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The Current Energy Situation: Federal Role Remains Important

By the POPA Energy and Environment Committee

Energy problems are now being largely ignored, despite their continuing importance. The near-disappearance of energy from the U.S. public agenda is apparent in the scant attention given to energy topics by the media and by public figures. Some suggestions for governmental action were stimulated by the rise in gasoline prices in the spring of 1996, but the matter was treated as a short-term anomaly -- not as a harbinger of more severe difficulties to come. This lack of long term concern is perhaps natural, because fuel supplies are generally ample and prices are still relatively low, with the real cost of gasoline in 1994 only one half the cost in 1981. However, I believe, along with my colleagues on the APS Panel on Public Affairs, that neglect of potential future difficulties is highly imprudent, based on the considerations summarized below.

Consumption Trends

Without adequate energy supplies our society cannot function. The transportation sector is particularly vulnerable to energy disruptions and uncertainties. The coupling between energy and the economy has been reduced, but it is still a reality. Because of the increased efficiency of energy use and because of modal shifts in our economy, the ratio of U.S. energy use to GDP (in constant dollars) decreased by 32 percent from 1973 to 1995, but the rate of improvement in this ratio has fallen sharply since 1986.

In the first period since the oil embargo (1973-86), the GDP rose by 41 percent, while energy consumption rose by less than 0.1 percent. However, in the next period (1986-1995), the GDP rose by 23 percent while energy consumption rose by 17 percent.

On the other hand, energy use on a per capita basis has been relatively constant, dropping by about 14 percent in the decade following the oil embargo, but by 1995 rising most of the way back toward the 1973 value. Since 1975, electricity use has increased almost in lock-step with GDP, rising 72 percent from 1975 to 1995, while the GDP rose 74 percent.

The rest of the world has justifiable aspirations that will entail greater energy use. Energy consumption is growing much more rapidly in the still developing countries than in the industrialized countries of the Organization for Economic Cooperation and Development (OECD). For example, during 1970-1990 energy consumption increased 178 percent for non-OECD Asia (5.3 percent per year), compared to 36 percent for the OECD (1.6 percent per year). Within several decades, these and other developing countries are likely to outstrip the OECD countries in total energy consumption.

The Production of Energy

Let's compare the U.S. consumption of different energy sources for 1973 and 1994 Fossil fuels continue to be the mainstay of our energy economy, providing 85 percent of energy used in the U.S. in 1994. Annual consumption of oil, natural gas and hydroelectric power changed little from 1973 to 1994, while coal and nuclear power each grew by about 6 quads/year and renewable energy by about 1 quad/year.

Natural gas and coal are considered by some to be the "bridging fuels" of the future. U.S. proven natural gas reserves dropped from 200 trillion cubic feet (TCF) to 164 TCF from 1983 to 1994. (1 TCF is about one quad.) The present rate of consumption is 21 TCF/y. Resources may be as high as 1000 TCF, but it is not clear how much of this can be converted to proven reserves. There are very large resources of coal, but their mining and use entails major environmental problems.

Fossil Fuels

U.S. domestic petroleum supplies are limited. U.S. proven reserves of crude oil have declined for seven consecutive years. Low oil prices and a lack of good petroleum prospects are major factors in the downturn in domestic drilling and the success rates. U.S. proven oil reserves dropped from 32 billion barrels (Bb) to 22.5 Bb between 1977 and 1994. According to USGS estimates, the amount of remaining recoverable oil, both discovered and anticipated, is considerably less than the amount of oil already produced. In spite of new Alaskan production, U.S. oil production dropped from 9.6 million barrels per day (Mb/d) in 1970 to 6.5 Mb/d in 1995. The number of discoveries of large fields in the U.S. has greatly decreased and it seems unlikely that many new large fields of oil and gas will be found in the U.S. Since 1980 no discovered field has more resources than the top 100 previously discovered oil or gas fields.

U.S. reliance on oil imports creates problems for the country. The U.S. trade deficit on net petroleum imports was $48 billion in 1995 - about 30 percent of the total trade deficit and 7 percent of total imports. U.S. net petroleum imports have risen 31 percent since the oil embargo (6.0 Mb/d in 1973 to 7.9 Mb/d in 1995). The fraction of U.S. oil from imports was about 50 percent in 1995, and is projected to rise to about 60 percent in 2010. The OPEC fraction of the world oil market is projected to rise from 40 percent in 1990 to 52 percent in 2010, as a result of the fact that OPEC countries have a large fraction of remaining oil resources. The Middle East continues to be a region of potential political instability. The U.S. fought the 1991 Persian Gulf War in part to defend the unimpeded flow of oil to OECD nations. Dependence on Persian Gulf oil has motivated U.S. arms shipments to that region and increased military involvement. Europe and Japan have partially prepared themselves for future petroleum shortages by using considerably higher gasoline prices ($4/gallon) to raise revenue and moderate demand.

Environmental Impacts

Production and combustion of fossil fuels are harmful to the environment. Forty urban areas violate at least one of the U.S. ambient air quality standards, adversely affecting human health. Many foreign cities have considerably worse air quality problems. Automobiles contribute about one-half of the cities' air pollution.

If current trends in fossil fuel use continue, carbon dioxide concentrations will double in the next century. According to the Intergovernmental Panel on Climate Change, changes in weather and temperature patterns, particularly the spatial pattern of temperature changes, all point to "a discernible human influence on global climate." The aggregate impacts of changes in temperature, precipitation, and sea-level, while uncertain, are likely to be harmful to both human and natural systems.

Energy Efficiency Gains

Buildings and appliances consume about 40 percent of U.S. energy; there are great opportunities to reduce these energy requirements. New building diagnostic computer codes allow architects opportunities to use new energy-management techniques. The need for space heating in new large buildings and houses can be decreased by more than 50 percent on a cost-effective basis. Because of the long lifetime of buildings and the incomplete application of energy standards for buildings, the national transition to more energy efficient buildings will be slow. However, an Energy Information Administration (EIA) study found that houses built after 1988 consume only 59 percent as much natural gas as those built before 1980. From 1972 to 1990, new refrigerator energy usage dropped from 2000 kwh/year to about 800 kwh/year.

Transportation alternatives are an extremely important challenge. Because transportation uses 2/3 of U.S. petroleum and over 1/4 of U.S. energy, it is a very critical target for energy savings. Since the oil embargo of 1973-74, the number of registered passenger cars has risen from 102 million to 147 million, an increase of 44 percent. The DOE's EIA projects that vehicle miles traveled by light duty vehicles will increase by 1/3 by 2015. The U.S. is saving huge amounts of fuel and billions of dollars a year because the current standard (average) fuel economy for new automobiles of 27.5 miles/gallon is twice the 1973 fleet average of 13.5 miles/gallon.

Alternatives to Fossil Fuels

Alternatives to fossil fuels are nuclear fission and fusion; solar sources such as photovoltaics, biofuels, wind, hydro, and solar thermal; tidal; and geothermal. These energy sources are sufficient to sustain the Earth's economy, but in most cases the costs are not now competitive with fossil fuels. Renewable energy sources are not widely replacing fossil energy sources.

Nuclear fission's role will diminish without new initiatives. In 1995 nuclear energy's share of the electricity generated by utilities was 22 percent in the United States, 76 percent in France and 33 percent in Japan. Nuclear energy has risen from a negligible contributor to U.S. electricity generation in 1970 to the second largest source after coal in 1995, substantially moderating the need for fossil fuel sources. No new reactors have been ordered in the U.S. for more than 20 years. Several versions of improved reactors are expected to be available for pre-licensing shortly, but there are no immediate prospects for U.S. utility purchases. No decisions have been reached in the U.S. on the location of either interim or permanent nuclear waste repositories, and it is not clear that a coherent, politically acceptable, nuclear waste disposal program can be established in the near future.

The Federal Role

Science and technology have had major successes. Energy R&D has produced new and improved products and accelerated market penetration, such as combined-cycle power plants, compact fluorescent bulbs, enhanced nuclear safety, more efficient automobiles, high bypass ratio jet engines for airplanes, improved building designs, catalytic converter mufflers, improved photovoltaic cells, more reliable wind mills, and so forth. R&D is necessary to enhance development of future energy sources and to improve end-use energy efficiency.

The federal government has an essential role in addressing problems with long time horizons, particularly when they involve potential threats to the national security and well-being. Industry will typically invest in products that have a relatively short payback period. However, energy problems may require several decades of development and success is not assured. Federal help is needed to fill the gap. This should be done with a stability in funding that goes beyond the yearly Congressional budget cycles.

This article is based on a document prepared by the Energy and Environment Committee of the APS Panel on Public Affairs (POPA), an effort led by Chair David Hafemeister (California Polytechnic State Univ.). D. Bodansky, Univ. Washington; A. Brecher, Dept. Transportation; P. Craig, Univ. California-Davis; A. Fainberg; B. Hammer, Amer. Inst. Physics; R. Howes, Ball State Univ.; S. Smith, AAAS-EPA Fellow; R. Socolow, Princeton Univ. and E. Stechel, Sandia Nat. Lab. also contributed to its preparation. See the POPA homepage for the full version of this paper.