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Energy secretary on the future of oil and the need for alternatives

Middle East Institute’s 60th Anniversary Conference
Remarks Prepared for Energy Secretary Samuel Bodman

Thank you, Ambassador Mack, for that kind introduction. And many thanks to you and your colleagues at the Middle East Institute for inviting me here today. The Middle East Institute has a long history of bringing people together – scholars, businesspeople, diplomats and government officials – to examine some of our world’s most intractable conflicts. And it does so with an eye to one goal: creating an environment of mutual understanding and respect. Everyone associated with this Institute understands that in order to develop solutions that stick, we must first listen to each other in an informed and civil way. And so, I greatly appreciate the opportunity to share a few thoughts with all of you and also to hear from you.

As evidenced by the theme of this conference – developing new approaches to enduring conflicts – there is certainly no shortage of tough issues facing the Middle East, and the United States’ relationship with that region. Today I’d like to concentrate on one such issue – energy concerns and specifically, the global dependence on fossil fuels. I thought I might give you my take on both the major problems that we all face – and also the major opportunities that we all share.

First off, as we all know, the global demand for energy is rising rapidly and will continue to do so. The Energy Information Administration (EIA) estimates that, by 2030, global energy consumption will grow by over 70 percent. Not surprisingly, the strongest growth is expected in developing economies in Asia – including China and India – with growth projected to triple in that region over the next 25 years.

Secondly, most national economies around the world, including the United States’, are fundamentally hydrocarbon-based. And they will remain so in the near-term. Though we estimate that oil’s share of total energy use will fall slightly in the coming decades (from 38 percent in 2003 to 33 percent in 2030), the demand for oil is still expected to grow strongly, reaching 118 million barrels per day by 2030. The United States, China, and India together will account for half of the projected growth in world oil demand. It’s fair to ask: is that type of growth even sustainable? Will the supply be available?

And that’s not even the whole picture. There is an appropriately high level worry about the impact of energy prices on American families and American companies and similarly, in recent years we all have heard about the booming economies of China and India and their nearly insatiable appetites for more and more energy. But what we do not hear as much about is the impact that high energy prices have on smaller, developing economies. It is not an understatement to say, as the President did recently, that high oil prices can literally wreck economies. They can restrict development in a way that stifles business growth and, more notably, inhibits improvements in the health and well-being of so many around the world.

What I’m saying, is that this is a global problem and it goes like this: if we are to encourage economic growth around the world if we are to raise living standards for all people of all nations the world needs a clean, affordable, diverse energy supply. If we look two or three or four decades into the future, we know that hydrocarbons alone will not meet the needs of a growing world economy. Even with all the technical expertise the world could offer and all the political will it could muster, eventually, we will run out of oil. And, even before then, the price of a dwindling supply will be prohibitive. At present, our world is overly focused on, and overly dependent upon, one source of energy. And that path is unsustainable.

And now comes the hard part: what do we do about it?

That answer is complex, of course, and the solution will be multifaceted. But, it can be summarized this way: we must grow the pie of what’s available. And we need to start right away.

In the very short-term – like, now – we certainly must stop doing the things that we know will not help. For example, we know that purposeful market distortions – such as rationing supply, cutting production, or creating price floors and ceilings – do not work. That is, market interventions have been proven ineffective for controlling prices. I can’t stress this enough: the global oil market must be allowed to function in a predictable and transparent way.

And, in the same way, we all recognize that the market is now demanding alternatives to oil. Which means that we must actively move toward developing and deploying alternatives to diversify our global energy supply. To be sure, the private sector has a major role to play here – and companies are realizing that they can make money in the alternative energy business. But, I also believe that governments – all governments – must lead the world to a quick and aggressive transition to alternatives.

We know, for example, that there are technologies on the verge of breaking through that will provide cleaner, more efficient energy. And, there are new sources of energy and production methods on the horizon that will one day be available to our grandchildren. All of these advances will be revealed through the basic scientific research that is taking place in government laboratories, at universities, and in corporate labs around the world. And they will require significant and sustained investments.

I can assure you that President Bush understands this quite well. The President’s American Competitiveness Initiative proposes, among other things, an increase of half-a-billion dollars this year for the Department of Energy’s research budget, and a doubling over ten years. The complementary Advanced Energy Initiative proposes to increase funding for clean energy technologies by 22% this year. Our goal is to identify the technologies that could have the greatest impact on the marketplace in the relatively near future, and then really go after them with increased resources and aggressive timelines. These are things that are already in the pipeline and, as a matter of sound public policy, need to be pushed more quickly to market. In my view, key areas include:

* The development of commercially competitive cellulosic ethanol;
* Advanced hybrid vehicle technologies – with a focus on developing better batteries;
* Hydrogen fuel cells;
* Solar energy, including an acceleration of the development of solar photovoltaics;
* Wind energy; and
* New technologies to burn coal for electricity production with near-zero emissions.

We also must safely expand the use of nuclear power – in this country and across the world. And so, as part of the Advanced Energy Initiative, the President has proposed a Global Nuclear Energy Partnership, or GNEP. An international effort, GNEP aims to address our growing global energy demands in a way that will foster economic development around the world, improve our environment, responsibly manage nuclear waste, and significantly reduce the threat of nuclear proliferation and terrorism. GNEP will develop the technological capability to increase the energy extracted from spent fuel by repeatedly cycling it through advanced burner reactors. There are two major advantages: first, the energy benefits will be enormous. But that is not the only – or arguably even the most important – up-side. This process of repeatedly reprocessing and recycling spent fuel – which would consume, not separate, plutonium – has the potential to reduce proliferation risks and reduce in the amount, heat-load and radiotoxicity of nuclear waste.

There are a few key ideas that underpin all these initiatives. The first is that innovation offers the best path to bold, new energy solutions. The second is that if we are to make critical advances in this area, we must train enough scientists and engineers to do this important work. This is a crucial component. We need more highly-skilled researchers devoted to these problems. There are too few in the United States – and, indeed, around the world. Which brings me to the final piece: this is a global problem that demands a global solution. I hope that other nations follow America’s lead here and devote significant, national resources to one of the greatest challenges that the world community faces.

So, let me tie this up, if I might, with a few points.

Point one: the global demand for energy is only going to grow. And that’s a good thing because that demand is fueling economic growth around the world.

Point two: we cannot meet future demand with hydrocarbons alone. Period.

And so, point three: we must grow the pie, we must expand the availability of and access to clean, affordable, diverse sources of energy around the world.

To achieve it, we need a global response and, by that, I mean all nations, including those that produce our world’s oil supply. In my view, the idea of moving toward increased use of alternative energy should not be viewed as a threat to oil-producing nations. First of all, such a move provides an opportunity to diversify energy industries around the world – with plenty of advance warning. After all, even an aggressive transition to alternatives will not happen overnight. Secondly, the introduction of alternatives will actually prolong the life of earth’s fossil fuel supply, which is certainly not unlimited. And not incidentally, there is another global benefit: the pursuit of new energy sources will allow poorer, developing nations to “leap-frog” over some of the dirtiest (but most rudimentary and prevalent) fossil-fuel-based technologies – improving public health and our earth’s environment. We can’t afford to have any nations sitting on the sidelines here – protecting their own short-term interests. I believe we all should get into this game.

So, right now and into the future, the bottom line is this: if we work together, if we promote the very type of understanding and collaboration that this fine Institute was founded upon we can expand our world’s energy supply in a way that is cleaner, more diverse, more secure, and more affordable to all people of all nations.

I thank you very much for your time. I’m happy to take any questions.

Location:
The National Press Club

Editorial Notes: Fairly good energy speech for a U.S. politician. The limits of oil are mentioned, as well as the need for action. Unfortunately, ideological blinders prevent Mr. Bodman from recognizing two additional points that are required for an effective energy policy: The speech was spotted by Dante's Peak at peakoil-dot-com -BA

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