The Energy Challenge of Our Lifetime

Of all the challenges facing President Barack Obama next January, none is likely to prove as daunting, or important to the future of this nation, as that of energy. After all, energy policy -- so totally mishandled by the outgoing Bush-Cheney administration -- figures in each of the other major challenges facing the new president, including the economy, the environment, foreign policy, and our Middle Eastern wars. Most of all, it will prove a monumental challenge because the United States faces an energy crisis of unprecedented magnitude that is getting worse by the day.

The U.S. needs energy -- lots of it. Day in and day out, this country, with only 5% of the world's population, consumes one quarter of the world's total energy supply. About 40% of our energy comes from oil: some 20 million barrels, or 840 million gallons a day. Another 23% comes from coal, and a like percentage from natural gas. Providing all this energy to American consumers and businesses, even in an economic downturn, remains a Herculean task, and will only grow more so in the years ahead. Addressing the environmental consequences of consuming fossil fuels at such levels, all emitting climate-altering greenhouse gases, only makes this equation more intimidating.

As President Obama faces our energy problem, he will have to address three overarching challenges:

1. The United States relies excessively on oil to supply its energy needs at a time when the future availability of petroleum is increasingly in question.

2. Our most abundant domestic source of fuel, coal, is the greatest emitter of greenhouse gases when consumed in the current manner.

3. No other source of energy, including natural gas, nuclear power, biofuels, wind power, and solar power is currently capable of supplanting our oil and coal consumption, even if a decision is made to reduce their importance in our energy mix.

This, then, is the essence of Obama's energy dilemma. Let's take a closer look at each of its key components.

Excessive Reliance on Oil

No other major power relies on getting so much of its energy from oil. Making that 40% figure especially daunting is this: the world supply of oil is about to contract. The competition for remaining supplies will then intensify, while most of what remains is located in inherently unstable regions, threatening to lead the U.S. into unceasing oil wars.

Just how much of the world's untapped oil supply remains to be exploited, and how quickly we will reach a peak of sustainable daily world oil output, are matters of some contention, but recently the scope of debate on this question has narrowed appreciably.

Most energy experts now believe that we have consumed approximately half of the planet's original petroleum inheritance and are very close to a peak in production. No one knows whether it will arrive in 2010, 2012, 2015, or beyond, but it is certainly near. In addition, most energy professionals now believe that global oil output will peak at far lower levels than only recently imagined -- perhaps 90-95 million barrels per day, not the 115-125 million barrels once projected by the U.S. Department of Energy. (Here I'm speaking only of conventional, liquid petroleum; there are some "unconventional" sources of oil -- Canadian tar sands, Venezuelan extra-heavy crude, and the like -- that may boost these numbers by a few millions of barrels per day, without altering the global energy equation significantly.)

What underlies these more pessimistic assumptions? To begin with, the depletion rate of existing fields is accelerating. Most of the giant fields on which the world now relies for the bulk of its oil supplies were discovered 30 to 60 years ago and are now reaching the end of their productive life cycles.

It used to be thought that the depletion rate of these fields was about 4% to 5% a year, but in a study to be released November 12, the International Energy Agency (IEA), an affiliate of the Organization for Economic Cooperation and Development (the club of wealthy industrialized nations), is expected to report that the decline rate is closer to 9%, an astonishingly high figure. At this rate of decline, the world's major fields will be depleted of their remaining supplies of oil relatively quickly, leaving us dependent on a constellation of smaller, less productive fields, often located in difficult to reach or unstable areas, as well as whatever new deposits the oil industry is able to locate and develop.