The energy question

07 May 2008

The International Energy Agency (IEA) recently estimated that sustaining annual growth in the global economy to 2030 would require a 40 percent increase in global oil supplies. The US Energy Information Administration (EIA) projects that America will consume 19 percent more oil by 2030.

In addition to strong global oil demand, a number of fundamental factors contributed to the run-up in crude oil prices. These include tight spare production capacity, rising geopolitical tensions, falling US crude oil inventories, a weak US dollar, domestic strife in Nigeria that has lowered production, and declines in worldwide production. Short-term factors such as cold weather also play a role.

Rising oil prices tend to lead to heightened concerns about America's energy security. However, the situation may not be as bleak as many Americans imagine.

For example, the fear that America has become overly dependent on Persian Gulf countries is often overestimated. Less than 15 percent of the oil the US consumes is imported from that region. A recent public opinion poll by Harris Interactive found that nearly 60 percent of respondents identified Saudi Arabia as the largest supplier of oil to the US; only one in 10 people correctly identified Canada as the largest supplier to the United States.

To meet the growing demand for its products, the domestic oil industry has been investing heavily. New investment in 2006 reached over $174 billion, a 29 percent increase over the prior year. The industry is making record investments in US refineries, expanding their capacity and investing nearly $50 billion from 1996 to 2005. According to the EIA, current expansion plans will boost domestic refining capacity by one million barrels per day between now and 2012, the equivalent of five new refineries.

Moreover, the expanded refineries generally work smarter. Some refineries are converting heavier, sour crude oil into low-sulfur gasoline, diesel and jet engine fuel and squeezing extra gallons from every barrel. Upgrading other inferior sources of oil such as tar and oil sands into refinery feedstocks shows some promise. Turning waste and residue hydrocarbons into high-value products through gasification is yet another approach being considered.

The introduction of ultra-low sulfur diesel fuel is enabling the use of cleaner-technology diesel engines and vehicles, resulting in significantly improved air quality. In the long run, we need to support anything that helps our industry minimize its footprint on the environment without incurring an unreasonable economic burden.

To supplement petroleum, America is looking to unconventional sources such as ethanol and biodiesel, produced from corn, oil seeds, animal fats, and waste oils. However, the transition may not be as uncomplicated as originally perceived. For example, increased production of ethanol has naturally resulted in heightened demand for corn, leading to higher prices for the crop. Those expenses are reflected in increased prices for meat and poultry as farmers shift increased feed prices to consumers.

Other tough issues are bound to arise as the search continues for energy solutions. But the quest must continue. Unforeseen advances could significantly improve energy production, distribution and use.

Already, a number of members have profited from their role in the construction of an expanded mix of energy resources, which, besides oil, includes wind, solar, biofuels and others. Such developments, while not total solutions, help soften the impact of escalating fuel prices.

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D.Ann Shiffler Editor, American Cranes & Transport Tel: +1 512 869 8838 E-mail:
Matt Burk VP Sales Tel: +1 312 496 3314 E-mail: