The United States is already significantly “energy independent” in most sectors, with transportation fuels being the notable exception, according to a Deloitte study. Here, alternative fuels, including natural gas, can bolster U.S. energy security, which is a more attainable goal than independence, the firm said.
The Deloitte report “Energy Independence and Security: A Reality Check” asserts that when people say the U.S. needs a secure supply of energy, what they really mean is a secure supply of crude oil, mainly for transportation. Measures that should be taken include improving vehicle fuel efficiency, improving ride-sharing and mass transit options, expanding the electric vehicle fleet and the use of alternative transportation fuels such as methanol, ethanol and natural gas.
According to Deloitte, natural gas provided 3% of the energy used for transportation in 2010, mainly in the form of fuel for repetitive-use fleets such as buses, delivery, maintenance and warehousing vehicles. This was all in the form of compressed natural gas (CNG).
“Various groups have called for federal assistance to expand the use of natural gas for transportation, in the form of CNG or liquefied natural gas (LNG), but significant new infrastructural construction is required to support the wider use of these fuels,” the report said. “In particular, compressors are required either at gas stations or at home, to fill CNG tanks adequately. Similarly, LNG would require significant investments in refrigeration and storage equipment to make it widely available. Finally, without CNG- and LNG-ready vehicles from manufacturers, conversion costs can run to $1,500 or more per vehicle. In all, these factors continue to constrain the wider use of natural gas for transportation.”
The report recalled the 1970s, when domestic natural gas supplies were thought to be dwindling and restrictions were placed on its use as a fuel for power generation. Gas prices were high and markets uncertain. Wellhead gas price deregulation enacted in 1989 helped bring supply and demand into better balance, Deloitte said.
“Today, U.S. natural gas is in plentiful supply at low prices due to the application of new technologies to extract gas from shale rock formations,” the report said. “During the summer of 2012, natural gas surpassed coal as the primary fuel for power generation for the first time on record, according to the [Energy Information Administration]” (see Daily GPI, June 28).
Abundant domestic supplies have sparked numerous proposals to liquefy and export gas, Deloitte noted. “The bottom line is that America is today almost completely ‘independent’ in natural gas, and even has the potential to become the world’s largest exporter,” the report said.
Domestic crude production needs to increase, Deloitte said, as does crude procurement from “friendly” suppliers such as Canada and Mexico, the report said.
“While rising global demand for oil will likely keep crude prices relatively high, it also will provide a continuing stimulus for increased domestic production,” said report author, Branko Terzic, executive director of the Deloitte Center for Energy Solutions. “Moreover, the introduction of increasingly sophisticated enabling technologies worldwide may herald the introduction of new countries as oil suppliers, and increase potential supplies from existing friendly sources.”
The report said that while U.S. energy independence may be unattainable in the near future, energy security is still a realistic and achievable goal.
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