On May 19, 1986, Oil & Gas Journal published an address given at the 1986 annual meeting of the American Association of Petroleum Geologists, Pacific Section, entitled, "The Looming Energy Crisis."
The thesis of the paper was that, unless the US recognized an approaching crisis in energy with aggressive and constructive planning, a shortfall in energy supplies in the country would surely occur at the end of the 20th century.
The 21st century is now with us, and we are confronted by the very conditions in energy that were clearly predictable 15 years ago.
For most of the 20th century, oil, its products, and natural gas have dominated the energy market because of their plentiful availability and ease of handling. The same patterns of usage are expected to continue well into the twenty-first century. Accordingly, the thrust of this essay will deal with oil and gas rather than other energy sources.
Recent trends related to energy use have displayed the decline in domestic petroleum production predicted in 1986 and the consequent rise in imported oil and products. Other trends should be noted here as well.
During the President Clinton years, the trend was to foreclose large areas of public lands from energy development, e.g., in Utah, and place no emphasis upon opening promising regions for exploration, e.g., Alaska and the US offshore waters.
The usual arguments in favor of this negative trend are that these prospects, even though quite attractive for their energy production, contain amounts too small to be significant in terms of our daily demand. What is left unsaid in these arguments is that every barrel of oil and unit of natural gas displaces imported energy and save us money.
Another trend is of particular concern. Our use of natural gas has sharply increased in just the last several years, mainly because it is a clean-burning fuel. The surplus of supply, which has overhung the market for years, is gone, and future demand must be met by new discoveries or additions to reserves. The result of this trend is higher prices.
If the trends outlined above are not arrested, or, even better, reversed, what may we expect? Most of the discussions about energy policy deal with advocating new and urgent energy development and singularly omit the consequences of failing to do so. It is the purpose of this essay to forecast some of these consequences.
If we don't stop the decline in domestic production, we must increase our imports of foreign oil and products to sustain or increase our current use of oil. As a result, we shall become more dependent on OPEC and other countries. Inevitably, under these conditions we may expect the prices of petroleum products to rise, as foreign producers assert control over our demand.
Natural gas occurs in association with crude oil accumulations, or it may be found alone in exploratory regions known for their dry-gas fields, viz., the Sacramento Valley.
With our surplus of natural gas depleted, we have seen prices escalate to surprising levels. During the past winter, in fact, spot prices for gas in California were on occasion as high as $50/Mcf, and gas from new discoveries is being sold under long-term contracts for $12-15/Mcf. Several years ago, gas was available for less than $3/Mcf.
If demand for natural gas does not abate, especially for electric power generation, we may expect that our requirements will be satisfied by imported gas in liquefied form at prices even higher than at present.
Under present trends it is reasonable to forecast continuing increases in crude oil and product, e.g., gasoline, prices. For natural gas, we have just begun to experience high costs. Because of its premium qualities as a clean-burning fuel, demand for gas, particularly as mandated for electric power generation, is bound to accelerate.
The upshot will be sharply higher home heating and electric power costs.
In the development of national energy policy it is essential that the US public be given accurate forecasts of the alternatives: Either we strive for greater dependence on our domestic energy resources or we buy our energy from abroad.
In the former case we have abundant coal reserves and still regions highly promising for oil and gas production, all of which can be brought to market at acceptable prices with acceptable environmental risk.
In the second case we cede our energy dependence to OPEC and other countries, prepare to pay for energy at prices determined not in the marketplace but rather by foreign potentates, and incur the risks attendant with increased tanker traffic for both oil and liquefied natural gas.
The US citizen should be given this information and the choice of these two alternatives.
Arthur O. Spaulding
Petroleum Geologist
Ojai, Calif.
