Despite current low oil prices, mankind faces one of its biggest challenges to date: a future in which worldwide oil supply will not keep pace with worldwide oil demand. Although I am a firm believer in the theory of “peak oil”, the term is controversial and can sometimes lead to much debate about its exact definition. Rather than getting sidetracked on the definition and validity of “peak oil”, the reader is encouraged to Google “peak oil” or read Wikipedia's excellent summary http://en.wikipedia.org/wiki/Peak_oil . For the remainder of this article, the author assumes worldwide oil supply will not keep pace with worldwide oil demand. The result will be periodic economic contractions of increasing severity. Each economic contraction will lead to sharply reduced oil demand (as we are experiencing today) and subsequently reduced short-term oil prices. Each economic recovery will see increasingly higher oil prices until economic prosperity will once again be cut off at the knees. In other words, the author believes the world is now on an economic yo-yo which is tightly dependent on oil supply/demand fundamentals. If the planet is indeed entering an era in which worldwide oil supply cannot keep up with worldwide demand, and if the world economy is indeed dependent on oil to function and grow, logically these two hypotheses taken together cannot bode well for future worldwide economic prosperity.

In this context, it is important to examine the petroleum supply/demand fundamentals of the world's largest consumer of oil - the United States :

Worldwide Oil supply

87,500,000 barrels/day

Total US petroleum consumption

20,680,000 barrels/day

Total US petroleum imports

12,036,000 barrels/day

Dependence on net petroleum imports

58.2%

Share of US oil consumption for transportation

70%

US Motor Gasoline Consumption

390,000,000 gallons/day

These figures were updated as of February 2009 and are from the EIA website: http://www.eia.doe.gov/basics/quickoil.html . It should be noted the US was dependent on foreign sources for 65% of its petroleum supplies during the more functional economy of 2008.

Looking at these figures, one can come to some fairly logical conclusions:

  • The US consumes roughly 23.6% of all worldwide oil supply
  • In order to meaningfully reduce foreign oil consumption, the US must significantly reduce demand from its transportation sector.

Why should the rest of the world care about these facts and US energy policy in general? For exactly the same reasons that Americans should care: the economic, environmental, and national security problems which result as a consequence of US addiction to foreign oil. Let's take a closer look at the implications each of these three issues has on the world as a whole.

Worldwide Economic Implications of US Energy Policy

The US dependence on foreign oil imports has led directly to huge American trade deficits and indirectly to massive American fiscal deficits. US policymakers continue to focus on financial based solutions (bailouts, increased fiscal stimulus, etc) in an attempt to solve what is at its core a commodity based problem (oil). This approach to economic problem solving has been and will continue to be ineffective. As a result of American policymakers' refusal to acknowledge the role foreign oil addiction has played in the current financial crisis, the world's economy and financial markets have paid a big price. The ethanol mandates Bush signed into law marginally reduced foreign oil imports while causing large distortions in the grain and food markets. These distortions resulted in food inflation that circled the globe. America is still the largest economy in the world and its currency is the world's reserve currency of choice. It is clear the rest of the world has a vested interest in seeing America confront its oil crisis head-on. It is no surprise that China , Russia , India , Brazil and many other countries have recently suggested it is time to create a world reserve currency that is not based on any one country's currency and therefore one country's economic policy. This is a stinging indictment of US economic and financial mismanagement (some would say fraud). Clearly the world is expressing unhappiness with the role US behavior is and has played in the current economic contraction.

Worldwide Environmental Implications of US Energy Policy

As noted above, the US burns 390 million gallons of gasoline a day. Each gallon of gasoline burned in an internal combustion engine combines with oxygen in the air and emits 19 lbs of CO2 into the atmosphere. This means in one year US drivers release 2,704,650 million pounds of CO2 into the Earth's atmosphere from burning gasoline alone. In addition, the US consumes over 1 trillion short tons of coal every year, and coal emits 25% more CO2 than does gasoline (on a BTU basis). In addition to CO2, gasoline and coal emit toxic particulates causing the smog which is visible in so many American cities. It is clear the world pays a price for US over-reliance on oil and coal and the lack of a US energy policy which aims to reduce consumption of these two fuels.

President Obama appears to have swapped Bush's “drill, drill, drill” mantra for the oxymoronic “clean coal” mantra. Obama seems to utter “clean coal” like a yogic chant during every speech related to energy. Yet this fixation on “clean coal” is wrong headed both environmentally and economically. The mere act of mining coal is a detriment to the environment. Focusing too much on coal's CO2 emissions (bad as they are) foolishly distracts attention from a more serious problem: the toxic particulate and byproducts of burning coal. One only has to read about the largest coal ash spill in US history to get an inkling of the horrific environmental dangers of burning coal for electrical power. On December 22, 2008, a coal ash “spill” at the TVA coal power plant in Kingston , TN released 1.7 million cubic yards of coal sludge into the surrounding environment. The sludge contained toxic levels of lead, thallium, mercury, arsenic, copper, barium, cadmium and chromium. Much of these coal combustion byproducts ended up in the Emory River and further downstream into the Clinch River . The decline of American's health and the subsequent cost of health care due to coal consumption is an economic burden hard to quantify – yet we know it is substantial. US government policy should therefore be designed to reduce coal consumption, yet the coal industry enjoys government subsidies which encourage coal consumption. These subsidies seem very unwise when comparing various fuels and emissions as summarized in the chart below.

Fuel

Chemical Composition

Chemical Structure

Emissions

CO2 Emissions lbs/million BTU

Coal

60-80% Carbon

5% Hydrogen

Complex

Very toxic

210

Oil

C6H14 (hexane)

C8H18 (octane)

C5H12 to C36H74

Complex

Toxic

156 (gasoline)

161 (diesel)

Natural Gas

CH4 (methane)

Simple

None

115

Hydrogen

H

Simplest

None

None

Wind/Solar

N/A

N/A

None

None

For a moment, let us suppose “clean coal” is possible (even though we know it is not). How would burning more coal reduce foreign oil imports? Answer: it wouldn't. Many expected more from President Obama and his Nobel Prize winning Energy Secretary Chu. Yet it appears to be business as usual in Washington DC these days. Let there be no doubt: the energy decisions and policies enacted in Washington , DC affect the environment of every citizen on the planet. The CO2 and toxic particulate emissions due to US consumption of gasoline and coal are simply too gargantuan for their affects to be felt only inside the borders of the US .

Worldwide National Security Implications of US Energy Policy

The quest to supply the US economy with oil drives what some refer to as the “petroleum/pentagon relationship”. The Bush administration's war on Iraq might be viewed as validation of this relationship. We know Iraq had nothing to do with 9/11. We also know Iraq did not possess weapons of mass destruction. We do know that Iraq has massive reserves of high quality and easily produced oil. Unfortunately, people associated with the Bush administration such as Alan Greenspan waited until after it was too late to publicly declare that the Iraqi war was all about oil.

Another Bush administration disaster was it involvement in the former Russian territory of Georgia . The Bush administration apparently decided to prop up a puppet, Georgian President Mikheil Saakashvili, on Russia 's underbelly with the intent of irritating Russia as much as possible and somehow protecting the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. At the same time, the US announced their intention to deploy a “missile defense shield” in Europe close to the Russian border. With these acts of provocation, was it any surprise when Russia took action and sent a clear message they could take out the BTC oil pipeline any time they want? One person who was obviously caught off guard by the Russian response was US Secretary of State Condoleezza Rice. Perhaps Ms Rice's reputation as Stanford University trained “Russian expert” was a bit overblown?

Fast forward to today and we are quickly finding out that Obama intends to make Afghanistan his equivalent of Bush's Iraq . Apparently the petroleum/pentagon relationship continues believes the key to unlocking the energy riches of the Caspian Sea area is through taming Afghanistan – anything to keep the oil and gas from being piped across Russia and/or Iran .

These are a few examples (and there are many more) of how America 's quest for oil has negatively affected countries around the world. Going forward, does anyone believe a country with the military power of the US will go quietly into the night when oil shortages arise? In conclusion it has been shown from the economic, environmental, and national security perspectives that the citizens of the US and all citizens of planet Earth have a vested interest in seeing the US solve its economic dependence on foreign oil.

Obama's Energy Policies

Many Americans were full of hope when President Obama took office. Just like every US President since Eisenhower, Obama promised the American people he would significantly reduce foreign oil imports. Yet, have we seen meaningful energy policy enacted to accomplish this goal? Has “Yes We Can!” been fully applied to the problem of US foreign oil addiction? Or has Obama's rhetoric merely been a smoke screen to cover up a continuation of previous Bush administration policies that keep the US addicted to foreign oil? Let's take a look.

From a foreign policy perspective, the petroleum/pentagon relationship need not worry. Yes, Obama plans to draw down troop levels in Iraq , but it is now clear this is merely to move the troops over to Afghanistan . How a bankrupt nation like the United States can rationalize this move is troublesome to many Americans. Further, it is not clear if “victory” in Afghanistan would indeed mean greater access to Caspian Sea energy assets. Regardless, the return on investment is questionable.

On the positive side, it is generally accepted by most people concerned about climate change that Obama's energy policies are substantially better than the previous administration's in both tone and substance. Government support and incentives for wind and solar power, investment to update and improve the electric grid, and incentives to increase hybrid vehicle ownership are all admirable initiatives and a welcome break with the recent past. To Obama's credit, he has also directed the EPA to develop higher fuel-efficiency standards and to reconsider its refusal to regulate greenhouse-gas emissions from cars and trucks. Environmentalists (at least the environmental “purists”) are quite happy with these developments.

However, the only way to significantly reduce foreign oil imports, as well as the CO2 and particulate emissions caused by burning gasoline derived from foreign oil, is to significantly reduce oil consumption in the transportation sector. Remember, EIA data shows that 70% of all US oil consumption is used for transportation. Therefore, to fairly judge Obama's energy policies, we need to ask the simple question: has he enacted legislation to significantly reduce foreign oil imports over the next decade? The answer is “no”.

As welcome as the wind and solar initiatives are, they won't significantly reduce gasoline consumption or foreign oil imports over the next decade because Americans simply do not drive electric cars. Someone should remind the administration that solar and wind arrays produce electricity, not gasoline.

As fuel efficient as some hybrid vehicles are, at the end of the day they still run on gasoline and they still produce 19lbs of CO2 per gallon burned. Though environmentalists support electric vehicles, EVs deployed in significant numbers prior to building the wind and solar infrastructure needed to recharge them simply means the US will burn significantly greater amounts of toxic coal.

Meaningful increases in fuel-efficiency standards would indeed reduce foreign oil imports and overall greenhouse gas emissions. However, if the vehicles are still fueled by gasoline, are these efforts alone the kind of changes America needs to protect itself from a future in which worldwide oil supply (and therefore gasoline supplies) won't keep pace with worldwide demand? It seems the logical conclusion would be to move transportation away from gasoline. At the same time, it will take a decade or more to build out solar and wind electrical generation capacities in order to recharge EVs; otherwise the US simply increases its already large reliance on toxic coal. Is there no solution that the US can implement in order to reduce foreign oil imports over the next decade or two?

The Solution: Natural Gas

Fortunately, the US is blessed with an abundant domestic supply of clean, cheap, and readily available natural gas. Recent discoveries of natural gas in the Marcellus, Barnett, Fayetteville , and Bakken shale formations led to a 9-10% increase in US 2008 natural gas production – the largest rate of increase since 1984. The Haynesville

shale alone could turn out to be one of the largest gas fields in the world.

The figure below shows monthly US natural gas production figures and is significant for two reasons. First, note the big drop in US production in the early 1970's as a result of disastrous US government regulation with respect to natural gas production and consumption. More importantly today, note the vertical spike in supply over the last few years as companies successfully drilled into these new shale discoveries and brought large new supplies onto the market.

People like Robert Hefner III, who predicted way back in the 1970's that US natural gas was abundant have been vindicated. In his recent book The Grand Energy Transition (or GET ), Hefner presents a powerful case that while natural gas is indeed a fossil fuel and created in many biological processes, it is also quite logical that natural gas also has a non-biologic origin as well. Gases make up the majority of the Universe and natural gas is found in many places where oil and coal are not. The reverse is not the case: natural gas is always found wherever coal and oil exist. During the decade of the 1990's, despite big oil companies exploring for oil, more reserves of natural gas were discovered. As a result of these and other observations, Hefner believes the energy content of worldwide natural gas reserves could well exceed the energy of the world's coal and oil resources combined .

In addition to lower-48 shale assets, the US has huge proven reserves of Alaskan natural gas. Taken together, energy experts now estimate American natural gas reserves are adequate to supply all its home heating, industrial and electrical generation requirements for 60-100 years. If these experts are correct, and recent E&P data indicates they are, this means the US could easily leverage its natural gas reserves to power cars and trucks in the transportation sector and significantly reduce both foreign oil imports and CO2 and particulate emissions over the next 10-20 years. Doing so would give the US sufficient time to build out the solar, wind, and nuclear infrastructure necessary to recharge EVs. Domestic natural gas could therefore sustain US economic growth until the transition to renewable energy sources is made, with an eventual transition to the cleanest of all gases: hydrogen.

One big advantage of natural gas is the existing 2.2 million mile natural gas pipeline grid. This grid supplies natural gas to every major metropolitan area in the US . The grid connects 63,000,000 US homes where 130,000,000 cars and trucks could be refueled every night in the garage while their drivers sleep. There is no doubt about it: America 's natural gas reserves and its natural gas pipeline grid is the best weapon the US has in the war on foreign oil addiction . Natural gas is the only US domestic fuel that can be scaled up over the next decade to meaningfully reduce both foreign oil imports and the greenhouse gases released by the combustion of coal and gasoline.

Natural Gas Vehicles (NGV's)

Natural gas vehicles (NGVs) have been around for decades and are a proven, mature, and reliable means of transportation. In 2008 when gasoline in California was $4.50/gallon, owners of the Honda Civic GX were filling up with US produced natural gas at $2 per gallon equivalent. Today, people in Utah are filling up their NGV's at $0.88/gallon equivalent. NGV's emit 20% less CO2 than do gasoline fueled internal combustion engines. NGV's emit none of the toxic particulates that gasoline fueled cars and trucks release into the atmosphere. Best of all, NGVs in America can be fueled by US produced natural gas.

Natural Gas Electrical Power Generation

For electrical power generation, natural gas emits 50% less CO2 than burning coal and none of the toxic particulates that coal emits. There is no “coal ash” sludge problem to worry about and therefore environmental disasters like last year's Kingston, TN debacle are simply not possible. Since natural gas is so much cleaner burning than coal, there are none of the acid rain or health issues associated with burning coal. In addition, recent studies say most of the “cleanest” and most efficient coal in the US has already been burned. Therefore, America is entering an age in which coal fired plants will have to burn greater and greater quantities of less efficient and dirtier coal to produce the same amount of power.

The natural gas pipeline grid can easily supply natural gas wherever it is required – no need to fill up box cars full of coal and transport them across the country by train. Natural gas is clearly a superior option when compared to coal for electrical power generation.

Electrical power generation from wind and solar arrays is intermittent. Backup power generation is necessary for those cloudy or calm days. Natural gas is the backup power fuel of choice. Not only is natural gas significantly cleaner and more efficient than is coal, but natural gas power generators have much faster startup and stop characteristics. This is a critical attribute when backing up power sources that are dependent on ever changing weather conditions.

So What Is the Problem?

Addiction to foreign oil is clearly at the heart of America 's economic, environmental, and national security issues. US produced natural gas is obviously the best alternative and America 's biggest competitive answer to foreign oil. Yet, the US continues to import foreign oil in greater quantities while neglecting its own abundant, clean, and cheap fuel: natural gas. Why? There are three main reasons:

  • Environmental “purists”
  • Governmental policy
  • The chicken-n-egg problem of NGV and natural gas refueling station availability.

Environmental “Purists”

Environmental “purists” is a term given to environmentalists who ideologically refuse to take a pragmatic view of the environmental and energy challenges and therefore lack common sense when supporting solutions to these challenges. The purists take a very simplistic view that wind, solar, and EVs are “good” and any fossil fuel is “bad”. However, lumping natural gas into the “fossil fuel” category along with coal and oil is mixing the historical problems (coal & oil) together with the 21 st century solution (natural gas). Natural gas is much cleaner than either oil (gasoline) or coal in terms of both CO2 and toxic particulate emissions. Why then do environmentalists illogically lump natural gas with these two fuels and therefore remove it from the list of possible solutions?

The environmental purists (“env-purists”) don't seem to recognize the magnitude of the challenge the US faces in order to realistically and significantly reduce the 390,000,000 gallons of gasoline burned every day in the US . If the magnitude of the problem was better understood, the env-purists would realize that their support for EVs and electric/gasoline hybrids before adequate wind and solar power capacity is in place, at the expense of natural gas transportation, actually keeps the US addicted to foreign oil and coal and the high CO2 and toxic emissions both fuels generate. The env-purists are shooting themselves in the foot by keeping greenhouse gas emissions high and supporting the two industries which they routinely vilify!

Governmental Policies

US governmental policies regarding natural gas transportation are a disgrace. Idiotic EPA rules and regulations hamstring natural gas transportation solutions from being broadly available and adopted. Outside of some enlightened states like California , Utah , and Oklahoma and a few fleets in the municipal and trucking sectors, US natural gas transportation is for all intents and purposes insignificant. The natural gas transportation successes which do exist are in spite of governmental policies not because of them. The US government should be pounding the table for natural gas transportation. Yet, recently US Energy Secretary Chu, a Nobel Prize winning physicist who should know better (and much sadder, probably does…), was quoted as saying he is “agnostic” about natural gas transportation. President Obama missed a great opportunity to require US automakers make the NGVs they sell around the world available in the US as a condition of receiving US tax-payer bailout funds. Yet not only did Obama fail to mention this requirement, he has yet to even utter the words “natural gas transportation” in any major energy policy speech. Why? How does Obama plan to deliver his promise to significantly reduce foreign oil imports without leveraging the only domestic fuel (natural gas) which has the capacity to do so? How can Obama's environmental policymakers significantly reduce greenhouse gas emissions while they and their energy policymaker cohorts appear more than willing to keep Americans addicted to foreign oil and coal? Obama's environmental and energy policies are as oxymoronic as is his “clean coal” mantra. They are simply a contradiction in terms and in policy. Apparently the Obama administration believes the only way to reduce foreign oil imports is a continuing economic contraction. The economic contraction is indeed reducing foreign oil imports, but is this an admirable or desirable way to do so? Of course not.

The Chicken-n-Egg Problem

Nothing clarifies US governmental energy and environmental policy failures better than the chicken-n-egg problem of NGV and natural gas refueling availability. The fact that only one NGV is available for purchase in the US (the Honda Civic GX, and only then if you are lucky enough to live in a state where Honda decides to sell them) is a testament to failed US energy and environmental policy. So too is the fact that Fuelmaker, the Canadian company which was the only company to sell a garage home natural gas refueling appliance (the “Phill”) in the US, recently declared bankruptcy. The Obama administration (and previous administrations) should have been doing everything in their power to publicize and support broad adoption of Honda Civic GX-like vehicles as well as supporting competition and innovation to increase availability and decrease the cost of devices like the “Phill”. An affordable natural gas home refueling appliance combined with increased NGV availability would lead to increased NGV ownership. Increased NGV ownership would then lead to increased natural gas refueling stations. Yet, we hear not a peep out of Washington , DC . Why?

Last year, Toyota announced a CNG-fueled Camry hybrid vehicle (shown below).

After listing all the benefits of the vehicle:

  • It's a hybrid that runs on electric batteries and natural gas
  • Lower CO2 emissions than gasoline
  • Zero particulate emissions
  • 33 mpg equivalent combined driving
  • Reduces foreign oil imports
  • Has a range of 250+ miles

So, think of a Prius that runs on US produced natural gas instead of gasoline derived from foreign oil. After rattling off this impressive list of advantages, the spokesperson then went on to say Toyota had no immediate plans to produce CNG or CNG hybrid vehicles for the US market! Now, this is where President Obama should step in and use his bully pulpit to lift this car up on a pedestal as an example to US car makers of what a common sense engineering solution to US foreign oil imports looks like. Once again, US Congressional members didn't even mention this vehicle during the automaker bailout hearings. Why? This electric/natural gas hybrid concept vehicle from Toyota is exactly the kind of vehicle Americans need.

A Natural Gas-Centric Revitalization Program

With all the bailout and stimulus money flying around the United States these days, the US government has completely missed the one infrastructure spending program that can solve its economic, environmental, and national security issues: a natural gas centric revitalization and reindustrialization program. The goal should be to convert or replace half of the cars and trucks in the United States to natural gas over the next 5 years and to build the refueling infrastructure needed to support them. Although the cost of such a program may well be as much or more than some of the bank bailouts, it would have the following benefits:

  • Would reduce foreign oil imports by 5-6 million barrels a day (or by almost 50%)
  • Save trillions of dollars that would otherwise go to foreign oil producers, many of whom are unfriendly to the US
  • Save millions of jobs in the automotive industry
  • Increase royalty payments to thousands of farmers and landowners sitting atop domestic natural gas
  • Create thousands of jobs in the energy, infrastructure, and CNG sectors. Many industrial companies would thrive.
  • Drastically reduce CO2 emissions
  • Drastically reduce particulate emissions from gasoline powered automobiles responsible for smog in so many American cities.
  • Restore American energy and climate leadership and its reputation as a wise and moral country capable of solving its own problems instead of being a problem to other nations.
  • Rally the country behind a goal everyone can understand, participate in, and profit from.
  • Strengthen the US dollar and balance our financial trade and budget deficits.
  • Protect us from the dire economic and social consequences as a result of being addicted to oil while entering an era of Peak Oil.

Such a program would quickly pay for itself by reducing the expense of foreign oil including the huge military expenditures to fund oil wars and securing foreign oil transport. Like the interstate highway system, cross country railroads and telegraph lines, the man-on-the-moon project and so many other government sponsored programs, a program to deploy natural gas vehicles and the infrastructure to refuel them would pay dividends to all Americans for decades. Such a program would remove oil as the critical variable in the energy equation until clean energy capacity is online and clean vehicle technology is robust and mature enough to make a total transition to renewable fuels.

Anything less than this natural gas centric policy will effectively keep the US addicted to foreign oil for the foreseeable future. As this article has explained, America's reliance on foreign oil to supply 58% (65% in 2008) of its oil supply will not only continue the economic, environmental, and national security problems the US faces today, but will also negatively affect every other country and every citizen of the planet.

Recently China , Russia , Brazil , India and even France and Germany have been publicly commenting on the dangerous consequences of irresponsible US monetary and fiscal policy. Russia and then China voiced their opinions that a new “world currency” not based on any one country would better serve and protect the world from future financial crisis like the one being experienced round the world today. Many countries supported this idea of a world reserve currency as an alternative to the world's current defacto reserve currency (the US dollar). For the same reasons foreign countries are speaking out on currency changes, these countries should also publicly urge the US to adopt natural gas transportation as a means to cure the root economic problem facing America . Perhaps some well-crafted and publicized suggestions by leading world policymakers would embarrass Obama and his seemingly incompetent energy and environmental officials into becoming less “agnostic” about natural gas transportation and to begin implementing robust policies to deploy NGVs and CNG refueling stations. Since it is in the world's best interests for the US to do so, world leaders should begin challenging the Obama administration on this issue. International pressure applied through the world's major media outlets might just be the pressure Obama needs to address America 's most pressing problem: peak oil combined with its economic dependence on foreign oil.

This article concentrated on US foreign oil addiction and energy policies to mitigate the problems associated with this dependence. However, as the world's fastest growing oil consumer, China is facing similar issues and is well on a path to repeat the same mistakes the US made with respect to economic dependence on coal and oil. Just like the US , China needs to leverage natural gas and correct wrongheaded energy policies for its own future prosperity. A world addicted to oil for economic growth while entering an era in which worldwide oil supply will not keep pace with worldwide oil demand can only lead to economic contraction, conflict, and social unrest.

Although natural gas transportation should serve as the core of American (and Chinese) energy policy over the next few decades, it is only one component of a long-term strategic and comprehensive energy policy . The US needs to adopt such a strategic and comprehensive energy policy in order to mitigate the economic, environmental, and national security problems associated with its foreign oil addiction. The next article will unveil such an energy policy.