While the growth of biofuels, nonhydroelectric renewable energy sources and construction of additional nuclear power plants will impact future energy demand, the U.S. Energy Information Administration (EIA) projects that instead of shrinking oil, coal and natural gas will provide roughly the same share of the total U.S. primary energy supply in 2030 that they did in 2005.
“We are going to see a continuation of energy prices going up 10 percent to 20 percent every two years,” says John Barnes, chairman and CEO of B&R Energy LLC, “and the movement of energy-intensive activities to where these commodities are less costly.”
Smart Business spoke with Barnes about the current and emerging trends that will shape the future of energy in the United States and worldwide.
What is the projected demand for gas, oil, and alternative fuels by 2030?
It is projected that we’ll need 120 million barrels of oil per day, up from the current 85 million. Oil demand increases at about 2.5 percent per year. Gas demand goes up at approximately the same rate, but to some extent, is affected by price. With gas and oil expected to supply an estimated 85 percent share of the 2030 energy market, it’s going to be tough for renewable energies and alternative fuels to do much more than hang on to their current share.
How will weather trends impact energy production and demand?
There are still a multitude of weather factors that we can neither accurately predict nor understand. For example, global warming advocates and weather forecast models predicted that 2006 would prove to be the worst hurricane season in the history of mankind. But, basically, there weren’t any. And in spite of those who would like there to be, there simply is neither scientific consensus nor scientific proof that global warming is a reality.
Hurricanes have up-cycles and down-cycles every 20 years. We’re currently in an up-cycle, so we’ll have some hurricanes. With 20 percent of our natural gas products and quite a bit of oil production taking place in the Gulf of Mexico, we will have scenarios like Katrina and Rita when our offshore production is impaired, which will reduce some domestic supply for a period of time.
What role will the government play in future energy trends?
There’s a lot of discussion in Congress about the tax relief that was granted to big companies so they could invest in highly speculative deepwater drilling in the Gulf of Mexico. Now that they’ve found more oil there, some politicians are saying, ‘We didn’t really mean that!’ The government will have to provide more tax relief and incentives for exploration and drilling, or we are going to head toward more foreign dependency and higher prices. Companies can’t drill for oil and gas with money they don’t have. It’s that simple.
The government also must encourage energy economies and efficiencies, although the price of energy is doing that by itself. There are very few businesses and buildings that have not implemented energy-efficient lighting, heating and cooling to reduce their energy costs, and many state public utility commissions are introducing legislation to further drive those efforts.
How will technology impact oil and gas trends?
Advances in natural gas production are unlocking large areas of unconventional gas, like the gas fields discovered in north Texas’ Barnett Shale. More than half of the growth in natural gas over the next 30 years will likely come from Barnett and other yet-untapped unconventional reservoirs.
Some additional trends include liquefied natural gas (LNG) and the reappearance of a fuel technology called Fischer-Tropsch that helped Germany fight World War II. Countries like Iran, Algeria and Australia have plentiful natural gas but soft natural gas markets. LNG plants in those countries, costing several hundred million dollars, can liquefy natural gas so it can be shipped abroad in extremely expensive ships. It is then deliquefied and placed into pipelines. Of course, this only adds to our foreign energy imbalance.
Fischer-Tropsch is a method of turning coal into gasoline and diesel. South Africa did extensive research on it during its economic embargo during the apartheid years. Considering that the U.S. is the Saudi Arabia of coal, there will probably be some domestic research and government funding for harnessing this technology for expanded applications.
JOHN BARNES is chairman and CEO of B&R Energy LLC. Reach him at john_barnes@BandREnergy.com or (214) 445-6808.