Much of America is feeling pretty comfortable driving through the holiday season and seeing gas prices hitting new lows. What’s not to love about paying $2.50 for a gallon of gas that back on the Fourth of July went for $3.68 per gallon, the highest price for gas on Independence Day in six years? It would not be a stretch for consumers to forget the energy security concerns that have long plagued our U.S. energy strategy.
Yet, it is not Grinch-like to remind American drivers that oil is and always will be a global commodity. Yes, domestic production of oil and gas has gone up, reducing the share of our oil that we get from foreign sources. The U.S. Energy Information Administration says that in 2013, about 33 percent of the petroleum consumed by the United States ‑ crude oil and petroleum products such as gasoline, diesel fuel, heating oil, jet fuel, chemical feedstocks and asphalt ‑ was imported from foreign countries. That’s a far better number than the 65 percent share of foreign oil in the U.S. supply five years ago.
But think about it. That is still one-third of our oil supply, a share that remains dangerously high given the economic ramifications should something interrupt that oil flow from foreign sources. And given those foreign sources include Iraq, Saudi Arabia, Nigeria and Venezuela – countries that are either unstable, antagonistic towards the United States, or have an often tenuous diplomatic relationship with Washington – this is no time to be lulled into a false sense security over our energy supplies.
That’s a message underscored by no less an authority than the International Energy Agency (IEA), an autonomous body that monitors global energy supplies for its 29 nations, including the United States, Japan, Germany and other developed countries. In the IEA’s World Energy Outlook 2014, the agency warns against the risk that current events could distract decision makers from recognizing and tackling the longer-term signs of stress that are emerging in the energy system.
“A well-supplied oil market in the short-term should not disguise the challenges that lie ahead, as the world is set to rely more heavily on a relatively small number of producing countries,” said IEA Chief Economist Fatih Birol. “The apparent breathing space provided by rising output in the Americas over the next decade provides little reassurance, given the long lead times of new upstream projects.”
The report’s central scenario shows world primary energy demand is 37 percent higher in 2040, putting more pressure on the global energy system. (This pressure would be even greater if not for efficiency measures that play a vital role in holding back global demand growth.) And it also shows that world demand for two out of the three fossil fuels – coal and oil – essentially reaches a plateau by 2040, although, for both fuels, this global outcome is a result of very different trends across countries. At the same time, renewable energy technologies gain ground rapidly, helped by falling costs and subsidies (estimated at $120 billion in 2013). By 2040, world energy supply is divided into four almost equal parts: low-carbon sources (nuclear and renewables), oil, natural gas and coal.
The IEA says the world oil supply will rise to 104 million barrels per day (mb/d) in 2040, but notes that number hinges critically on investments in the Middle East. As tight oil output in the United States levels off, and non-OPEC supply falls back in the 2020s, the Middle East becomes the major source of supply growth – a possibility with a high number of political risks.
The report says renewables are expected to account for nearly half of the global increase in power generation to 2040, and overtake coal as the leading source of electricity. Wind power accounts for the largest share of growth in renewables-based generation, followed by hydropower and solar technologies. However, as the share of wind and solar PV in the world’s power mix quadruples, their integration becomes more challenging both from a technical and market perspective.
“As our global energy system grows and transforms, signs of stress continue to emerge,” said IEA Executive Director Maria van der Hoeven. “But renewables are expected to go from strength to strength, and it is incredible that we can now see a point where they become the world’s number one source of electricity generation.”
It is critical that developed nations continue that growth trend in renewables with policies, regulations and funding mechanisms and incentives that guarantee their optimal development. The 25x’25 Alliance calls on all renewable energy stakeholders and advocates to make it clear to Washington that relatively low gas prices now do not bring an end to the real possibility of a crisis in the not so-distant-future. Urge policy makers to reinforce the path to a balanced energy strategy by approving production and investment tax credits, biofuel blending requirements and other mechanisms that insure strong renewable energy development.