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Fueling the Economy, Coal, Natural Gas Oil

Economic Prosperity and Fossil Fuels



The economic prosperity of the United States, and for that matter, your own personal quality of life, depends on reliable access to low-cost energy. If you are not sure of the validity of that statement, simply imagine your life without energy. No air conditioning, no travel, no imported goods, no plastics. Assuming that a life without those things is not what you want, then it is very important that you understand the real nature of the energy you depend on because the media is not telling you.
Part 1 of this series will examine each of three fossil fuels, coal, natural gas, and oil. We will illustrate how we use it, where we get it from, and its likely impact to our economy in light of growing global competition for energy. Part 2 of this series will offer some recommendations to help avoid a severe economic crisis triggered by an imbalance in the fossil fuel supply and demand curves. Part 3 of this series provides an overview of the process, risks, and costs of exploring and developing oil or natural gas. It will also examine status and some of the myths associated with the U.S. Oil Industry

Economic Prosperity and Fossil Fuels: Fueling the Economy


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85% of the United States energy needs are met by fossil fuels, a mere 15% by nuclear, wind, solar, and hydro-electric. And that 85% is expected to increase over the next few years as we reduce the number of dams providing hydro-electric power and our aging nuclear power plants shut down. To replace fossil fuels with “green” energy resources will take dozens of years and billions of dollars of investments. So, the FACT is that for the next decade, we are heavily dependent on fossil fuels. We’ll look first at Coal. It represents the largest known fossil fuel resource in the world, and one that we will continue to need to use: According to the Energy Information Association coal currently provides just over 22% of America’s energy needs. The U.S. produces almost 920 million tons of coal each year, most of which is used to fuel power generation plants. The U.S. Coal reserves are found in the Appalachian Basin, the Illinois Basin, the Gulf Coastal region, the Colorado Plateau and the Northern Rocky Mountains and Great Plains. Once mined, coal is used primarily for the generation of electricity in power plants where it is burned to create steam. Unfortunately coal is not a resource that can be used to help meet our growing demand for petrochemical products, and, ever since the days of the steamboat and locomotive, coal has not played a role in meeting the demand of the transportation sector. But, with some technology advancements, coal could provide electricity for electric or plug-in hybrid vehicles; provide methane for natural gas-powered vehicles; and eventually it will be able to provide petroleum liquids and gas. The two principal concerns with increased coal consumption are air quality and the disruption to the landscape caused by surface mining. However, improved clean coal technologies can significantly reduce the amount of pollution and mine remediation practices can restore mine sites. Looking now at Natural Gas: Natural Gas provides just over 23% of America’s energy needs. Like coal, gas is used to fuel power generation plants. It is also refined to help provide for the needs of the transportation sector. The present day capacity for trans-oceanic transportation of Natural Gas is limited, and dangerous. Therefore for the next 3 to 5 years, gas can be considered to be predominately a regional commodity. U.S gas production peaked in the 1970’s, so to meet the growing demand for natural gas, more reserves need to be found and produced. Five basins in the western United States have estimated gas reserves exceeding 180 Trillion Cubic feet. These reserves, along with gas provided by Canada, should be sufficient to meet the projected U.S. demand for the next 10 to 20 years. However, access to much of these reserves is restricted. For these reserves to be available to help meet our energy demand, these restrictions will need to be eased. Even if they are eased tomorrow, it will take several years before there reserves could be delivered to market. Another consideration that must be taken into account in considering natural gases role in our energy future is the maze-like network of natural gas pipelines that are necessary to deliver gas to the market. This pipeline network is aging and susceptible to both accidents and terrorist attack. So for natural gas to play a larger role in meeting our energy needs, there will need to be a significant investment in gas pipelines. Finally we will look at the most important fossil fuel of our energy mix; oil. It is our single biggest source of energy for the US, providing almost 40% of our energy needs. However, US production of oil has been declining over the last 30 years Although the United States is one of the world’ most significant oil producers, it consumes far more than it produces, such that we import over 50% of our oil. As we become increasingly dependent on imported oil, it is important to note that oil is the one fossil fuel most susceptible to geo-political instability, as oil is a global commodity. As our demand for imported oil is increasing, competition for the oil we depend on is also increasing. China, India, and Europe are all increasing their imports, as are many other countries. At the current rates of increased demand, the global demand could soon exceed the available supply, a combination that could lead to an even more severe economic crisis. So, where is the oil found to meet that demand? The largest oil reserves are found in the Middle East. South and Central America, Africa, and the former Soviet Union come in at a very distant second third and fourth. Currently the largest oil importers to the US are Canada, Saudi Arabia, Venezuela, and Mexico, followed by Nigeria, and Iraq. As we have recently seen, not all of these suppliers are friendly to the US, Venezuela in particular, which is in the process of negotiating to sell its oil to China Moreover, the competition for oil can not be met simply by one or more of these exporting countries increasing their production; the worlds refineries bottleneck the flow of oil as they are now operating at near full capacity. Over the last 25 years, there has been a 50% Decline in the number of operating refineries. Existing refineries are operating at 90+% capacity. Any loss of the remaining refinery capacity could significantly impact prices as we have recently seen with Hurricanes Katrina and Rita Finally, distribution of oil throughout the county depends on a complex network of aging pipelines, rail, trucks and ships, all of which are susceptible to accidents and terrorist attack. As you can see, the balance between our demand for fossil fuels and the supply of fossil fuels is approaching a crossing point. Coal and natural gas can meet some of our increased demand, but only with increased access. In the case of Oil, which provides the majority of our energy needs, increasing global competition will make it increasingly expensive for us to import oil Sustained high oil prices will likely result in inflation, which in turn can lead to a more serious economic recession. A serious disruption in supply, such as an embargo by one or more key suppliers, or a terrorist attack on one or more refineries, could have a catastrophic affect on our economy, leading to gas rationing, work stoppages, and a crippled National Defense. Hurricane Katrina gave us a glimpse of how serious such a disruption in supply can be. The only medium to long term solution to this dilemma is to narrow the gap between fossil fuel supply and demand. There are many ways in which that can be accomplished. Ideally, we should take steps to increase our domestic supply of fossil fuels while at the same time reducing our dependence on fossil fuels. In part 2 of this series, we will examine some of those options together.


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Bob Shoup -- Bio and Archives

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