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The Obama administration has made us less energy independent

It’s nearly impossible to read, watch or listen to the news lately without updates on the uprisings in the Middle East. While some may view these events, tragic though they are, as removed from their day-to-day lives, their impact is in fact far too close to home. While nearly everyone agrees that this global tension further demonstrates the need to extricate the U.S. from unstable sources of energy abroad, our own government agencies have put in place policies that do the exact opposite.

As we approach the one-year anniversary of the tragic oil spill at the Macondo well in the Gulf of Mexico, some lawmakers are seizing the opportunity to push legislation further crippling the oil and gas industry’s ability to produce domestic energy. Environmental groups are actively pursuing litigation to this effect. While anti-drilling proponents advance their cause in the name of energy security, their efforts are sabotaging that very goal.

There’s no getting around the fact that oil and natural gas produced right here in the United States will still account for 57 percent or more of domestic energy consumption by 2035. Not to mention that domestic production — not by Cuban, Brazilian or Chinese companies permitted to drill within miles of our coast — of these resources will ease the decades-long grip held by petro-dictators over the United States. Alternative sources of energy, while undoubtedly important to develop in the present and deploy in the future, aren’t yet ready to meet demand. While we work as a nation to diversity our energy portfolio and improve overall efficiency and conservation, current bureaucratic, legal and legislative barriers to drilling in the form of moratoriums, permitoriums and bills like “Use it or Lose it” only deepen our dependence on foreign sources of oil.

The president is doing his part, as well. In a trip to Brazil earlier this month, he told Brazilian President Dilma Rousseff, whose country recently discovered two major oil fields off the coast of Rio, that the United States wants to be one of Brazil’s “best customers” once it’s ready to sell. The president stated: “At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy.”

The president is exactly right about the impact of foreign events on the price of oil. However, he contradicts himself just seconds later. He doesn’t seem to understand — or realize — that shifting our foreign energy dependence from one part of the world to another doesn’t make us more energy secure, and it certainly doesn’t help prices at the gas pump. Instead of looking to Brazil — or any other country, for that matter — why aren’t we moving to produce 97% of offshore federal lands that are kept off limits to energy exploration?

Though the moratorium on Gulf drilling has been lifted and a few permits have been issued since, thousands of workers remain on the unemployment ranks. A recent study by Louisiana State University Professor Joseph Mason found that some 13,000 jobs and $800 million worth of wages have been lost in the Gulf region since last summer’s moratorium on offshore oil production. National job losses are estimated at 19,000, and national wage losses at $1.1 billion.

While our government struggles to formulate some sort of workable energy policy in light of domestic and international events, our national and economic security remain at risk. We’ll need energy from somewhere, and continued inaction in the Gulf threatens to force the United States to import an extra 88 million barrels of oil per year by 2016, at a cost of $8 billion.

What’s often unacknowledged in this debate is the tremendous steps the industry has taken to improve its safety and response capabilities after the Macondo incident. The industry and government heeded this wake-up call, with the industry doing its part in crafting two state-of-the-art containment systems proven to capture spills more catastrophic than what occurred last spring, and meeting the government’s deservedly stricter safety standards.

If this administration viewed our domestic oil and gas industry as a growth engine — one that directly and indirectly employs 9.2 million Americans and contributes 7.5% of our GDP — it may be the first to realize true energy security.

David Holt is President of the Consumer Energy Alliance.

The Daily Caller

Consumer Energy Alliance Welcomes New Member Iowa Motor Truck Association

Consumer Energy Alliance Welcomes New Member Iowa Motor Truck Association

HOUSTON – April 20, 2011 Consumer Energy Alliance (CEA) is pleased to welcome the Iowa Motor Truck Association (IMTA) as its newest affiliate member.

Founded in 1942 the IMTA is the voice of trucking at the Iowa State Capitol.  The association is not only the recognized voice of trucking; it is also a valued business partner to its members through the variety of membership benefits that are offered by the association. Currently the Iowa Motor Truck Association has over 700 member companies and continues to strengthen its foundation by enrolling additional members. The Iowa Motor Truck Association is headquartered in Des Moines at the foot of the State Capitol.

“Consumer Energy Alliance is pleased to work closely with the IMTA on energy issues at a regional and national level,” said CEA president David Holt. “Uniting producers and consumers of energy on rational policy is one of the most essential functions of CEA and IMTA accomplishes this by providing a voice to the Iowa State Capitol on energy issues that affect members of the trucking industry.  CEA looks forward to working closely with IMTA to provide consumers with credible energy information and learning first-hand some of the concerns consumers have about federal and state energy policies.  With recent troubles in Libya and Egypt and the specter of higher energy prices looming on the horizon finding common sense, balanced energy solutions here in the U.S. has never been more important.”

Added CEA Midwest Director Ryan Scott, “The Iowa Motor Truck Association will play a key role for CEA in the Midwest; IMTA understands as well as any group energy policy is crucial as we continue our economic recovery.  IMTA is a first rate organization that will inform us what is happening on the ground in Iowa, as well as help us to spread our message about the importance of affordable and reliable energy as we head into the next Presidential election cycle.”

As a group with strong concerns on energy policy, the trucking industry has a vested interest in legislation and regulations that affect the production, distribution and supply of motor fuels at the retail level.   “Iowa’s trucking industry is pleased and proud to be onboard with CEA.  We believe it is imperative that the development of viable energy policies becomes a top priority among our elected officials.  We look forward to our continued work together and supporting the ongoing effort to create good policies that impact everyone in a positive way,” said Mike Riggan, IMTA Chairman of the Board and President of TanTara Transportation.

 

Matching actions with intent

This week in energy we have watched gas prices reach a new two-year high along with lots of concern, speculation and fear that prices are headed even higher.

We also got word, from Alaska, that oil production from Alaska’s North Slope this year is going to be lower than forecast. CEA has previously discussed this troubling decline in production from a key domestic source of oil. There are multiple reasons for the decline, but one major factor is the slow pace of approving leases to drill in federal lands and waters off the coast.

It is never a good thing when we fail to make the most of our natural resources, but at a time when reducing our dependence on oil imports is supposed to be a top economic priority, this failure to fully tap our oil in Alaska or other oil-rich parts of the country suggests we are only paying lip service to that longstanding goal. You may recall how President Obama recently traveled to Brazil, where he encouraged that country to expand its offshore drilling and even pledged that the U.S. would be a major customer of its oil. As this editorial notes, Obama, “does not share the same eagerness,” for oil production in the United States.

In the case of Alaska, a trend of declining production impacts not only our current supply of domestic oil but also the future viability of the state’s oil sector. Oil production in Alaska impacts the Trans Atlantic Pipeline System, the 800-mile-long feat of modern infrastructure, which today, after years of diminished flow, is now at risk of reaching a point where it can no longer function. Without a pipeline to transport Arctic oil, there would be little incentive to produce oil, and little means to ship what oil was produced to points south in the U.S. Without a pipeline, producers in Alaska could find it more economical to export the oil to the Far East.

Back in Washington, President Obama continues to insist he is serious about reducing our dependence on foreign oil, but as one lawmaker recently remarked, without a commitment to increase production in places like Alaska, this amounts to vague platitudes.

 

From too good to be true, to good … and true

Just last week we cautioned that fuel efficient technologies – like a car that runs on water – that seem  too good to be true, may indeed be too good to be true. This week, we offer a more hopeful sign of the power of technology to transform the way we produce and consume fuel.

Agilyx is a Tigard, Oregon-based company with a patented technology for converting plastics to crude oil.  You might accurately say converting plastics back to crude oil, since oil is used to produce plastic in the first place. Hearing about the company’s unique brand of alchemy makes you wonder why no one thought of this sooner, and also, is this even possible?

Indeed, the company, which recently secured $22 million in venture capital funding, is already producing oil from discarded plastic and selling it to a local oil refinery at a competitive price. Agilyx says it can process all kinds of plastic, including dirty plastic that was discarded long ago, and that tests show the technology it uses to convert this trash back to oil leaves a “favorable” carbon footprint.  (That last claim is one that would need to be investigated further, since it is critical that the process does not produce excessive waste.  But the fact that investors have backed the business is a good sign.)

An even better sign? The massive demand for such a business.  In the Pacific Ocean alone, there is an estimated 100 million tons of plastic afloat — everything from toys to truck fenders — which have long posed an environmental nightmare. Converting this plastic to fuel not only creates a lot of incentive to clean up the mess, but solves the problem of where to put all this waste once it is cleared from the ocean.

So often we are reminded that national energy policy is all about compromise: measuring the risks and benefits of various fuel sources and making the hard choices. Agilyx offers a breakthrough not only in technology but also in conventional wisdom and shows us that, along with hard choices, there are also at least on occasion, some win-win solutions.

Stay tuned to CEA’s website for more information about our upcoming Energy Day where we will showcase some of the most cutting-edge energy production technologies.

 

April 2011 Newsletter

April 2011 CEA Newsletter
Issue 49


 

What Does Energy Mean To You?

Over the past month, CEA’s blog has highlighted a range of energy topics, from efforts to boost solar power production in the sunshine state, to tips just about everyone can use to become more energy efficient at home and at work. In our recent post, Pain moves beyond the pump, we showed how rising oil prices affect us all, even if we don’t own a car and never have occasion to visit a gas station: Recent increases in the price of food and other consumer goods have been linked to higher fuel costs.

This is all part of CEA’s ongoing effort to increase awareness of all forms of energy, how it enables us to live, work, and prosper, and all the different ways we can tap our natural resources to fuel our communities, our businesses, our dreams and our future. Already, the year 2011 has proven to be an extraordinary year, with widespread turmoil in the Middle East, an unprecedented natural disaster in Japan, and here at home, an economy that is on shaky ground and feeling the pressure of surging oil prices. We cannot control most of these events, which is why we must make the most of the sun that warms us here at home, the wind that cools us, the generous reserves of oil and gas that lie beneath us, and the state-of-the-art technology we have developed for channeling all of these resources into reliable sources of fuel.

It often seems so simple, but the reality is much more complex. For decades, our country has been unable to meaningfully reduce our dependence on crude oil imports, and more recently our policymakers have erected a set of particularly daunting (and ever-changing) regulatory hurdles for onshore and offshore natural gas & oil drilling. The problems with so much of our national energy policy were cast in sharp relief recently when President Obama traveled to Brazil and pledged not only to provide the technology and support to help Brazil develop its own oil resources, but then went to say that the U.S. would be one of the best customers for Brazil’s oil. The Obama Administration has also been criticized recently for boasting that oil production is up on its watch; while in reality, oil flows seen today, reflect projects that were approved years ago. It is bad enough that we fail to tap our own natural resources, but when we then encourage other countries to produce more oil our domestic policy seems even more misguided.

Education is the first step toward building consensus on a national energy policy that truly diversifies our energy mix, properly recognizes our current energy needs and fundamentally makes sense for all Americans. It will lead to continued technological breakthroughs and it will build our understanding of the risks of neglecting our home-grown resources. This year, education will also be a key theme of CEA’s Energy Day, October 15 in Houston. The event will feature interactive displays of energy production and efficiencies, demonstrations of the most advanced energy production technology, and contests for high school and college science projects, all focused on the tangible questions of what energy means in our everyday lives and how we can meet our future energy challenges. Meeting those future challenges will require effort and understanding from all of us. So think about it: What does energy really mean to you?

David Holt


Protect the Public Use of Our Oceans:
Tell Washington to Ensure Commercial and Recreational Access to Coastal and Offshore Activities

This past summer, the Obama Administration formed a new bureaucracy to implement a national ocean policy and direct federal agencies to oversee these plans. Following the President’s order, the Interagency Ocean Policy Task Force developed a series of recommendations for ocean management that included nine national priority objectives for a federal oceans policy. Now, the newly formed National Ocean Council would like public input on how to turn these objectives into action plans, which may as well be lingo for “more regulations.”

Our oceans support several vital industries – including fishing, tourism, traditional and renewable energy development and shipping – as well as millions of American jobs. Given its significance to our economy, its sustainable use remains a priority for coastal residents and governments. Already, several federal and local agencies oversee commercial and recreational activities and ensure these practices do not significantly distress the health of local ecosystems or local residents.

However, the National Ocean Council is seeking to use coastal & marine spatial planning – essentially ocean zoning – and other practices that may limit, if not ban, offshore oil and gas production as well as a multitude of other commercial and recreational activities offshore and onshore. Not only will our domestic offshore energy production be stymied by another layer of federal bureaucracy, but given how broad the goals are, these proposed policies may also affect economic activity far away from our coasts.

Tell the Obama Administration how valuable our marine resources are to our economy and make sure the federal government doesn’t block public access through a series of red tape. Please feel free to use our draft letter below and tell the National Ocean Council to protect the public’s rights. For more information on oceans policy, please visit the National Ocean Policy Coalition. Comment period closes April 29, 2011.


As Energy Day 2011 approaches, momentum is really picking up.  There has been a couple of interesting Energy Day developments throughout the month of March.  On April 12th the second Energy Day Steering Committee meeting will take place at City Hall in Downtown Houston.  Also, CEA would like to welcome 4 new Energy Day Partners; Foundation for Energy Education, Knowledge Is Power Program (KIPP), University of Texas and the U.S. Chamber of Commerce Institute for 21st Century Energy.

Here is the list of confirmed Energy Day sponsors:

ABC-13, American Public Power Association, Apache, Bug Ware, Inc., Caterpillar, City of Houston, Consumer Energy Alliance , Consumer Energy Education Foundation, Cooperative for After-School Enrichment (CASE), CSTEM Teacher & Student Support Services, Earth Quest Institute, Eco-Holdings Engineering, Energy People Connect, Environmentally Friendly Drilling Project, Foundation for Energy Education, Greater Houston Partnership, Green Mountain Energy, Halliburton, Harris County Dept. of Education , Houston Advanced Research Center, Houston Area Land Rover Centers, Houston Independent School District, Museum of Natural Science, Wiess Energy Hall , Houston Renewable Energy Network, Houston Technology Center, KBR, Inc. , Lone Star College, Momentum Luxury Group , NASA-Johnson Space Center , National Algae Association , Offshore Energy Center, Science & Engineering Fair of Houston, Shell, 60 Plus Association, Solar Tour Houston , Statoil, Texas Alliance for Minorities in Engineering, The Wind Alliance, TransCanada, TXU,  University of Houston, University of Texas, U.S. Chamber of Commerce, Western Energy Alliance

We need your participation and involvement to make this an outstanding event! Please email Kathleen atKKoehler@consumerenergyalliance.org for details.

Energy Day Academic Awards Program – Upcoming Events

While Energy Day is still a little over six months away, the Energy Day Academic Awards Program will get started in April with 3 events.  Each event will also count towards the Energy Capital Academic Program (ECAP) for all of those who attend.  For more details on the Energy Day Academic Awards Program or the Energy Capital Academic Program please email Craig at: Koshkin@consumerenergyalliance.org.

The Science and Engineering Fair of Houston (SEFH) —April 7-9, 2011

Since 1960, SEFH has promoted the “learning and applications of science and technology” for Texas junior and senior high schools students in Houston and the surrounding 23-county area. SEFH is a regional fair, associated with the INTEL International Science & Engineering Fair and is one of the largest pre-college STEM activities in the U.S. April 7 is project registration and setup day; April 8 is judging day; and, April 9 the projects are on public display from 9:00 a.m.-2:30 p.m. in Hall A3 of the George R. Brown Convention Center, and the Awards Ceremony is from 2:30-5:30 p.m. in Hall B3. More details about SEFH.

On April 8, judges from the CEA Energy Day Steering Committee will select three energy-related team projects to receive an award. Winning projects will be chosen based on creativity, originality, knowledge of student, effort, conclusions and quality of display. Awards will also be given to the top three winners in each division of the Energy & Transportation category. In all, CEA will give 12 awards at SEFH.

Winning teams will be recognized at the SEFH Awards Ceremony, will receive awards at Energy Day, and will be invited to display their projects at Energy Day on October 15, 2011.

 

The International CSTEM Challenge—April 16, 2011

On April 16th more than 3,000 students from across the country and the Dominican Republic will transform Downtown Houston into a science and technology think tank.  The International CSTEM Challenge is free to the public and will be held at the George R. Brown Convention Center.  Students grades P-12 will showcase projects ranging from sculptures to robotics.  This year CSTEM has partnered with the Shell Eco-Marathon, a competition where high school and college students unveil futuristic vehicles running on alternative energy resources.  This event will be held at Discovery Green.

The annual CSTEM competition aims to interest kids of all walks of life and aptitude in careers in science, technology, engineering and mathematics.  CSTEM is educating and enabling our nation’s workforce to succeed in the 21st century.  For more information visit www.cstem.org.

 

Energize! Houston

Houston Northwest Chamber of Commerce (HNWCC) and the Houston Airport System are hosting Energize! Houston, a family-friendly annual festival that provides an opportunity to enjoy a fun day of activities, static aircraft displays and demonstrations focusing on energy and transportation. Visit the pilots and their planes up close and personally, learn about making slime, check out the AFLAC racecar, find out how CenterPoint Energy delivers electricity to light up your home, and see how bio-fuels are changing transportation! Take time to explore the Offshore Technology Center Mobile Lab, to see the Global Tae Kwon Do International Team, meet the Airport Rangers, and much more!

Energize! Houston is at George Bush Intercontinental Airport (IAH), Continental Hangar B, 4365 Wright Road, Houston 77032 on April 30, 2011 from 12 noon to 4pm. More details for Energize Houston.


Interested in discovering ways to use renewable energy around your home? The U.S. Department of Energy maintains a wealth of information on what you can do with renewable energy. Check out these tips:

To learn more about using renewable energy, visit the Renewable Energy section of EnergySavers.gov, a consumer-geared website of the U.S. Department of Energy.


CEA Affiliate Spotlight

As policymakers work to address our growing demand for energy, all forms of technology and resources need to be sustainably harnessed to increase production and supply, lower costs and strengthen energy security.

One way to do so is to employ state-of-the-art technology to produce synthetic fuels from natural gas abundant in North America.

Not only is natural gas a clean source of energy to generate electricity, but this feedstock can be converted to clean-burning fuels with numerous benefits for the environment, economy and national security. And due to new exploration and drilling technologies, the amount of natural gas available for production in the U.S. has soared by 58% over the last four years, making synthetic fuel production from natural gas an attractive option to utilize these resources to meet our transportation fuel needs.

CEA member Sasol, an integrated energy and chemicals company, has produced synthetic fuels from both coal and from natural gas using their proprietary Fischer-Tropsch technology for over 60 years. Gas-to-liquids (GTL) fuel includes GTL diesel, naphtha, liquefied petroleum gas, jet fuel and chemical feedstock.

With headquarters in Johannesburg, South Africa, operations in 38 countries and a workforce of nearly 35,000, Sasol currently operates the Oryx GTL facility in a joint venture with Qatar Petroleum in Qatar.

As CEA members recently learned, Sasol has partnered with Talisman, a Canadian oil and gas exploration and production company, for shale gas production in British Columbia and most significantly, to explore the potential to bring GTL technology to North America for the first time.

Projects of this nature provide a strong vehicle for job creation, strengthened energy and national security and environmental stewardship.

  • An average GTL facility is expected to support 600 permanent jobs, in addition to significant construction and indirect jobs.  Local communities will also gain much needed new tax revenue and economic stimulus.
  • GTL fuels are virtually free of sulfur and aromatic compounds and reduce emissions of particulates, nitrogen oxides, carbon monoxide and other ollutants, helping to meet emission mandates.
  • GTL fuels can be used in diesel and jet engines and transported utilizing existing tankers and pipelines.

Synthetic fuels produced from natural gas can play a meaningful role in diversifying and strengthening our energy supply.  It’s important that CEA members – energy producers, suppliers and consumers alike – work together with policymakers to enact meaningful and responsible energy policy that fully utilizes our domestic energy resources, leading to a cleaner, more secure energy future for our nation.

House NRC Hearing Highlights Rising Fuel Prices, Weakness In American Energy Policy

House NRC Hearing Highlights Rising Fuel Prices, Weakness In American Energy Policy
Alliance Calls for Relief from Pain at the Pump; Access to More Domestic Energy Resources

Washington, D.C. — This morning, the House Natural Resources Committee heard valuable testimony from American consumers in the hearing, “Harnessing American Resources to Create Jobs and Address Rising Gasoline Prices: Impacts on Businesses and Families.” Consumer Energy Alliance (CEA) president David Holt, and John Heimlich, CEA Vice Chairman of the Board and vice president and chief economist for the Air Transport Association of America (ATA) released the following statements on today’s testimony:

“After hearing testimony today from America’s trucking industry, farmers and businesses, it’s increasingly apparent that our policymakers need to embrace and advance policies that encourage the responsible production of every form of domestic energy to ensure our great nation has access to ample supplies of safe, affordable energy,” said Holt. “We call on the Administration to end the ongoing delays in issuing oil and gas permits and to allow access to domestic energy reserves offshore in the Gulf of Mexico, Alaska and the Southeast. Given that our combined recoverable oil, natural gas, and coal resources total 1.3 trillion barrels of oil equivalent – the largest in the world and more than Saudi Arabia, China and Iran, it’s time to harness the tremendous energy resources we have right here in the U.S.”

Added Holt: “We applaud House Natural Resources Committee Chairman Doc Hastings (R-WA) for responsibly addressing this issue head-on through the introduction this week of offshore energy legislation.  These responsible, common sense approaches – combined with long-term development of alternative energy – rightfully encourage American energy development, while strengthening our energy security and struggling economy.”

“With energy prices, including jet fuel, at their highest level in more than two years, Americans need immediate relief from the pain they are experiencing in almost every good or service they consume,” said Heimlich. “High and volatile fuel prices are a tax on Americans – threatening to paralyze our nation’s economic recovery. One example of the fallout of rising energy prices is the recently announced cutbacks in levels of air service. Before American consumers see oil prices climb toward $150 per barrel once again, it’s time for the federal government to take affirmative steps to encourage and ensure the responsible production of our domestic energy supplies.”

 

Can cars run on water alone?

If it sounds too good to be true, that’s often because it is. You may have recently heard about a new car fueled entirely with water. Early reviews of the vehicle created by the Japanese company Genepax promoted it as one that would continue cruising as long as there was bottled water in the vehicle to pour into the energy generator in its tank.

But, this so-called breakthrough was quickly exposed for what it really is: A gimmick that, in practice, would require so much money and energy to work that it has no place in the world of everyday people looking for practical and affordable ways to reduce fuel consumption.

This reviewer was quick to note that, in order to run on water, the car must carry a heavy and expensive electrolyzer on board and that it would ultimately require an outside source of energy – a lot of it – to “break” the water down into a usable fuel. In other words, the fuel used to render the water usable would most likely exceed the amount of fuel needed to power a conventional gasoline-powered car. So much for that.

This does not mean that it is impossible to build a better, more fuel efficient car using advanced technologies. Indeed, technology will be the key to fueling our future. But it does suggest that even as we do discover creative ways to do more with less, there will be tradeoffs. As we have seen with electric cars, higher costs and limited range are tradeoffs that the typical consumer often cannot afford to make. Not to mention that it takes energy to make electricity. Yes, technology will continue to improve, sometimes at a breathtaking pace. However, for the foreseeable future, there does not appear to be a magic bullet that will render transportation fuel-free.

The lesson behind the hype of the Genepax vehicle that runs on water is one that goes beyond just automobile transportation. When considering energy efficiency, we must consider the big picture: Not just the amount of energy we consume, but other factors, like the massive amounts of energy required to turn water into fuel, or the amount of oil it takes to transport imported foreign oil to our shores. Likewise, when considering promising new technologies, we must consider whether they could be produced and adopted on a large scale.

 

CEA: President Pursues Every Energy Option Except Access to Domestic Energy Resources

CEA: President Pursues Every Energy Option Except Access to Domestic Energy Resources

WASHINGTON – Following President Barack Obama’s remarks today on America’s energy security and the testimony presented this morning by Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) on the President’s FY 2012 Budget Proposal at the House Natural Resources Committee, Michael Whatley, executive vice president of the Consumer Energy Alliance released the following statement:

“Despite gasoline pump prices approaching $4.00 per gallon nationwide and millions of Americans still out of work, statements made today by BOEMRE Director Michael Bromwich indicate that this Administration will pursue just about every option except domestic oil and gas production to relieve us from our foreign oil dependence.  Though Director Bromwich denies that his agency’s policies have produced a “de facto moratorium”, the pattern of obstruction is clear: In 2006, the U.S. Department of Interior approved 381 permits; in 2009, 170; in 2010, 104; and in 2011, 20. We urge the Administration to reexamine their policies regarding Outer Continental Shelf (OCS) exploration and development, and meaningfully embrace  accelerated permitting that will allow the offshore industry to go back to work in the Gulf of Mexico and beyond.”

 

Tale of two fuel sources

Frequent readers of this blog will recall that we often bemoan the way consumers are left paying the price for a national energy policy that relies too strongly on oil imports while failing to develop much of  the oil available right here at home. This week, as gasoline prices have spiked to a two-year-high, we want to turn our attention to the natural gas market, where prices remain, by contrast, rather stable.

Natural gas prices peaked above $13 per thousand cubic feet in 2008, but over the past year they have averaged just $4.38. Why is the price of crude oil more volatile than natural gas? One key reason is that the domestic natural gas industry is booming. This new report, from Bipartisan Policy Center and American Clean Skies Foundation, notes that “in a few short years, technology advances combined with new shale discoveries have more than tripled estimates of the nation’s economically recoverable natural gas resources.” Indeed, today the U.S. is the world’s number one natural gas producer.

It can be hard to reconcile those statistics with the fact that, not that long ago, natural gas supplies in the U.S. were believed to be pretty limited, and many in the United States were preparing to import liquefied natural gas (LNG) to meet domestic needs. The recent growth in the country’s natural gas sector is due largely to the breakthroughs that have enabled the production of more natural gas from shale rock. However, the growth will not be sustained unless we continue to support production and maintain the infrastructure to store and transport these growing resources, which are vital for electricity generation, heating, manufacturing – including fertilizer and chemical products – and potential increased use in transportation. The health of this industry will require continued vigilance to impress upon lawmakers the importance of domestically produced energy.

But for the moment at least, the domestic natural gas sector is a model of effective use of our national energy resources. The bulk of the natural gas we consume in the U.S. is produced here at home, and growing production has supported stable prices. As for the crude oil used to produce gasoline, the story is different. High imports have contributed to higher prices and greater volatility. This, despite the fact that the United States also has a wealth of oil reserves and the technology to develop them.

Pain moves beyond the pump

We’re starting to see the other shoe drop. When oil prices first shoot up, there is a tendency – at least among those of us with a measure of disposable income – to regard the matter as a nuisance. We talk about pain at the pump and consider carpooling and adopting other small changes. But, as we have started to see in recent days, the pain of high oil prices is never confined to the pump. Consider this news on how rising oil prices have sent all sorts of costs higher:

The price of goods imported to the U.S. climbed 1.4% in February from a month earlier as costs increased for energy, industrial supplies and food…. Prices for imported foods and beverages increased 0.8% last month and have risen 15.8% over the 12-month period ending in February – the biggest year-on-year rise since the Labor Department’s index was first published in September 1977.

Higher oil prices mean that that factories are paying more for raw materials at the very time they are attempting to ramp up production following a lengthy downturn. Similarly, the U.S. service sector, which accounts for as much as 70% of the country’s GDP and is seeing its economic recovery gain momentum, is now also at risk of having all its progress undone by higher oil prices. The fuel-intensive farming industry is seeing operating expenses rise, meaning that costs of domestically-produced food will also continue to rise.

When you consider how widely oil price shocks are felt, you understand how sustained high oil prices will damage world economic recovery as the International Energy Agency cautioned. “If (the price of a barrel of crude oil) continues to be $100 through the year, it will certainly be detrimental for economic recovery all over the world,” the agency’s executive director recent told Reuters. Standard & Poor’s warned on March 16 that if oil prices – which approached $120 a barrel last month – were to reach $148, it could cause global panic and risk a double-dip recession.

Of course, for most consumers who don’t have a lot of wiggle room in their budgets, pain at the pump is painful enough. What is worse is that you ultimately can’t duck the cost by taking the train to work or turning down the thermostat. The dramatic events of a still-young 2011 continue to remind us of all the events around the world that are out of our control. Building a strong domestic energy supply is one of the tools we have to help strengthen our economy and shield it from damaging oil price shocks.

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