Maley's Energy Blog

The Energy Information Administration of the Department of Energy compiles and analyzes energy-related statistics. One of their key reports is the Annual Energy Outlook. On December 14, EIA released its look at the next 25 years, the Annual Energy Outlook 2010 (AEO2010). This Early Release details only the Outlook’s “Reference Case” (assumptions on this slide & the next); the full report, due out in March, will cover a broader range of scenarios.

Slide 6 illustrates the difficulty of dramatically changing the energy use picture.

Just as an aircraft carrier can’t be turned on a dime, neither can the enormous energy-consuming engine that is our economy. For the last several years, the U.S. has consumed 100 quadrillion Btus of energy in various forms. That’s a lot of energy. Every year, the population grows (about 0.9% a year) and we get a little bit more efficient and productive with our energy consumption (see Slide 7, below), roughly to offset the increased energy needs of those 3 million or so warm bodies.

Out of 100 “quads”, 85 are “fossil fuels” – petroleum, natural gas and coal. Nuclear energy accounts for about 8 quads, so currently 7 quads is made up of “renewables” – hydropower, geothermal energy, biomass, wind and solar. For practical (and political and environmental) reasons, nobody expects much growth in hydro or geothermal (less and except Al Gore, who somehow got the idea that the temperature of the earth’s core is “several million degrees” – but I digress).

Thus, the conclusion of this Outlook, at least in the Reference Case, is that reliance on fossil fuels declines from 85% to 78% over the next 25 years. And the size of the overall pie is growing in that time frame, to 115 quads, so that all of the conventional sources of energy actually grow. A few extra quads of renewables actually get us to 115 quads total. More on renewables in the coming slides.

This slide presents a very important concept.

The Obama Administration, and the Left in general, see the prosperity of the U.S. as a problem to be remedied. Some would suggest, as RedState diarist Bernard Chumm has pointed out, deliberately crippling our economy to the tune of 25% in order to “fix” the “disparity”.

Bullcrap.

The U.S. economy is a very efficient engine for creating wealth, and it has improved steadily over the last 40 years (at least). It is less energy-intensive, and less carbon-intensive, if that yardstick has any meaning to you.

Hobbling our economy will have the effect of reversing this trend. And our slack will be taken up by competing world economies that are nowhere near as efficient, or “green”, if you will. Fixing a nonexistent “problem” will not only make the U.S. less prosperous, it will make the world dirtier and less prosperous.

Beware the V-shaped forecast, when the bottom of the V is “today”.

Consider the red curve, production. The EIA’s forecast has us reversing 40 years of decline, returning to the 1970 level of liquids production in just 25 years.

How is this possible? you might ask. The EIA would answer that it’s a combination of deepwater Gulf of Mexico oil, along with growth in biofuels. More about that later.

In the meantime, the Obama Administration plans to do just about everything it can to discourage and punish domestic oil production. Interior Secretary Salazar has yet to proceed with the Five-Year Outer Continental Shelf Leasing Program. ANWR and the Eastern Gulf of Mexico will remain off limits to drilling. Proposed tax law changes will make capital formation harder than ever.

But at least we have … switchgrass!

Source: EIA Annual Energy Outlook 2010

Now this graph is remarkable.

It’s pretty much an admission by EIA that the Congressionally-mandated 2007 Renewable Fuel Standard (RFS) goal of 35 billion gallons of ethanol usage per year by 2022 will not be met. Not only that, EIA arrived at that conclusion in last year’s outlook, AEO2009.

Consider the makeup of the ethanol blend. Large portions of it are projected to be made up of “biomass to liquids” and “cellulosic ethanol”, two sources which don’t even exist at present.

And the EIA is giving ethanol and ethanol blends a significant price advantage in their assumptions, to make it more price competitive with gasoline:

Retail prices for E85 (a blend of 70 to 85 percent ethanol and 30 to 15 percent gasoline by volume)are projected to shift from a volumetric basis to an energy-equivalent basis relative to motor gasoline, in order to meet the renewable fuels standard (RFS) … . In 2022, the retail price of gasoline is $3.41 per gallon while the price of E85 is $2.63 per gallon, reflecting the higher energy content of gasoline versus E85 and delivering a similar cost for the two fuels per mile traveled.

An interesting bar chart that illustrates a point I wrote about recently in a RedState blog called The Big Energy Lie. “Resources” and “reserves” are not interchangeable terms. Reserves are quantities known with relative certainty that can be recovered or are directly indicated by wells that have already been drilled. They are a small subset of the total resource base. In the chart, natural gas reserves are represented by the dark blue portion at the base of each bar. And the growth in the resource base in the last few years is particularly notable. Activity and new technology directly led to the growth of the resource estimate, mostly in the shales.

Source: EIA Annual Energy Outlook 2010

Several interesting things to note here. EIA takes the AGA Potential Gas Committee estimate of resources seriously. There is a large growth projected in shale gas, which they expect will keep prices low and actually depress exploration and development of conventional gas reserves onshore and in the Gulf of Mexico. Secondly, they project completion of an gas pipeline to serve the Alaska North Slope in 2023.

Source: EIA Annual Energy Outlook 2010