About this video
In a recent report, the National Petroleum Council analyzed the political, economic and environmental factors that may be causing instability in the availability of fossil fuels.
How big of a role will fossil fuels play in the future? Will production hit a peak or will supplies remain abundant? How will we generate energy in the future?
During today’s E&ETV Event Coverage, Lee Raymond, chairman of the National Petroleum Council; James Glassman, an American Enterprise Institute economist; and Kenneth Green, an AEI environmental expert, discuss the report and assess the future of fossil fuels.
Transcript (Excerpts)
Jim Glassman: Lee Raymond chairs the National Petroleum Council, which he will describe in his introductory remarks. And the NPC has put out what I think is the most clearheaded, comprehensive document on where we stand today and energy and what the future looks like through 2030. I just learned that the Hard Truths, as it’s called, “Facing the Hard Truths about Energy,” has already had 750,000 complete downloads on the Internet, and with good reason. …
Lee Raymond: … Before we get started in talking about the report I’d like two first of all make a few comments about the National Petroleum Council. I suspect it’s an organization that most of you have never heard of and that probably does not bother the members that you haven’t heard of us. The genesis of the National Petroleum Council is kind of interesting. It’s an outgrowth of World War II. At the beginning of World War II the then Department of War, we didn’t have a Department of Defense at that time, concluded that one of the most significant aspects of the Allied effort was going to be the management of petroleum supplies, both from the standpoint of making sure the Allied forces were supplied and preventing the Axis forces from having supplies. And what is probably somewhat different than it would be today, the Department of War quickly acknowledged they didn’t have a clue as to how to do that. And even more remarkable, they decided the only people who did were the people in the industry. …
… This current study was started back a little over two years ago, at a request from Secretary Bodman to the NPC, and a copy of the letter in the report of course. But basically, what it asks is if you look out about 25 years, what’s the outlook for energy? And this study was put together in response to that.
It had participation of about a thousand people. The majority were not from the oil and gas industry. Many members of the National Petroleum Council are not in the oil and gas business per se, but they’re in the superstructure that of course supports the oil and gas industry, contractors like Fluor, Bechtel, General Electric, the automobile industry. Any industry that basically impinges on the oil and gas industry is involved in the National Petroleum Council.
And in this study there was a real effort for outreach and the involvement also of the academic community. I think if you stand back and that you were to talk to all of the people who were involved in the study, I think there are two I would call over-arching perspectives that this study would offer.
One is that there are very few people, if any that understand the magnitude of the energy industry. It’s immense in everything that it does. It’s obviously pervasive in a sense that it’s involved in everybody’s daily life, but it is very, very difficult to get your head around the magnitude of the petroleum industry and the magnitude of the energy industry, which are really overwhelming. A perspective, as we talked a lot about it, just to give you kind of a gee whiz perspective, the United States consumes 150 billion gallons every year of gasoline. Now I think I can say, without fear of contradiction, there’s nobody in this room that has a clue what 150 billions gallons looks like. And there are many people, frankly, in the petroleum industry that don’t understand it either, because they’ve never thought about it that way. … if you really want to significantly alter what’s going on in the energy industry, it’s going to have to be big.
The second thing that I think comes out of this study for the people who thought about it at the end, is people don’t relate to the timeline. In order to do these large things the amount of time that’s required from inception to completion of big projects in the energy industry is long by any scale, which, when you put those two together, gives you a perspective in terms of the kind of game we are in in the energy industry. It’s big. It’s capital intensive. It takes a long time to get things done. That’s another way of saying there are no quick fixes. There are no quick changes. If you want to have a substantive change, you have to adopt a policy and pursue it rigorously for a long, long time.
…Jim Glassman: Where does your study come down on the question of peak oil?
Lee Raymond: Well, you know that was the subject of a lot of discussion, and I think we were as clear as we could be that the problem the world has, at least at this point, 50 years from now someone else will have to look at it again, is the world isn’t short of resources. That’s not the problem.
The question of access to resources, timeliness, and being able to develop them, a lot of the political issues, the industry that’s required, to the service industry to support and build all these projects in a timely fashion. I mean you probably read in the paper every week about a major project in the oil and gas industry running into difficulties, either in construction or some argument with some government on a tax issue or some issue like that. And that’s particularly true when you’re in a high-priced environment, where we are right now.
So Jim, I think the study is pretty clear on it’s not a resource question. It’s an availability and timely development of resource question, which is really what drives a lot of the conclusions in this study.
Jim Glassman: You talk in the study a fair amount about conservation and efficiency. You know Peter Hubert has pointed out that efficiency doesn’t actually reduce the use of a particular commodity. It actually increases it, that if it’s more productive people want to use more of it.
Lee Raymond: Right.
Jim Glassman: And that certainly has been the history with the energy. So if the objective is to — I guess some people have an objective of decreasing the use of energy, why would you put on CAFE standards for example?
Lee Raymond: I think the focus of the study is driven almost totally by the notion of efficiency. I think you’re correct in a sense that when you become more efficient in using something, it tends to increase the demand for it.
And I think if you look at the energy world, the fundamental driver has always been economic growth. There’s an element of population growth too, but it’s really economic growth that’s driven the energy industry. And it’s very difficult, I think, for us to conceive that the objective of the world is to no longer have economic growth. And I’ve made the comment many times and believe it very strongly that I’m not sure the world can handle all of its issues even with economic growth, but I’m pretty certain without economic growth it can’t handle all of its issues.
…in terms of becoming more efficient in how we use it, I think that should always be the objective. But at the same time, we have to realize that as the standard of living increases, which comes from economic growth, the demand for energy by itself is going to continue to increase. I mean all you have to do, and probably some of you have done it, if anybody went to China 15 years ago and then goes to China today, all you have to do is just use your eyes and you can see what’s going on. And the energy demand is going to skyrocket just simply because people have more money, they have a higher standard of living, and they’re going to continue to have access or want to have access to those things which ultimately depend on energy. And if we continue to have economic growth in the world, that’s going to continue to be the case.
Now, in that context however, I think everybody has the view that we should become more efficient in how we use energy. As a matter of fact, I could digress, Jim, and make the comment we should become more efficient in how we do a lot of things. Like we’re not very efficient on how we use water. Frankly, we’re not very efficient on how we use people. …
Jim Glassman: … Last question, from me, for now, where does this study come down on energy independence?
Lee Raymond: Well, I can open up the page and read to it, but I think the use of the word independence with energy is a non sequitur. Energy independence, if by that we mean we’re not going to import energy into this country, and I don’t mean to say that all of you are going to die soon, but it’s not going to happen in your lifetime. And it’s sure not going to happen in my lifetime and I hope to live a long time.
That’s a lot different concept from energy security. The notion that you have to have independence in something, there are a lot of countries in the world that never have had energy independence so to speak and never can have. As a matter of fact, nearly all of the developed countries in the world are not energy independent. There are very few that are right now, Norway I guess is one, Holland is probably one, and then we’d probably kind of run out of — maybe Canada I guess if you add it all up.
But the vast, vast majority of the developed countries of the world have been energy importers for a long time. As a matter of fact, this country is a major importer not only of energy, but of many, many commodity raw materials. It’s a fact that the American people don’t even realize that’s the case. We import nearly all the chromium, palladium, and all kinds of metals. We’re a huge importer of copper. We can’t produce all the copper we use in this country.
So the whole notion that there’s something sacred about being independent, the problem with it is Jim, that it’s an attractive concept to Americans and it is fighting with the realization of globalization. And it’s an issue that’s not only here in the energy industry, it’s a much broader issue in the country of how we continue to view ourselves in the world, recognizing that the world is globalized, and how we’re going to have those two things match.
…Question: Have we peaked in the production of light, sweet crude and will we see an increase in the use of heavier and synthetic crude in the future?
Lee Raymond: I’m not sure I know the answer to the first part, but the answer to the second part is clearly yes. I mean obviously, the world would like to find more light, sweet crude, but if you’ve ever spent any time talking with explorationists, and if you tell them, you know, I want you to go out and just find light, sweet crude they don’t know how to do that.
That’s a chance exercise that you get into. And I can tell you every explorationist would like to find it, but odds are they’re going to find gas or heavier crude. Synthetics, if by that you mean things like from the tar sands and the heavy oil and the Orinoco, the answer to that will be, yes, that it will continue.
But I guess I would also make another observation that I think kind gets into the peak oil in a broad way. And that is one of the reasons that the study has the view that the resource base is still significant and still out there to be developed is because of technology. The idea of what I would call conventional resources, say 30 or 40 years ago what we thought was a conventional resource, today, or what we thought was unconventional at that time, we would probably consider conventional today because of the ability we have that we didn’t have then. I mean I tell the story, it’s actually true, I worked in the mid-60s in Creole, Creole in Venezuela. And Creole was the leading deepwater technology company in the world. We produced in Lake Maracaibo two million barrels a day, almost as much as the whole country produces now, maybe more if you knew the truth. But we were working in 50 feet of water and we were the leading deepwater technology company in the world and today we produce in 5000 feet of water and consider that to be conventional. Now, what it will be 20 or 30 years from now I don’t know, but I can tell you that technology will continue to move, develop, and give us access on an economic basis to resources that today we can’t even conceive of. And that’s how the industry works, and it’s technology driven and it will continue to work.
…what is viewed of course as kind of the Holy Grail on coal-fired power plants is carbon sequestration. And people are correct in the sense that the oil industry, for a long time, has been carrying on a form of a carbon sequestration project because we’ve been injecting CO2 as a secondary recovery technique in oil reservoirs for a long time. But to go from that, quickly, to massive carbon sequestration for a power plant is a whole different animal. The technology, I think most of the people who worked on it would conclude that the technology is probably there to do it, but it has never been demonstrated at scale. Secondly, if you think about that very long it will require a regulatory framework that does not exist today. … So it is a huge, huge undertaking. And, again, people — this gets into a lot of the infrastructure issues, people just assume that that can happen. You can’t assume that’s going to happen. And the cost is going to be very, very significant.
The full transcript is much longer. Mr. Raymond discusses the prospects of various sources of energy, as well as many other topics.
