Facing the Oil Problem
A call for an energy policy that would spark outside-the-box basic research, end dependence on foreign oil, and reduce death and destruction on the nation's highways.
By Charles F. Doran
Charles F. Doran, SAIS '66, A&S '69 (PhD), has studied energy policy, oil politics, and Persian Gulf security for decades; among his 10 books is Myth, Oil, and Politics (Free Press, 1977). After his essay "Life After Easy Oil" appeared in a recent issue of The American Interest, we asked him if he'd write something on energy policy for Johns Hopkins Magazine, and he graciously agreed. Besides being director of the Global Theory and History Program at the Nitze School of Advanced International Studies, Doran is the Andrew W. Mellon Professor of International Studies and directs SAIS' Canadian Studies and International Relations programs.
When the price of oil plummets to $50 a barrel as it did last November, it is hard to imagine it soaring to $250. But within five years, as the world resumes dynamic growth after the present recession, the United States very likely will face $250 oil. Economists argue over whether, or to what degree, the abrupt 2007-2008 increase in oil prices precipitated the subsequent recession (as did the 1973-1980 price hike) or at least worsened its effects. But there is no doubt that the equally abrupt and continuing decline in oil prices from nearly $150 a barrel in July 2008 to less than $50 a barrel four months later resulted in large part from a sudden drop in demand because of the worldwide recession on the heels of the summer/fall 2008 financial crisis.
In most advanced industrial countries, including the United States, consumption of energy relative to GDP has declined so that the relative importance of energy to the overall economy is less significant than it was a couple of decades ago. But relatively less economic significance does not mean less absolute demand for energy. On the contrary, the absolute level of energy consumption in these countries has continued to rise, though at a slower rate than their economies as a whole. Absolute declines in energy consumption are for the most part still in the future.
U.S. government agencies have recently come around to the view that conventional oil supplies are likely to peak worldwide sooner rather than later. Although U.S. supplies peaked as far back as 1970, the government has long denied concern about the availability of oil to fuel future world growth. But Hard Truths, a 2007 report issued by the U.S. National Petroleum Council, an advisory group to the Department of Energy, included assessments from both the U.S. Government Accounting Office and the U.S. National Energy Technology Laboratory regarding the likelihood that world oil is peaking. Both Hard Truths and the 2008 International Energy Agency study World Energy Outlook include data and graphical evidence of the global peaking of conventional oil, especially in non-OPEC areas. Outside OPEC, oil fields everywhere are in decline. Even the huge Ghawar field in Saudi Arabia may have reached its peak rate of output of easy oil. Meanwhile, pushed by high economic growth rates in China, India, Brazil, and elsewhere in the Third World, demand continues to rise.
The amount of crude oil that can be extracted from a reservoir is only about 30 percent to 40 percent of the total amount of oil it contains. Secondary and tertiary recovery using water, natural gas, and other chemicals to dissolve and make mobile the last remaining barrels of oil is an increasingly expensive and difficult process as pressures within the fields dissipate. Critics of the peak oil notion like to point out that techniques of tertiary recovery perhaps could be improved to remove an additional 10 percent to 20 percent from old wells. But at current levels of production, the resulting addition to the world supply would extend production only a decade or two at most. More likely, the price of oil will spike, some additional high-cost oil will be found, new alternative energy sources will slowly come online, and the demand for oil, especially in the advanced industrial countries, will diminish.
From the perspective of the nation, there are other reasons
for concern about oil. Although it powered American
development for over a century and allowed individual
Americans unparalleled independence of movement, oil also
has negative effects. The import of oil and natural gas has
increased the U.S. deficit in balance of payments by more
than $500 billion. This gargantuan deficit reduces the
value of the U.S. dollar, diminishes American influence
abroad, and hinders American economic dynamism and
|The reality is that the automobile, despite its beguiling curves and fancy sound systems, is a killer whose carnage we do not know how to stop.||
For over a century, oil and the automobile have been
inextricably linked. In the United States, 75 percent of
all oil is used for transportation. But the era of the
automobile — along with that of oil — may be
coming to an end. The predicted price hikes in petroleum
alone could doom the internal combustion engine. But that
is far from the only cost the United States faces.
Already importing more than two-thirds of its oil, the United States faces increased dependence, which will yield an additional out-of-pocket cost annually that could easily exceed another half trillion dollars. Defending oil fields and supply lines, especially in the Persian Gulf where the bulk of the world's exportable oil exists, is a tough, expensive task that adds perhaps another $200 billion to the oil tab. Not-so-hidden costs of air and water pollution and of global warming associated with the internal combustion engine add hundreds of billions more to costs already out of control. Finally, the bitter reality is that the automobile, despite its beguiling curves and fancy sound systems, is a killer whose carnage we do not know how to stop, a cost that should make all thoughtful Americans shiver. (See "The Automobile Paradox," page 55.)
The bottom line is that it is time to ask ourselves whether
we can do better.
response to the oil-automobile dilemma is to chart new
directions through energy research and development. I wish
I could report that this is what the United States has done
for the last three decades. Unfortunately, the opposite is
the case. Since 1979, the high point of expenditure on
energy R&D, federal spending has declined precipitously. In
2005 U.S. dollars, the government was spending about $9
billion on energy R&D in 1979, but only a little more than
$3 billion by 2007. National Science Foundation statistics
have long documented this reality. Given the seriousness of
the oil problem, and the fact that every president since
Carter acknowledged its severity, this decline in U.S.
energy research and development spending is unconscionable.
What makes the decline in energy research support even more
lamentable is that the private sector has not done any
Washington has a preferred strategy for energy development: subsidies. But that strategy is counterproductive, and billions of dollars have been wasted. There are many examples — ethanol for one. Ethanol from corn is quite popular in corn-growing regions because it provides a new market for a commodity that heretofore was used largely to fatten cattle and hogs. It is not a perfect substitute for gasoline. It requires special engine modifications where usage exceeds about 15 percent of total volume and gets lower mileage than gasoline. Nonetheless, ethanol is advertised as a substitute for imported oil. But virtually as much energy goes into the making of ethanol as comes out. A great deal of energy is required to plant and harvest corn, transport it, and process it into ethanol. Regardless of where the price for oil goes, it will never be high enough to make ethanol profitable because the inputs into ethanol production rise with the price of oil. But the crucial limitation is the inescapable reality that the amount of energy recovered from ethanol barely exceeds the amount of energy required to produce ethanol. By subsidizing ethanol production, the demand for corn increases, thereby driving up food prices. In addition, ethanol is terribly destructive of the environment. Corn literally drinks chemicals. To push crop yields, farmers pour on huge amounts of liquid fertilizer, pesticides, and herbicides, much of which escapes into rivers and lakes. Corn production on Maryland's Eastern Shore has set back cleanup of the Chesapeake Bay, we are told, by five years. As the residue from corn and other agricultural production sweeps down the Mississippi River and enters the delta, huge dead zones are expanding in the Gulf of Mexico. In short, ethanol production, a major element of the most recent energy legislation to emerge from Congress, is a prime example of a terrible energy initiative.
What we need is an energy strategy that attacks all of the costs currently associated with the oil-automobile linkage. We may have to step outside this paradigm, so comfortable and so familiar, altogether. This means we need a strategy that reduces the financial cost of imported oil; eliminates the need for the burdensome policing of oil fields and supply lines in the Persian Gulf; cuts drastically the air and water pollutants and global warming effects of fuel use; and, most boldly of all, begins to reduce the death and destruction on the nation's highways. The strategy must address not only the cost and availability of oil, but also problems with the use of the car as we know it today. The mode of transportation and the fuel used must be competitive relative to other possible modes and fuels, both financially and in ease of use. This is a large order.
The strategy ought to forgo subsidizing energy development, and instead fund the underlying research and development that will carry us to the next step of the technological revolution. This involves putting together a long-term program of funding that unleashes the brainpower latent in our science and engineering communities. The focus of research ought to be broader than simply energy. It ought to include the link with the transportation industry, especially that of the automobile. A too-narrow focus will stifle the creativity necessary for this research to reach its broadest and most productive applications. Finally, funding needs to be regarded not as an annual decision by Congress, beset as it is with yearly budget worries, but as part of a 20-year commitment to transforming the energy industry by the end of this interval. It ought to ramp up funding to a level of at least $10 billion annually to meet the energy R&D challenge without diminishing funds for ongoing science and technology in other disciplines. Energy research and development is a complement to, not a substitute for, other ongoing research.
Energy research and development must be insulated from politics to the extent that scientists, not politicians or unqualified administrators, make the decisions on projects and amounts, and politicians are precluded from intervening in decision making regarding the location of facilities, projects, and research initiatives. While incorporating legitimate standards of oversight and monitoring, the program must be insulated from the current practice of manipulation by special interests and periodic congressional budgetary cutbacks and intrusion.
Whereas two-thirds of R&D traditionally goes for
development and the other third for research, the balance
in the beginning ought to shift toward research and away
from development. Past attempts to push on to development,
without having fully expanded the research base upon which
that development must establish itself, have been mistakes.
Pure research is as much a legitimate target of support as
so-called applied research. The history of science teaches
that there is no airtight barrier between the two. Feedback
loops operate backward and forward from one type of
research to the other. Such funding flexibility and
prescience will yield the greatest gains most quickly.
Universities ought to consider creating departments of
energy science and engineering, to attract not only faculty
but also graduate students who could pursue careers in this
endeavor. Universities will only commit themselves if they
are assured that government funding will remain dedicated
to this field in institutional terms.
|Once sprawling and low in density, American cities will remake themselves. Verticality will replace horizontality.||
The private sector should not be kept at arm's length.
Indeed, the entire purpose of the energy research program
is to involve the private sector and to see the resulting
ideas applied rapidly in terms of commercial outcomes.
Publicly supported research in science and engineering is
not meant to be a substitute for the valuable research in
nuclear energy, solar power, wind power, coal, oil, natural
gas, and other areas currently being undertaken by the
private sector. The best way to guarantee that
government-sponsored research will have a multiplier effect
on research overall is to show the private sector
spectacular breakthroughs that, though often incremental,
are scientifically and technologically sound.
A significant portion of research monies ought to be spent on ideas outside the conventional, ideas that are high-risk but exciting and capable of turning the understanding of the energy-transportation nexus upside down. It is my contention that the oil-transportation industry, when combined with the fruits of information technology, is on the cusp of a revolution within industry (as opposed to an industrial revolution). This revolution may witness electricity at the core of the transportation-energy mix, propelled by innovations in storage and transmission of electricity that allow vehicles of all kinds to exploit motors instead of engines, sparing the environment and saving the declining reserves of oil for other petrochemical and manufacturing applications. New ideas about electricity may transform its generation as well as its cost. Furthermore, by fully incorporating information technology, introducing new forms of command and control for vehicles, and blurring the lines between public and private transportation, perhaps the horrendous carnage on the streets and highways could be reduced to a bearable level. The widespread application of non-swerve devices, advanced braking systems, and sophisticated warning mechanisms that are now available — but upgraded with superior software development and instrumentation that could literally pilot a car by itself — may bring about a vast reduction in automobile deaths. And that can be achieved at no loss of mobility, efficiency, or independence.
Along with changes in energy use and transportation will come a resuscitation of the American economy no longer so burdened by dependence on oil imports. Foreign policy responsibilities will grow more manageable. The Persian Gulf will no longer so preoccupy the architects of security. Perhaps even more striking will be the impact this integrated technology has on cities. Once sprawling and low in density, American cities will remake themselves much more in the image of Chicago than Houston. Verticality will replace horizontality. Streets and highways will metamorphose into far more efficient corridors, and cities will require far fewer of them despite continued pressure from population expansion. At present, travel within cities is more difficult than between cities. By vastly increasing the efficiency of travel within cities, the ratios of efficiency and safety will be reversed, making intra-urban transportation the preferred form. Parks can proliferate. Cleaner and less noisy, cities will emerge as far more pleasant places in which to live. Traffic jams and 90-minute commutes will be forgotten.
None of this is science fiction. Off-the-shelf inventions now combined and applied, plus a few new scientific and technological breakthroughs in energy production, storage, and transmission, are likely to make feasible tomorrow what today can only be imagined. I foresee that the three separate industries — oil production, automobile manufacturing, and information technology — will be replaced by one megaindustry combining aspects of energy, transportation, and digital communication into a single commercial network. Whether the United States is the center of this new gargantuan megaindustry is for the scientists, engineers, and entrepreneurs of America to decide. If they are creative enough, relentless in their determination, and practical in their applications, the 21st century may see this new integrated "electricity + vehicle + command and control technology" establish itself first and most successfully in the United States. Otherwise, someone else in Europe, Japan, or China will capture these notions and ride them to prosperity.
The ideas are in the wind. It is up to a receptive president and Congress, a creative scientific and engineering community, and a vital and risk-acceptant private sector to master this vision and this new transformative technology.
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