Diversification and energy independence

Don Stowers, Editor-OGFJ

Everyone from Al Gore to George W. Bush concedes the need to diversify our energy resources, improve energy efficiency, and reduce the dependency of the United States on foreign oil supplies. Unfortunately, there is considerable difference of opinion as to how to reach these goals.

President Bush has stated publicly that the US needs to evolve to a “hydrogen economy,” meaning, I assume, that over time we need to reduce our reliance on the internal combustion engine that burns gasoline or diesel fuel and make the conversion to an engine powered by a hydrogen fuel cell. A noble goal, although one that won’t happen in the near term.

The main difference, as I see it, between Bush and the former vice president is that Gore would have us reduce our dependency on fossil fuels practically overnight, which is not a realistic objective. At this point, there are no viable alternatives to fossil fuels. With energy demand on the rise in developing nations as well as developed ones, even coal - the dirtiest fossil fuel - is enjoying a renaissance of sorts.

With the world’s ever-increasing energy demands, both renewable and non-renewable forms of energy are needed to keep the engines running. That’s why we can expect to see construction of nuclear power plants resume in the United States in the next decade, if not sooner, and it is why there will be no quick phase-out of carbon-burning cars and factories.

Three high-profile energy executives offered some insight in a recent appearance on NBC’s long-running “Meet the Press” program on Sunday, June 18.

Jim Mulva, chairman and CEO of ConocoPhillips, suggested that we Americans need to wean ourselves from our well-deserved reputation as an inefficient consumer of energy.

“This is a global business, and it’s not only that we need to add to supply, but we need to reduce demand,” said Mulva. “In the United States alone, we have about 2% of world oil reserves, and yet we use about 25% of the world’s consumption of oil.”

Mulva also said he considers $3/gallon gasoline relatively cheap when compared with global prices. In much of Europe and other Western nations, gasoline prices are closer to $5 to $7/gallon, he noted.

John Hofmeister, president of Shell Oil Co., commented that global competition for supplies - not excessive oil company profits - is to blame for high prices at the gasoline pump. “If we didn’t have this level of profitability, I don’t think we could get the supplies to where they need to go.”

Hofmeister emphasized that to increase supplies it is crucial that oil and gas producers gain greater access to federal lands and offshore waters for exploration.

Chevron Corp. chairman and CEO David O’Reilly concurred. “I do understand why consumers are concerned,” he said. “The issue here is not the price issue. The solution here is how to increase supply.”

All three executives acknowledged the increased global competition for resources with Hofmeister concluding, “If we’re going to be more independent, we’re going to have to address the tough, tough question of should we allow more oil and gas development in this country.”