Over the Energy Cliff?

John Hofmeister America may have skirted the fiscal cliff, but don’t unfasten your seatbelts just yet. Looming ahead is the energy cliff, another avoidable crisis brought on by our own ignorance, complacency and lack of leadership.

That was the grim warning conveyed this week by veteran energy executive John Hofmeister at a meeting of the Houston chapter of the American Petroleum Institute. Mr. Hofmeister, former president of Shell Oil Company, currently heads a public advocacy group called Citizens for Affordable Energy, devoted to educating the American people and our leaders on the need for responsible energy policies.

“Hurricane Sandy reminded the American people what gas lines look like,” he told his audience, “and just how ugly things can get when people are deprived of fuel they need to run their cars.” He predicted that such scenes would be repeated on a much broader scale by the end of the Obama administration, unless we change course now.

Mr. Hofmeister is no Neanderthal capitalist. He supports government regulation of the energy industry “because it keeps the industry honest.” He freely acknowledges that renewable energy sources – wind, solar and biofuels – will eventually play a larger role in meeting America’s energy needs. The problem is that they won’t play that larger role anytime soon. Meanwhile, we have 250 million cars on the road. How do the clean fuels advocates propose to keep those cars running when all forms of renewable energy currently provide less than 15 percent of America’s total energy needs?

Environmentalists may hate hydrocarbons, observed Mr. Hofmeister, but at this point there is no realistic alternative. We have to use fossil fuels. Moreover, we have to use fossil fuels available to us on the North American continent. We can’t continue to rely on imports from increasingly unstable parts of the world.

The good news, says Mr. Hofmeister is that in North America “we have more energy than we know what to with right now,” and we can develop that energy in an environmentally responsible manner. He noted that with new technologies, even coal can be made sustainable. He cited the case of a new coal plant being built in Queensland, Australia, that will be able to cut carbon emissions by 98.8 percent. In America, by contrast, the average age of a coal-fired power plant is 40 years old. And no new coal-fired plants are being built, despite the fact that this country has vast coal reserves.

Mr. Hofmeister said that the U.S. needs 20 million barrels of oil a day. He then outlined how to meet that need, without having to depend on unstable foreign suppliers.

First, we need to increase domestic production to 10 million barrels a day, up from the nearly seven million barrels we currently produce. We produced 10 million barrels a day in the 1970s and 80s, and the oil industry can do it again if the government will only grant the necessary drilling permits.

Next, we need to convert natural gas into a transportation fuel. Converting the U.S. trucking feet to run on natural gas would eliminate three million barrels of oil a day in imports. And, since natural gas emits 30 percent less carbon dioxide than oil, the environment would gain as well. Converting natural gas into liquid fuel to power automobiles would save another three million barrels in imports.

Taking these steps would meet 16 million of the 20 million barrels of oil we need a day. Higher mileage requirements for cars could eliminate the need for an additional two million barrels a day. The rest we could easily obtain from our friendly neighbors, Canada and Mexico.

In short, ample, secure and affordable energy for this country can be achieved. The question is, will we do it?

Mr. Hofmeister is pessimistic about the political process. He maintains that we need long-term energy planning, but politicians think no further ahead than the next election. Mr. Hofmeister’s answer, as detailed in his book, Why We Hate the Oil Companies, is to create a Federal Energy Resources Board. This would be a federal agency, modeled after the Federal Reserve Board, that would have charge of long-term energy planning for this country.

Mr. Hofmeister acknowledges that this is a controversial idea, particularly among opponents of more government regulation. But, as he points out, the energy industry is already heavily regulated. It is regulated by 27 congressional committees, 13 executive agencies, 800 federal judges and goodness knows how many state and local authorities. A Federal Energy Resources Board, charged with creating a coherent national energy policy, would at least bring order and clarity to the process, and thereby create an environment in which energy companies could make long-term investments with confidence. Mr. Hofmeister calculates that creating the right conditions for energy investments could lead to the injection of as much as a trillion dollars a year into the U.S. economy.

Full disclosure compels me to acknowledge that I wrote speeches for Mr. Hofmeister during his tenure as president of Shell. I can take no credit for anything he has said in public since. I can only be grateful that an executive of his stature and integrity is telling the American people the hard truths they must accept if we are to have the energy we need.

Hal GordonHal Gordon, who wrote speeches for the Reagan White House and Gen. Colin Powell, is currently a freelance speechwriter in Houston. Web site: www.ringingwords.com.

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  • Bruce Laube

    I would add to this the current facts about our use of oil as it relates to our balance of payments. Currently we ship $40 to $50 Billion dollars overseas each month due to our negative Balance of Trade. Over $1 Billion per day is for oil. The US has exported over $13 TRILLION dollars out of our economy over the last 40 years. I believe this has played a substantial part in reducing our economic growth. Improving our Oil production and utilization will reduce imports and make a substantial impact on domestic economic growth.