Q&A with energy watcher James Coyle

Published in the Orange County Register on April 4, 2013. To access the original article, click here.

Q: What factors are causing high gas prices worldwide?

A: First, there's the ever-increasing need for fuel in China and, to a lesser extent, India. These countries push up demand. In China, they're putting 70,000 new cars on the road every day. Those aren't replacement cars; that's a net increase of vehicles every day. And when you combine that with declines in production from Libya, Syria and Iraq and sanctions on petroleum exports from Iran, you have a recipe for high prices.

Q: So when will we get relief at the pump?

A: I hate to be pessimistic, but as long as demand for oil continues to grow worldwide, we can anticipate high prices. While prices in March moved down slightly because of seasonal fluctuations, the long-term trends predict prices remaining around $4 per gallon.

Q: What needs to happen for gas to become more affordable?

A: The usual answer is drill, baby, drill – but the domestic amount of traditionally-recoverable oil that is suitable for production as gasoline offers just a short-term solution. We're talking about unrecovered deposits in the Arctic National Wildlife Refuge in Alaska, off the coast of California and some other places. They could provide relief for 10 years, maybe 20. Recent advances in the recovery of oil from shale extend the timeline out to 50 years, but at a high environmental cost.

In the short term, any increase in supply, regardless of where we drill, will drop the prices. There really is no such thing as a domestic or world market. That's a fallacy; it's all one market. So we can increase tar sands production in Canada, and all that will do is produce enough oil so that China can add another 70,000 cars to the road.

Q: Taking a longer view, are there opportunities for improvement?

A: There are a couple of possibilities that provide some hope. One is biofuels. Researchers are really starting to experiment with the growth of algae and other things that could be burned for energy – not to put gas in your tank but to generate electricity so oil can be freed up to use for gasoline.

Also, we are witnessing a revolution in the production of petroleum and natural gas from shale oil. Ten years ago, the question was "How long before we run out?" It was a scary possibility. Then, in 2002, a new technique was established to unleash energy from shale through fracking. Now, for the first time since the 1960s, the U.S. is exporting energy. This is the most viable source of hope, because other technologies are just too immature. It is, however, a two-edged sword: the sudden availability of cheaper oil and gas from fracking is kicking the bottom out of alternative energy technologies.

Q: Won't conservation help?

A: Yes, it becomes clear that a big part of the answer is conservation, which doesn't have to mean people riding everywhere on bicycles. It can mean things as simple as checking your tires. If everyone in the U.S. kept their tires properly inflated, we would see a 5 percent reduction in the use of gasoline. That might not sound like a lot, but we consume 20 million barrels of oil a day. Five percent would equate to an extra million barrels of oil daily.

Can Alternative Fuel Replace Gas and Oil?

Most people agree that use of hydrocarbons to produce energy is a terrible use of natural resources. It is expensive, it pollutes, there is a correlation between energy use and global climate change, and relying on hydrocarbons often means relying on corrupt or authoritarian governments that control the sources. Why, then, don't we develop other sources of energy? Can't we use clean technology such as hydropower, windpower, solarpower, etc.?

In a word, the answer is no, the technology does not exist in the near future to replace the world's reliance on gas and oil. To quote that National Intelligence Council in their prognostications:

All current technologies are inadequate for replacing traditional energy architectures on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025. The present generation of biofuels is too expensive to grow, would further boost food prices, and their manufacture consumes essentially the same amount of energy they produce.
Other ways of converting nonfood biomass resources to fuels and chemical products should be more promising, such as those based on high-growth algae or agricultural waste products, especially cellulosic biomass. Development of clean coal technologies and carbon capture and storage is gaining momentum and—if such technologies were cost-competitive by 2025—would enable coal to generate more electricity in a carbon-constrained regulatory environment. Long-lasting hydrogen fuel cells have potential, but they remain in their infancy and are at least a decade away from commercial production. Enormous infrastructure investment might be required to support a “hydrogen economy.” An Argonne National Laboratory study found that hydrogen, from well to tank, is likely to be at least twice as costly as gasoline.
Even with the favorable policy and funding environment that would be needed for biofuels, clean coal, or hydrogen, major technologies historically have had an “adoption lag.” A recent study found that in the energy sector, it takes an average of 25 years for a new production technology to become widely adopted. A major reason for this lag is the need for new infrastructure to handle major
innovation. For energy in particular, massive and sustained infrastructure investments made for almost 150 years encompass production, transportation, refining, marketing, and retail activities.
Adoption of natural gas, a fuel superior to oil in many respects, illustrates the difficulty of a transition to something new. Technologies to use natural gas have been widely available since at least the 1970s, yet natural gas still lags crude oil in the global market because the technical and investment requirements for producing and transporting it are greater than they are for oil-based fuels.
Simply meeting baseline energy demand over the next two decades is estimated to require more than $3 trillion of investment in traditional hydrocarbons by companies built up over more than a century and with market capitalizations in the hundreds of billions of dollars. Because a new form of energy is highly unlikely to use existing infrastructure without modifications, we expect any new form of energy to demand similarly massive investment. (National Intelligence Council, Global Trends 2025, p.44)

Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at jimcoyle@verizon.net.