Air University Review, May-June 1978

Energy Resources: Revisited 1977

Six years have brought about a dramatic change in the outlook of the United States regarding energy resources, distribution, and use, and in our policies relating to energy.² Our previous short-term concerns have become long-term realities. We are faced not only with insufficient electrical generating capacity in some areas but also with the lack of ability to raise capital to increase that generating capacity. Environmental issues are continually being debated, forcing additional delays in supporting construction. But of even more basic concern to our national strength as a world power is our ever increasing dependence on overseas energy resources for oil and natural gas. Whereas in 1971 the Organization of Petroleum Exporting Countries (OPEC) was just beginning uniform price agreements, OPEC has now proved its ability to enforce and maintain higher prices. The recent tiered structure with Saudi Arabia's leadership has arisen because of concerns within OPEC nations that user nations of the industrial West cannot withstand as high a price increase as desired by the producers. However, there has been no major break to date in OPEC's policy to price oil comparatively with alternate energy sources. In fact, many OPEC producers view competitive pricing as their obligation to avoid energy waste.

In late 1973 and early 1974, the U.S. was visibly inconvenienced by the oil embargo imposed by the OPEC nations in objection to our foreign policy. At that time, we imported less than 20 percent of our oil requirements; this embargo forced an inconvenience, not a disruption of our economy. Today we import 50 percent, and the percentage is rising. Also, we have not been able to reduce our increasing dependence of foreign energy sources in the past six years.

The United States could not have developed into a superpower if abundant, low-cost energy had not been available. By the same token, we cannot sustain our position of leadership without the availability of an adequate supply of energy to meet the nation's needs. However, cheap energy is clearly a thing of the past. The OPEC nations' increase of oil from approximately $3 per barrel before 1973 to $12 today has placed oil in competition with other forms of energy. The OPEC nations also intend to maintain price parity with inflation throughout the world,³ reasonable to them considering that their imports from the Western nations, no small amount of which are arms, have risen in cost. Since cost of living indexes are included in many Western work agreements, contracts, and pension plans, the OPEC nations believe that their prices should be in step with the current market value of their products.⁴

Today, energy is becoming scarce, although the U.S. does not seem to be as aware of this as the rest of the world. In terms of oil and the international market, crude oil reserves were 50 times the annual world consumption as recently as 1966; now they are but 30.⁵ Eighty-five percent of the world's oil and gas reserves lie primarily in the East, while use is primarily in the West.⁶ This is the world's oil distribution seen objectively, but from the U.S. point of view, the outlook is somewhat different.

For the West, the U.S. is still in an enviable energy position since we do have alternatives. We do have oil--not as much as in the past, but some. We have even less natural gas, and in 1975 we consumed twice as much as we discovered. Our greatest energy source is coal, which still remains largely untapped and is sufficient to meet our needs for several hundred years. Nuclear power has progressed and now provides power for 8 to 10 percent of the electricity generated in the U.S.; six years ago, it furnished but half of that. Other energy sources are minimal, providing only a few percent.

Energy is now recognized by all as a perishable commodity. Yet while the price has become greater and resources are ever more limited, we still have those who act as if energy resources were limitless and argue for a return to the "good old days." At the same time, natural gas consumption is severely curtailed many states, and gas companies are often not connecting new customers. Schools and industries have been forced to close for lack of fuel, primarily natural gas. Throughout the nation, industries, colleges, universities, and government offices have gone on energy conservation programs. Last winter, our domestic distribution by pipeline, truck, and barge was severely strained to deliver the supplies we do have.

There is no simple solution to these problems. Man will proceed rationally or irrationally, depending on how well informed and self-disciplined he is. My purpose is to present the situation as it is today in comparison to the way it was in 1971 with the additional realization that the solution we want as a nation may not be the solution that others will readily grant.

It will be the industrialized nations which will have to make the major adjustments if petroleum and natural gas reserves are to he extended by conservation, on the one hand, and the use of alternative energy sources on the other.

Robert C. Seamans, Jr., Administrator,
Energy Research and Development
Administration⁷

We still need energy since we use approximately 35 percent of the world's annual energy production with only 6 percent of the world's population. Thus, for the West, the U.S. faces a particular challenge. Because of the operation of various factors, not the least of which is the inability of U.S. corporations to generate the necessary capital under conditions of moderate economic growth and increasing environmental investment, energy growth in the U.S. can he expected to average 2.8 to 3 percent per year over the next 25 years.⁸ The undeveloped areas of the world will probably have a more rapid increase in energy requirements as they become more industrialized and energy intensive in their methods of production. Thus, our competition with other nations for energy will become ever greater. Since our lead in energy use is so great and we do have domestic resources, we will probably retain our lead. However, this can he both a blessing and a curse-a blessing in that we will have a higher standard of living, but a curse in that other nations see our relatively small population using one-third of the world's energy output.

As with other products such as water and paper which have low prices relative to substitutable products, tremendous waste has been encouraged signs of this affluence are all about us; oversized automobiles, over-heated buildings, black exhaust from factory chimneys and motor vehicles, buildings ornamented with electric lights, gas flares in oil fields, even electric toothbrushes in our homes. The non-productive and wasteful uses of energy have contributed to the rapid growth in energy demand-a demand well above our needs,. .. ⁹

Projections have also been made which show that the demand of the consumer nations is less than a decade away from the maximum levels the producing nations are willing to supply.¹⁰ While we may want energy as a nation, the suppliers may be unwilling to supply it at any price. They may also reserve the right to say how we use it and what profits are just. Other factors opposing supplies to the U.S. are our lag in conservation measures and the fact that other nations live as well on considerably less energy, In Sweden, the energy use per capita is two-thirds that of the U.S., yet the standard of living is the same.¹¹ We stand next to the bottom in energy conservation compared to 14 other Western nations, as noted in a study by the International Monetary Fund. None of this helps our image, With our highly educated and technologically oriented population, we can adapt--a strong plus for the future of the U.S., since we have just begun to institute and follow energy conservation measures.

Our overall domestic energy supplies have not changed greatly since 1971. Coal remains our only domestic fuel that can meet our total cumulative energy requirements between now and the year 2000. Today coal can compete more economically with alternative forms of energy, particularly because of the increase in oil price.

U.S. oil reserves have decreased. The North Slope of Alaska is closer to reaching the markets of the U.S.; however, these reserves are not that great. ¹² By today's estimates they would supply total U.S. oil demand for only 2 to 5 years. Production of the fields is planned for a 20-year life span or more. The distribution also poses some problems, but today we have only 31 billion barrels of oil as proven domestic reserves including Alaska as compared to 37 billion barrels in 1971 excluding Alaska. By comparison, the United Kingdom has 17 billion barrels of oil.¹³

Natural gas continues to be our most meager reserve. Today's proven domestic reserves are only 220 trillion cubic feet as compared to 265 trillion cubic feet in 1971. The increased prices allowed for natural gas have spurred increased drilling; however, the cost of drilling has gone up as much as tenfold as has the construction of pipelines, particularly when they must be underwater from offshore gas fields. Considering the other uses of natural gas and products that can be obtained from this basic resource, one suspects that the value of its use for heating will continue to be argued. The problem of the tiered domestic price structure between interstate and intrastate sales also remains to be solved in addition to price deregulation in order to increase exploration.

Our oil shale deposits continue to stand untapped because of the lack of a cost-competitive extraction method or available water supplies needed for present processes.

Nuclear energy will continue to grow. The Energy Research and Development Administration (ERDA) recently projected that electrical energy-generating capacity based on nuclear reactors may increase as much as tenfold by the year 2000. At the same time the warning was given concerning the energy intensity of reactor construction, such a rapid growth raises the question of whether the expanding system would produce more power than it absorbs and whether net power will be produced in adequate amounts and in a timely fashion. ¹⁴

Hydro power has not changed more than a few percent since 1971 because of the lack of sites. Controlled fusion is as far off now as it was in 1971. The winds, the tides, and geothermal heat may still provide energy to specific localities. Large windmills have been researched further by NASA, but the energy storage method still remains to be solved. Solar energy for specific purposes has received considerable impetus by federal funding. This form of energy will probably fit in well with buildings in some locales. A new school in Michigan with 2000 sq. ft. of paneling is expected to generate 30 percent of the building's heating needs. If the paneling is installed, the projected payback period will be 18 to 20 years at present energy costs.¹⁵ Solar energy for the production of electrical power still does not appear practical because of the low efficiency of direct conversion systems and the high capital cost of indirect cycles.

Today, as before, coal is our ace in the hole. While electrical energy from fission-powered steam turbine generators is increasing rapidly, there will be a movement away from oil and natural gas to coal in future years for electrical generation as domestic oil and natural gas reserves become more scarce and the cost of imports becomes greater. Windmills, geothermal, and solar collectors will probably supply some small units in specific areas.

In the 1800s, our energy needs were based on wood. At the beginning of this century, we had switched to coal, and in the 1950s we were switching to natural gas; however, since 1968 we have been using more natural gas each year than we have discovered. Our oil production peaked in the early '70s. Consequently, the U.S. has been and will remain a net importer of energy, particularly in the liquid fossil fuels, sorely needed in transportation and military operations. Canada remains in a situation much like ours but with greater energy reserves per capita. Canadian proven oil and gas reserves are respectively one-fifth and one-fourth of ours. Canada has taken positive steps to decrease the use and exportation of her energy resources. Taxes are levied on new automobiles in accordance with horsepower, air conditioning, and other accessories. By the early '80s, Canada expects to halt all oil exports. Inasmuch as the upper tier of states receives approximately 20 percent of their oil from Canada, then the oil from Alaska may be needed to make up the lack of oil from Canada or further imports will be needed from the Middle East. Canada is also developing her resources in the northern reaches, Mackenzie Bay, and has begun excavating on the vast tar sands near Edntonton.¹⁶

Venezuela’s proven oil reserves have increased somewhat from 14 billion barrels in 1971 to an estimated 15 billion today. With Venezuela in OPEC, she is subject to the price controls that those nations agree to. At the present production rate, Venezuela could exhaust her proven reserves in eight years. Mexico retains a reserve cautiously estimated at 7 billion barrels although it could become larger. Total Western Hemisphere reserves have remained comparatively constant at twice the U.S. domestic reserve.

In Western Europe, the energy situation has improved. While still very heavily dependent on the Middle East for oil, Europe's situation has improved considerably because of the North Sea findings, from 4 billion barrels in 1971 to 25 billion today, close to the reserve of the U.S. These North Sea fields, both oil and gas, are still under development, but the Western European nations are not a potential major source of energy to the U.S.; in an emergency, they could even require a portion of our production. Unfortunately, the U.S. is not able to meet its own oil needs and those of Western Europe simultaneously.

In the Asia Pacific area the reserves have changed but little, 14 billion barrels in 1971,19 billion now. Japan continues to be dependent on the Middle East; however, there may be a diversion of some Alaskan oil to Japan in turn for a diversion of oil from the Middle East to our East Coast ports. If this were done, it would require legislation since presently the export of Alaskan oil is prohibited. This arrangement would allow shorter shipping distances. Also, West Coast refineries are designed to handle a "sweet oil" in comparison to the higher sulfur content of the Alaskan and Middle East oils; thus, additional Middle East oil could be more easily processed by the East Coast than could Alaskan crude by the West Coast.

Libyan oil fields and reserves are already peaking. Libya. very much the voice of OPEC four or five years ago, appears more concerned to seek the highest price for her oil as soon as possible. Like Libya, Algeria has already drawn down her reserves considerably. Yet without a doubt, the Middle East remains the energy giant of the world. Saudi Arabia, Iran, and Kuwait are the largest with 110, 63, and 67 billion barrels respectively in proven reserves; however, total Middle East reserves have decreased slightly to 326 billion barrels. Nevertheless, the Middle East still has more than one-half the world's total reserves of oil and one-fourth of the natural gas.

The Soviet Union has made major finds in the Siberian area--finds that may equal or even surpass those of the Middle East. Occidental Petroleum, a U.S. corporation, is already helping the U.S.S.R. bring these fields into production by providing technology. However, the extent of these fields is still not fully known. If they are as large as sometimes thought, the Soviet Union could become the oil center of the World. While discoveries have decreased somewhat from recent official Soviet reports, reserves are now estimated at two and one-half times our oil reserves and four times our natural gas, respectively two and one and one-half times ours six years ago. The energy balance thus has swung more to the advantage of the U.S.S.R.

The U.S. still has a reasonable position and possibly could become self-sufficient if considerable effort were expended in scientific and technological development as well as disciplined use and distribution.¹¹ But this energy self-sufficiency is under question by Senator Edward Kennedy and will be reviewed by hearings to be conducted by him and the Joint Economic Subcommittee. We have turned and probably will continue to turn more and more to overseas suppliers for oil and gas. These reserves are principally in the Middle East. Long-term supply from Canada no longer appears feasible: however, as a good neighbor she came to our aid last winter as did Mexico. Nor do the reserves of Venezuela and possibly Mexico offer as great support as we formerly anticipated. Our overseas allies, particularly in northern Europe, have improved their position, but they too are increasingly dependent on the Middle East; and our ability to supply our European allies is less than it was six years ago. Although the Soviet Union has become ever stronger in comparative energy reserves, the Middle East remains the giant, a giant which realizes the international power that energy resources bestow.

Reserves continue to be known deposits, which the world is recovering with today's technology. They are working inventory; undoubtedly the final figure will be different and higher as technology improves and increased prices make more fields profitable. Besides technology and price, politics and international economics have influence, too. Saudi Arabia recently reported a drop of more than 40 billion barrels of oil reserves, considered to be for political reasons and the forthcoming takeover of Aramco by the Saudis. While Mexico may have a great deal of oil, Pemex conservatively maintains an estimate of 7 billion barrels, with another 10 possible, and theoretically, an additional 30 to 60 billion barrels.¹⁹ The true figures throughout the world will only become known through time, price, and ingenuity.

The uses of energy within the United States in 1960 were the following, by percentage: industrial, 35; commercial and other, 25; transportation, 20; and residential, 20.²⁰ A more recent description of energy use in the U.S. and in slightly different categories, by percentage, reads as follows: agriculture. 15; transportation, 25; industry, 26; and building and space heating, 33.²¹ For the future, the question is how can we best meet our needs and use our resources.

In his remarks to the international meeting, Dr. Seamans made it clear that no single option will meet the requirements of the future even though the U.S. has more options than most nations. Until 1985, Dr. Seamans sees a maximum use of domestic resources to offset increasing dependence on overseas oil with a very strong energy conservation program at all levels. He also urges using coal in place of oil or gas and an increasing dependence on nuclear energy.

Conservation is a means stilt largely untapped in the United States as one considers the continual production and demand for large automobiles versus smaller automobiles. The gallons of automobile gasoline sold are setting new annual peaks again. We increasingly see a return to overlighting; gas lights are still burning day and night. Dr. Seamans noted that we waste 50 percent or more of the energy that we use. Thus, we could make a large dent in meeting our future needs by reducing our own domestic use.

Areas for conservation that appear most desirable are in transportation and space heating. The strength of the nation lies on its agricultural and industrial base, which together account for approximately 42 percent of the energy used in the U.S. This base must be protected. Our factories are often running with reduced heat. Last winter, gas quotas were established, and plants, schools, and offices were shut down. Measures of this sort have not yet been taken with the private dwelling. More encouragement has been given to increasing insulation, storm windows, and lower thermostat settings. There has not been a penalty other than a higher gas or electrical bill for private citizens who do not comply. Conservation here may be very fruitful. The American homeowner, if placed on the same footing as the American manufacturer with only so many BTUs or kilowatt-hours per month, will have a great deal more impetus for conservation. Laboratories, industries, and college complexes have reduced energy requirements from 10 to 20 to 30 percent or more with little or no impact on their overall operation. They have conserved because they were required to by the supplies allotted to them and the cost they could endure. If similar constraints were placed on domestic users, we might also see considerable energy saving in the home.

Energy policy was an issue in the last presidential campaign. To date, a reorganization of various federal agencies involved in energy research, development, and use has been accomplished, placing them under the directorship of the U.S. Energy Research and Development Administration. The Atomic Energy Commission, which had sponsored nuclear energy research and development under civilian control since 1947, has been abolished to become part of ERDA. The Joint Committee on Atomic Energy in the Congress. with review of the nuclear energy budget, now sees this responsibility returning to separate congressional committees. Several years ago there was the possibility that a joint energy committee would be formed within Congress to provide legislative leadership to the nation's energy program. This has not occurred. Thus, while there have been some organizational changes to the executive and legislative structures directing, overseeing, or controlling the U.S. energy program, there has not been a dramatic change in our national direction of efforts to meet future energy needs. Changes of monumental proportion that will be needed within the U.S. for us to become less energy dependent will not occur overnight.

As time goes on, the continuing measures necessary for the U.S. to maintain a proper energy base as a foundation to world leadership may require changes to our habits and way of life. These may not all be readily accepted or pleasant. A strong leader both in the White House and in the Cabinet will be needed to formulate, manage, and put into effect such policies. Without them, our strength as a nation can become increasingly dependent on others whose supplies are not totally dependable.

Initially, some readjustment may be expected, emphasizing greater conservation and development of coal resources in accordance with President Garter's energy policies. (Immediately after his inauguration, he acted to decrease consumption both in the home and industry when faced with a bitter winter.) These changes would be at the expense of monies now devoted to nuclear energy. While nuclear energy will not be abandoned, reliance would he cut by reducing overall demand, by improving auto fuel economy, increasing home insulation, and using industrial waste heat.²² John F. O'Leary, the new head of FEA, also expresses a cautious approach to nuclear energy.²³ By such measures and improved technology, our energy rate of growth could be reduced. Another fact emphasizing the importance of energy was Secretary of State Cyrus Vance's early visit to the Middle East.

Considering the longer term, 1985 and beyond, the situation may or may not be brighter. Fusion energy could still be the ultimate solution and most desirable because of the abundance of fuel reserves for that process. Whether it will come to pass by the year 2000 becomes ever more questionable. Solar energy projections made in the U.S. and abroad do not predict a major contribution to any national economy by the sun. As time goes on, other methods and technologies may become apparent, but for the present the U.S. is faced with conservation and the use of more coal and nuclear energy. The recent severe winters may have at last focused our attention on our dwindling energy supplies. Above all we need the will as a nation to realize, accept, and live in accordance with the fact that our energy is limited and a very precious quantity.

My basic conclusion expressed in 1971 remains essentially unchanged, but there are additional factors. While the free world needs oil, the oil-producing nations need to sell oil to support their own programs. The selling nations may strive for all the profit they can gain short of seriously harming their best customers. To support this contention is the moderation of oil price increases in late 1976 in accordance with the strained economic conditions in the free world. However, Reza Fallah and other OPEC spokesmen have added other dimensions that we must be aware of and appreciate. Comparative pricing of oil with periodic price adjustments is a policy OPEC plans to continue. How we use energy is also of concern to the suppliers. If we waste it, they may not be willing to sell or will price in such a manner that those practices undesirable to the seller cease for economic reasons. This practice combined with a strained domestic supply system and decreasing internal reserves requires a strong U.S. conservation program. A last concern of the seller is the limit of the energy reserves each has to sell. Since these resources often form the basis of a natural economy, as the reserves dwindle, prices and events may be less predictable.

The U.S. energy position is still good, but we will have to work and accept change to maintain that strength. Without it our power at any bargaining table or military confrontation is weakened. Today there are no easy paths leading to the reserves or technology necessary to quickly improve our national energy resources or posture.

We are indebted to the following oil companies for photographs illustrating this article: continental, Exxon, Mobil, Standard or California, San, and Texaco; and we gratefully acknowledge the assistance of Richard E. Drew, of the American Petroleum Institute. who made them available to us.

1. Ulf Lantzke, as quoted in "Lag in Oil Conservation Troubles Aides of West's Energy Agency," New York Times, November 2, 1976, p. 39.

2. William B. Haidler, ''Energy Resources: An Element of National Power," Air University Review, January-February 1972, pp. 2-13.

3. Reza Fallah, Transactions, International Conference on World Energy--A Status Report, vol. 24 (Washington, D.C.: American Nuclear Society, November 14, 1976), p. 3. Hereafter cited as Fallah, A Status Report.

4. Ibid. Remarks to questions from the floor.

5. Ibid.

6. Robert C. Seamans, Jr., "Alternative Energy Systems," Transactions, International Conference on World Energy--A Status Report, vol. 24 (Washington. D.C.: American Nuclear Society, November 14, 1976), p. 3. Hereafter cited as Seamans, A Status Report.

7. Ibid.

8. Economic Growth in the Future, Executive Summary (New York: Edison Electric Institute, Publication No.75-32, Revised February 1976), p. 1.

9. Fallah, A Status Report.

10. Clyde H. Farnsworth, "Lag in Oil Conservation Troubles Aides of West's Energy Agency," New York Times, November 2, 1976, pp. 39-41.

11. Lee Schipper and Allan J. Lichtenberg, "Efficient Energy Use and Well Being: The Swedish Example," Science, December 3,1976, pp. 1001-13.

12. Bryan Hodgson, "The Pipeline: Alaska's Troubled Colossus," National Geographic, November 1976, pp. 648 -717 offers a good overview of Alaska's oil-gas resources and marketing concerns.

13. Larry Auldridge, "Worldwide Report, "Oil and Gas Journal, December 30, 1976, pp. 101-6. Values for these and other areas were rounded from tables of worldwide oil at a glance.

14. George D. Sauder, "Expanding System of Power Reactors--Energy Source or Energy Sink?" Transactions, International Conference on World Energy-- A Status Report, vol. 24 (Washington, D.C.: American Nuclear Society, November 14, 1976) p. 25.

15. Ernie B. Shaw, Director, Van Buren Intermediate School District, Lawrence, Michigan; private communication, December 7, 1976.

16. Robert Paul Jordan," 'Now' Frontier,'' National Geographic, October 1976, pp. 480-511.

17. The OPEC Supercartel in Splitsville," Time, December 27, 1976, pp. 52-53 offers an interesting analysis and companion of OPEC reserves and production by nation.

18. Project Independence Report, Federal Energy Administration (Washington, D.C.: U.S. Government Printing Office, November 1974).

19. Auldridge, p.106.

20.Hans H. Landsberg and Sam H. Schurr, Energy in the United States, Sources, Uses, and Policy Issues (New York: Random House, 1968), p. 15.

21. Seamans, A Status Report.

22. ''Energy Conservation, Coal Development Seen as Major Focus of Carter Policies," Hall Street Journal, January 19, 1977, p. 36.

23. Les Gapay, ''More Cautious Policy on Nuclear Power Vowed by Carter’s Choice to Head FEA, ''Wall Street Journal, January 20, 1977, p. 5.

This article is a sequel to "Energy Resources: An Element of National Power," Air University Review, January-February 1972, pp. 2-13 which Dr. Haidler wrote while he was serving as a colonel in the United States Air Force.

The Editor

William B. Haidler (Ph.D., University of Arizona) is Assistant to the President for Technical Programs at Southwestern Michigan College. As an Air Force colonel, he was Dean of the School of Systems and Logistics, USAFIT; previously, Assistant Director of Research and Development, Division of Military Application, USAEC; and was with the department of physics at the Air Force Academy for eight years. He also served in research, development, and engineering positions statewide and overseas. Dr. Haidler is a graduate of Air War College and a previous contributor to the Review.

 Disclaimer

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.

Air & Space Power Home Page | Feedback? Email the Editor