Five numbers reveal our energy future

When the newly elected Congress convenes in January, energy will be a priority. In fact energy is the “foundation” action item according to the just-released roadmap from Speaker of the House John Boehner. So this is a particularly good time to map out just how different the energy world is today, and will be in the future.

Four decades ago, when America’s extant energy policy paradigm was forged, the U.S. was the world’s fastest growing major energy user in an environment of resource dependency and depletion. The facts have since flipped: America is now the fastest growing energy producer, while nearly all net new demand takes place elsewhere.

In this context, consider the implications for America, and the world, of five key numbers.

3,000 billion: Within two decades, the world will see 3,000 billion more passenger air milesflown annually, 3,000 billion more watt-hours used weekly to cool homes , and likely 3,000 billion more megabytes of data traffic every hour. All this, and more, happens because of rising global population and wealth—and not in spite of, but mainly, because of radical efficiency gains in associated technologies. Global energy use will rise by an amount equal to the demand of the U.S., times two.

2,000 billion: Long-run supply of oil and gas is determined first by the scale of the underlying resource. The hydrocarbons contained in America’s shales constitute a physical resource base of well over 2,000 billion barrels of oil and natural gas.(America only uses about 12 billion barrels annually.)

350: Near-term oil & gas supply is determined by technology. America’s shale resources have been unlocked by the combination of horizontal drilling, hydraulic fracturing, and information technology—technologies that all continually improve. The efficiency of shale rigs—energy produced per dollar of capital—has increased 350% over the past four years. It took solar technology 15 years to achieve the same 350% productivity gain. It is, simply put, cheaper and getting more so, to convert shale to gallons than photons to electrons. That’s why U.S. annual oil & gas production has jumped by two billion barrels in just four years—adding 350% more to America’s energy supply than derived from all the heavily subsidized renewables combined.

300: The shale boom has added at least $300 billion annually to the U.S. economy over the past half-dozen years, along with nearly two millions jobs . Without this addition to GDP, America’s economy would have stalled, or been in recession, for nearly every year since 2008.

3: Until recently, the future of global energy trade resembled an oligopoly of two: Russia and the Middle East stood aloft as the dominant suppliers of oil and gas. Now, the U.S., especially as part of a triumvirate with Mexico and Canada in a North American Energy Common Market, can become not just a stabilizing third player in global markets, but the new dominant one.

Nothing outlined here obviates the need for alternatives to hydrocarbons. But it bears noting an additional fact relevant to the last number, 3. The International Energy Agency estimates that over the coming two decades the world will need to spend $3 trillion (on top of $1 trillion already expended in the past two decades) to subsidize non-hydrocarbons. Even after such spending, 75% of all energy will come from oil, gas, and coal.

Let’s finish with a bonus number:

1. America is now the world’s number one energy producer. Policy makers should double down on this unbidden and unexpected transformation.

 

This article appeared in USA Today at http://www.usatoday.com/story/opinion/2014/11/21/us-energy-policy-technology-economy-column/19169421/

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