Energy independence: How to reach energy independence
Many options are available for how the country can move toward reducing its reliance on foreign oil.
American consumers use many kinds of energy every day, but the debate over energy independence focuses almost exclusively on only one: transportation fuel.
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U.S. has no refinery shortage
While the country is importing oil, it is not experiencing a shortage of refined products.
In 2011, about 29 percent of the country's total energy usage came from oil imported from outside North America. That amounts to about 5.4 million barrels of oil per day.
Over the past 15 years, the country's refinery capacity has gradually increased to 17.2 million barrels per day as refineries have expanded. The country's refinery utilization rates are cyclical, peaking in the summer and falling through the winter. Over the past year, utilization topped out at nearly 93 percent in July, up from 86 percent in February.
Nearly all of the country's electricity already is generated from domestic fuels.
Most of the country's power is generated from coal, followed by natural gas, nuclear and hydropower, with a small but growing amount fueled by wind, solar and biomass.
The biggest challenge with becoming energy independent is finding a way to replace the roughly 14 million barrels of oil per day that is transformed into transportation fuels, including gasoline, diesel and jet fuel. Transportation fuel represents about 70 percent of the country's current petroleum usage, according to the U.S. Energy Information Agency.
One option is to increase domestic oil production.
“For the second year in a row, the United States has been the country in the world that's set the stage for new exploration,” said Harold Hamm, CEO of Oklahoma City-based Continental Resources Inc. and an adviser to Republican presidential candidate Mitt Romney.
Horizontal drilling combined with hydraulic fracturing over the past five years has allowed producers to recover oil and natural gas from thick, dense rock that previously could not be harvested economically.
“What this does in the United States and in Canada and throughout the world is that in geological areas we used to view as uneconomical, we suddenly can re-examine the characteristics of rock in an entirely new light, which is why you see the industry plunging back in the Permian Basin, an area that five years ago was essentially viewed as a fully depleted area,” said Larry Nichols, executive chairman at Oklahoma City-based Devon Energy Corp. “Now it is the most active.”
Tom Ward, CEO of Oklahoma City-based SandRidge Energy Corp., said much of the reason for the industry's success in the United States is because, unlike in most of the world, mineral rights are owned by private landowners.
“One reason we have so many companies coming to the U.S. is because we already have the best policies,” Ward said. “I don't complain much about the policies in place. For the areas SandRidge drills, it's a very simple place to drill.”
A new focus
Another way to address the country's transportation fuel is to change not just the source, but also the type of fuel used.
T. Boone Pickens and several natural gas firms, led by Oklahoma City-based Chesapeake Energy Corp., have promoted a conversion to natural gas, saying the American-grown fuel could be adopted relatively quickly with minimal infrastructure changes.
“We have the biggest natural gas base in the world,” Pickens said. “I want to take the first bite of the apple on heavy-duty trucks. You're going to accomplish a great deal if you do that. That will open up options.”
Oklahoma Gov. Mary Fallin has embraced the effort. She and Colorado Gov. John Hickenlooper have organized a coalition now representing 22 states that has asked automakers to manufacture natural gas-fired vehicles. The governors have pledged to gradually replace state-owned vehicles with natural gas cars and trucks if they are commercially available.
“The government is taking a leadership role without a mandate,” Oklahoma Energy Secretary Mike Ming said. “Now that the states are stepping in, you're seeing corporate fleets converting to CNG at a greater volume, and we're seeing price competition at the pump for compressed natural gas. It sets up a situation where the markets will see a signal and will either react to it or not. If they don't, they don't. We're not going to cram a square peg into a round hole.”
While the adoption of natural gas is growing, Chesapeake Energy Corp. CEO Aubrey McClendon said it should be happening faster.
“Despite our nation's plentiful supply of natural gas, our adoption of CNG (compressed natural gas) and LNG (liquefied natural gas) lags too far behind other countries. As the leading producer of natural gas in the world, there is no reason why the United States should rank No. 17 in terms of natural gas vehicles on the road,” McClendon said. “Iran has more NGVs (natural gas vehicles) on the road than the U.S. That's embarrassing.”
The natural gas vehicle industry, however, has its detractors.
“We can absolutely be energy independent without it,” Hamm said. “We don't have to do it. I think that's a lot of money that would be spent that is not going to have a good net economic effect.”
Hamm also said the market has not demanded natural gas.
“I think if that was going to happen, it would have happened already,” he said. “We've had natural gas so cheap for the past four years. Since 2007, it's been so cheap and oil was high. I think if it was ever going to happen, that would be the market it would have happened in.”
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