Don’t expect the energy pie to get bigger, John Hanger, the former head of the Pennsylvania Department of Environmental Protection (DEP), told a Pittsburgh audience Thursday.
While shale plays are driving increases in domestic oil and natural gas production, flat domestic energy consumption is creating “intense competition” for market share of power generation and transportation, he said at the Energy Inc. Conference hosted by the Pittsburgh Business Times.
“Those in the natural gas business, at the least, need to really understand there’s some intense competition, both in the electric power sector and in the transportation sector,” Hanger said. While natural gas has been making inroads on coal when it comes to electric power generation, he said it faces an uphill battle against oil for transportation (see Shale Daily, Sept. 6; Feb. 3).
If domestic oil production continues to increase at its current rate, “it’s not going to be easy to dislodge oil from the transportation sector,” Hanger said, adding “it’s not going to happen without incentives, at least not in any kind of accelerated way” (see Shale Daily, April 6). That competition comes from a growing imbalance between supply and demand, Hanger said.
The United States is already the leading natural gas producer in the world, but Hanger noted that domestic oil production is on the rise after decades of decline “and there’s every reason to think that’s not a blip.” If those trends continue, Hanger said the country can expect to be completely off foreign sources of crude oil by 2025 “with or without a coherent policy to make that happen.”
Because of those figures, Hanger said that when asked whether the U.S. Environmental Protection Agency is trying to shut down fossil fuel production, he said. “If they are, they’re doing a really lousy job of shutting us all down because we’ve got record production going on in the U.S.”
Additionally, ethanol production is “booming,” and wind is capturing a larger share of the power generation market. Solar, Hanger said, is a “significant global industry” and is seeing its production costs drop despite public relations knocks from the recent failures of publicly subsidized projects and companies, such as solar developer Solyndra. And even without any new domestic facilities in decades, nuclear power production is increasing because of investments and improvements made to existing sites. And while coal production peaked in 1998 it continues to find export markets, Hanger said.
Consumption, though, is not increasing alongside production. With the total energy usage in the country this year estimated to be less than in 2000, despite a decade of economic and population growth, Hanger said, “the new rule on energy consumption in the U.S. is that it will be flat.”
That imbalance is the result of “real structural changes going on,” Hanger said, pointing to improved energy efficiency in everything from appliances to automobiles, and two recent stretches where gasoline topped $4 per gallon, but he said “the world is an entirely different story” and noted that the growth of China and India, in particular, will certainly increase global demand.
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