of GDP. That's 18% down from the 1990 level and 54% down from the modern peak in 1972.
The US thus shows remarkable ability to reduce its energy appetite relative to economic growth. The main reason is general deregulation, which has both stimulated growth in economic sectors with low energy intensity and forced businesses and individual consumers to make economically sound decisions.
These are beneficial and sustainable trends. Officials from neither political party should want to reverse them with major policy intrusions. Energy market shares will change naturally as the market evolves and new technologies come on stream.
Activists, however, can't wait. So from the interventionist side of the political spectrum come environmental alarms and calls for energy choice by government fiat. They make air-quality problems sound like crises worthy of crash response.
But facts say otherwise. An annual Environmental Protection Agency report released in April documents continuing improvement in air quality overall. During 1989-98, US air showed reductions of 56% in lead concentrations, 39% in both carbon monoxide and sulfur dioxide, 25% in coarse particulate matter, 14% in nitrogen oxides, and 4% in ozone smog. The numbers of areas not attaining pollution standards set by the 1990 amendments to the Clean Air Act have fallen to 20 from 43 for carbon monoxide, to 8 from 12 for lead, to 0 from 1 for nitrogen oxides, to 32 from 101 for ozone, to 77 from 85 for particulates, and to 31 from 51 for sulfur dioxide.
Problem areas
There are two problem areas. One is that some areas, especially rapidly growing city regions, remain out of attainment with the standards for one or more pollutants, especially smog. The other is that pollution by ozone smog is increasing in rural areas, an effect EPA attributes to what it calls regional transport from nonattainment areas. But these are regional challenges, not a national crisis, and should not be managed by government as anything else.
Overall, the US has sustained an historic economic expansion while steadily improving both the efficiency of its energy consumption and the quality of its air. This is the perspective under which the government should conduct energy policy and the perspective that the industry must communicate clearly in this political season.
