Gasoline is Cheap Temporarily, Energy Independence is Forever

The price of gas is going up. I guarantee it. The price being below $3 per gallon is a temporary “feel good” blip. Ten years of data shows that fuel prices takes dips and always bounce back. If you drive an electric-powered Nissan Leaf, or a Tesla, you probably personally don’t care if gasoline sinks below $3 per gallon. The reason is that you made a fuel choice to break free of oil. Mind you, an electric car is not fuel free. You are increasing your electric bill to charge your car, but it is less than gas. Electricity, by and large, is about $1 a gallon.

Time and again, we declare that we have a goal of energy independence but then we lose the courage to follow through because Saudi Arabia sucks us back in by temporarily reducing the price of gas. But remember, it is just that – temporary.

We are still paying much more for gasoline than in 1999. In fact, transportation is one area where we have not created efficiencies and driven down the consumer cost with choice. Compare transportation to long-distance calling. Today, we expect to make a long distance call for free, or close to free. In 1999, it was reported that AT&T it was cutting its long distance to $5.95 per month for access and 7 cents per minute. A gallon of gas in 1999 was $1.30.

In communications technology, we now have choice with mobile phones, Skype, IP phones, traditional landlines and more. Choice has driven costs down.

With autos, we have very little fuel choice. And fuel choice can actually fuel our economy.

Fuel Choice Technology is 20-Years Old

However, the sad truth is that the technologies necessary to achieve true fuel choice have been around for 20 years, but we seem incapable of deploying them at scale. Six years after the Pickens Plan, our pathway to a natural gas trucking fleet still seems a decade away. How is it that we seem to have lost the ability to actually plan and implement this transition at scale? Figuring out how to achieve this represents the largest wealth creation opportunity of our time.

Generally, these technologies fall into two categories: alternative fuels and efficiency technologies. Alternative fuels make fuel choice possible with flex-fuel technologies. An example today can be seen with the heavy truck-maker Peterbilt. The company is already building about 33 percent of its new trucks equipped to run on natural gas.

For existing trucks, duel-fuel upgrades replace about 55 percent of diesel fuel consumption with lower-cost domestic natural gas. The cost of these upgrades is less than $30,000, generating a payback in about 18 months. More than 280,000 trucks could be retrofitted by 2018—but probably won’t be. Together, both approaches (retrofitting and building new trucks) would save about 14 billion gallons of diesel fuel.

The Government Has To Step In To Drive Fuel Choice

Other alternative fuels can also be scaled up profitably. The reason: we have invested 30 years of research to develop these alternative fuels, and conventional fuels like diesel are still above $3.40 per gallon. Fuel choices like methanol, hydrogen, ethane, electricity, and other renewable fuels are cheaper. However, the Government has not systematically put a plan in place to give American’s access to these fuels at local refueling stations. In fact, the Government regulations in place today make it difficult to add these fuel choices.

Just like with solar and wind energy, getting the existing alternative fuels to scale requires mandates like the U.S. Renewable Fuels Standard. That requires gas stations to have a particular percentage of their fuels be renewable. Today, that standard needs to be updated to an "open fuels standard" to include non-biofuels like electricity, natural gas and hydrogen. Expediting availability of these fuels is not only possible, but also necessary to meet our goals to eliminate our dependence on foreign oil by 2025.

In addition to alternative fuels, vehicle efficiency technologies offer another off-the-oil-ramp towards energy independence. With only one out of every seven gallons of gas being used to move the car forward, it is time to stop waging war in the Middle East and start the war against vehicle inefficiency (more on that later).

Pushing The Extra Mile

Fuel efficiency and enhancement technologies, including improved engine design and aerodynamics for heavy trucks, can push us the extra mile. One exciting fuel enhancement technology is NanoVit. The nano particulate (i.e. very small), amorphous, formless powder interfaces between small moving surfaces to provide protection against extreme pressure, thereby reducing friction, decreasing wear, and increasing the life of components. Combustion engines that use this type of fuel enhancement could save up to 29 percent of the fuel burned.

Another way to make vehicles more efficient is by simply making them lighter. Following the oil-crisis in the 1970’s, average fuel efficiencies more than doubled. However, that increase has been nearly offset now that more people drive heavier cars like SUVs. Carbon fiber and aluminum offer a means of increasing fuel efficiency through a 50 to 70 percent weight reduction compared to existing car materials.

BMW has been a trailblazer in commercializing carbon fiber. In 2013, it built a $100 million manufacturing facility outside of Spokane, WA and is now tripling the plant’s production. BMW aims to make carbon fiber as cheap as aluminum by reducing the price by a factor of ten. Through the use of carbon fiber, BMW’s sleek i3 electric car weighs 20 percent less than the Nissan Leaf allowing it to accelerate from zero to 60 up to four seconds faster than the Leaf.

The technologies to conserve and displace oil save money, yet not enough people are willing to invest upfront to eliminate oil—even if the savings pay off the up-front investment within a few years. It is time to use financial innovation to cost-effectively deploy the technological innovations we already paid to discover.

It's time we had a choice.

Protecting The Right Priorities

Since 1976, we may have had the wrong priorities.

A study at Princeton University estimated that the U.S. spent $6.8 trillion dollars from 1976 to 2007—three percent of its total GDP—defending oil shipments in the Persian Gulf. If the U.S. government hadn’t spent that money defending Middle Eastern seaways and instead invested far less than the average $225 billion per year at home, we would be oil independent.

With a little courage, imagine what we could have done with the $6.8 trillion we spent in the Persian Gulf because of our oil dependence. Now that we have cost-effective alternatives, there is no reason why we have to make that mistake again. When we look back from 2045, we should see a fuel-choice economy that Americans built—not more warships and tankers in the Middle East.

Photo: Mark Weiss/Getty Images Chart: Ten-year USA average gas price: GasBuddy.com

Resource Development and Economic Opportunity Go Hand-in-Hand

As the United States slowly emerges from the economic downturn of the Great Recession, pockets of the country have enjoyed a much faster recovery thanks to development of shale oil and natural gas resources. For example, cities west of the Mississippi River have boomed in population and economic growth due to increased energy production in oil- and gas-rich areas of the Great Plains and Mountain West, according an Associated Press report based on new U.S. Census data.

The same data confirm that energy production is one of the fastest-growing industries and an engine for economic growth in the United States. Generally, in locations where energy development occurs, economic opportunity arises and towns and states thrive.

However, economic opportunity has not been limited to just those production areas. The shale boom has also helped American families across the nation through indirect job and economic growth, lower energy costs and higher incomes. In fact, IHS Global Insight estimates that the domestic oil and gas boom created the equivalent of $1,200 of real disposable household income to American families in 2013.

Resources Fuel Our Economy

As the shale energy revolution continues to impact the nation, we are reminded of how energy development is closely correlated to economic activity. In fact, the former House Resources Committee Chairman Richard Pombo (R-CA) said during a hearing in 2006, “The fact is, resources fuel our economy...they are the building blocks of our society. Without them, we produce nothing.”

As Charles Mann noted in his recent The Atlantic article, economic growth and energy use go hand in hand: “According to the National Bureau of Economic Research, the United States has experienced 11 recessions since the end of the Second World War. All but one were associated with spikes in energy costs—specifically, abrupt jumps in the price of oil.”

This strong connection between energy development and economic growth is even more evident when examining economic figures stemming from the U.S. shale boom. According to the consulting and forecasting firm IHS Global Insight, shale development has supported more than two million American jobs and generated $75 billion in federal and state tax revenues. By 2020, IHS estimates, total jobs linked to shale will grow to 3.3 million, and the total impact on U.S. gross domestic product will be nearly half a trillion dollars.

According to energy expert and Vice Chairman of IHS Global Insight, “Shale gas has created hundreds and hundreds and hundreds of thousands of jobs in the last five years in the United States. It's brought $1 billion of revenue into the state government of Pennsylvania…"It does have a transformative impact."

But the economic development doesn’t end there. The boom in domestic natural gas production has pushed down utility prices for customers and bolstered energy-intensive manufacturing, particularly steel, chemical and plastics producers.

Where specifically are we seeing the firsthand positive impacts of the shale boom? Let’s take a look at a few examples from across the U.S.

The Bakken Shale formation covers Eastern Montana, Western North Dakota, and parts of Saskatchewan and Manitoba in the Williston Basin.

North Dakota

North Dakota’s shale energy boom has produced a parallel ripple effect in income, employment and population. The U.S. Bureau of Economic Analysis reported this week that North Dakota’s personal income level grew 7.6 percent in 2013 – the highest among all states for the sixth time in the last seven years.

The report noted the state’s growth is connected in great part to its energy development, the epicenter of which is the Bakken shale formation. Its riches have transformed North Dakota into the second largest oil-producing state in the U.S. after Texas in volume of oil produced, according to the EIA.

The Marcellus Shale formation stretches across western New York, Western Pennsylvania and all of West Virginia, and is the largest shale formation in the world in terms of oil and gas input.

Pennsylvania

Stretching across nearly two-thirds of Pennsylvania, the Marcellus Shale formation has provided significant economic benefits such as lower utility bills, new jobs, economic growth and new opportunity for the state. According to economic reports published by Consumer Energy Alliance over the past two years, a number of Pennsylvania counties have directly seen economic development stemming from production in the Western and Northeast parts of the state.

Bradford County:

Marcellus Shale natural gas drilling has been ongoing in Bradford County since 2008, increasing by 20 percent and attracting national and international investment in the area. The state Dept. of Labor & Industry reported in 2010 that Bradford County experienced the highest increase in employment in any county in the entire state. Shale gas development has reduced unemployment and revitalized businesses and real estate in Bradford County.

Butler County:

The rolling countryside of western Pennsylvania just north of Pittsburgh envelops the abundant Marcellus shale formation whose natural gas development is revitalizing the county’s economy. In late 2012, shale gas revenue channeled $4.3 million to Butler and neighboring counties. In first quarter 2013, Butler County ranked in the top 50 counties in the nation for wage growth, according to the U.S. Bureau for Labor Statistics. Shell Chemical’s plan to build a multi-billion dollar ethane cracker plant in nearby Beaver County is expected to endow the region with additional business growth.

Washington County:

As one of the most active Marcellus natural gas production areas, Washington County has attracted national and international investment in the area. An increase in population and demand has brought a business boom for the service, transportation and tourism fields. Shale gas development in Washington County has helped to lower unemployment, boost average earnings and increase business growth outside the energy market.

The Green River Formation in Colorado, Wyoming, and Utah holds the world’s largest oil shale deposit. The Niobrara Formation’s most productive zones are in the Denver-Julesberg basin of northeast Colorado and southeastern Wyoming.

Colorado

Colorado promises to be an emerging locale for prosperous shale development, as companies are increasing their footprints and adding more jobs to the region. The U.S. Department of Energy estimates that 80 percent of recoverable oil shale in the Green River Formation is located in Piceance Basin in northwestern Colorado. The largest energy-producing county in Colorado is Wattenberg Field, located in the Niobrara Shale Formation in the Denver Basin.

The natural gas and oil riches of the Niobrara and Green River formations are sparking many job opportunities. Colorado’s energy industry employs 110,000 people and contributes $29.5 billion in economic activity. The Colorado School of Mines saw increased enrollment in its Petroleum Engineering Program from 30 to 200 in 10 years. Some two-thirds of the school’s graduates, no matter their major, work for oil and gas companies upon graduation with an average starting salary of about $90,000 a year.

A Bright U.S. Energy Future is on the Horizon

With the Energy Information Agency (EIA) forecasting that U.S. crude oil production will approach a record by 2016 and natural gas production will increase 56% between 2012 and 2040, it’s clear that tremendous opportunity for the nation lies ahead.

Through the availability of abundant energy resources across the nation and new energy production technologies, energy will continue to fuel the U.S. economy for years to come. But that opportunity will only remain on the horizon if the U.S. continues to promote access to these resources. Whether it is oil and gas, coal, wind, solar, and other renewables, there must be both access to the resources and reasonable regulation, as well as a focus on producing energy in a way that is responsible and acceptable to the public. By following this path, the United States will remain a leader in energy and economic prosperity for years to come.

Kristin Schrader Marcell is former House Resources Committee staff member and political appointee for the U.S. Department of Transportation. She is a public affairs consultant that focuses on the energy and transportation industries.

Diminishing Irreverent Ideology and Replacing it with Informed Understanding – The Unintended Consequences Project

Oil and gas are dirty; wind and sun are clean. It seems almost logical and undeniable. The thought of a breeze dancing through the air on a sunny day, providing energy to homes is almost idyllic, while drilling into the dark cold earth for oil and gas is grimy and horrid. The reality, however, is that the comparisons don’t match up, they are misleading. The processes to harness both renewable energy and fossil fuel energy are essentially the same. It starts with an end-user, you, and the products and technologies to supply that demand.  Whether it is drilling or manufacturing, nothing is clean. Everything comes at a price and sometimes those prices are the products of unintended consequences.

These consequences are a part of every industry and are the nature of innovation and advancement. From gas in shale plays across the United States to the Athabasca Oil Sands of Canada, down to the solar installations of the south and back up to the wind farms in the north, America and Canada are racing to harness energy.

There are two camps that sit at the crossroads of energy independence and energy sustainability, both entrenched in a one-sided conversation. In an attempt to curb the conversations and couch them in truth, documentary film maker Matt Palmer will challenge viewers on the difficult issue of “how do we deal with the externalities that result from our current global fossil fuel dominated energy system and transition to a low carbon society given that every aspect of our lives from modern science, medicine, technology and food production all rely on fossil fuels,” in his film Unintended Consequences.

While alternative energy resources and renewable technology is still being developed, it is important to understand the facts behind their foundation. Environmentalists tout the benefits of alternative energy as if it is a clean, free and benevolent source of energy without laying out other important factors to the production of solar, wind, hydro and biofuels. "We need to see how these energy issues fit together," said Palmer.

Sure past societies have existed on wind and watermills but they have advanced and excelled with the use of fossil fuels. They are what shaped our present but they don’t have to solely define our future. Both forms of energy have given sustenance and it is each persons choice how it will sustain them in the future. But according to Matt Palmer, they must be educated on both sides, "There is a true lack of understanding on where our energy comes from. I am going to help tell the story."

Palmer’s documentary will follows six families whose lives are exponentially different, and as he states, “to see how energy impacts their lives and the complexity of emotions that result from their access.”

To learn more about Matt Palmer’s upcoming documentary, Unintended Consequences click on the video below or visit http://www.indiegogo.com/Unintended-Consequences and get involved.