The much anticipated International Energy Agency (IEA) report was released today, and basically told the world exactly what renewable energy advocates have been screaming from the rooftops for the past decade – energy demand is rising dramatically, and massive investment in new energy infrastructure development is an absolute necessity.
The IEA expects demand for oil to rise from 85 million barrels per day to106 million barrels per day by 2030. And in order to keep pace with demand, the agency noted that an energy supply investment of $1 trillion a year is necessary. That’s trillion – with a “T.”
So while water cooler debates will likely focus on how the necessary capital will materialize in order to invest in oil and gas production increases, we believe the real focus should be on how we can transition our transportation systems to avoid getting caught up any further in the oil depletion vortex.
The IEA report basically tells us that the days of cheap oil are over. Although the truth is, they’ve been over for quite some time. But with so much subsidization in place, it’s hard for the average consumer to know this. Just on security issues alone, the U.S. military shelled out $44 billion in 2007 to protect the oil supplies in the Persian Gulf. You may not see your share of that $44 billion at the pump – but you better believe that those are your tax dollars at work. And that’s just one security cost.
The IEA report also takes little time to review what I like to call the “What If’s.” What if we see a major supply disruption, like the one we saw roughly 30 years ago? According to a report issued by Milton Copulos, the former head of the National Defense Council Foundation, oil supply disruptions of the 1970s cost the U.S. economy between $2.3 and $2.5 trillion. The cost of such an event today however, could be as high as $8 trillion. That’s more than 60 percent of our annual GDP, or roughly $27,000 for ever person living in the United States. Of course the IEA report is focused on the global “big picture,” and not just the U.S. But we can’t just conveniently forget that the U.S. consumes 25 percent of the world’s oil reserves.
Either way, logic dictates that we should not allow this latest IEA report to provide an excuse to ramp up investment for increased oil production. Not when the basic fundamentals of supply and demand simply do not favor oil as our primary source of transportation fuel. As it stands, the global peak of oil production is expected to occur between 2010 and 2013. This isn’t something that’s going to happen twenty or thirty years from now. This is likely going to happen in less than five years. And it’s going to happen with or without attempts to tap more oil. Of course, the major international oil companies are not investing in future production as had been hoped anyway. What else can you expect when even with new technology, there has been no improvement in recovery. In fact, wells drilled over the last few years have nearly doubled, but production has remained flat.
My friends, the solution is not chasing after every last drop of oil we can get our hands on. The solution is building a transportation system that doesn’t rely primarily on oil. A combination of electric and plug-in hybrid electric vehicles, a massive upgrade and expansion of our mass transit systems, and further development of biofuels that use non-food feedstocks, like cellulose and algae, can not only lessen our dependence on foreign oil – but can actually enable a new generation of wealth and prosperity.
We have the technology, we have the labor (especially with a 6.5 percent unemployment rate) and we certainly have a valid reason to do this yesterday. The only question now is: Will our leaders in Washington have the cojones to stand up to the old guard of fossil fuel cheerleaders and lobbyists, shut down their decades-long free ride, and redirect those tax dollars to a new, vibrant energy infrastructure? If they do, the private capital will flow like we’ve never seen before – and there will be no more excuses for continued complacency. Not even recessionary fears or tightening credit will be able to stop it.
But this has to happen immediately. If we continue to wait around and entertain the arguments of overpaid lobbyists and self-absorbed talk show hosts that are only seeking to muddy the waters and deter progress, we can officially chalk ourselves up as a second-rate nation sucking off the teat of an unsustainable future.
Let’s hope it doesn’t come to that.