THE ECONOMIC ADVANTAGES OF ENERGY SECURITY AND INDEPENDENCE Roger H. Bezdek, Ph.D. Management Information Services, Inc. Oakton, Virginia Presented at.

THE ECONOMIC ADVANTAGES OF ENERGY SECURITY AND

INDEPENDENCE

Roger H. Bezdek, Ph.D.Management Information Services, Inc.

Oakton, Virginia

Presented at the American Energy Security Summit: “Energy Independence Through

Domestic Alternative Liquid Fuels”

Alexandria, VirginiaApril 2007

2

THIS PRESENTATION

• Risks and concerns• Strategic and economic issues• Magnitude of the problem • U.S. resources and technologies available• SSEB study• Path to U.S. energy independence• National economic benefits

-- Oil imports displaced-- Industry sales and profits-- Employment-- Jobs and skills-- Tax revenues

• Benefits to a state

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No, we’re facing a liquid fuels crisisNo, we’re facing a liquid fuels crisis

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U.S. ENERGY IMPORTS ARE INCREASING

EIA forecasts that by 2030 U.S. will be importing 2/3 of its oil and nearly 25% of its natural gas

Source: EIA, Annual Energy Outlook 2007, December 2006

0%

10%

20%

30%

40%

50%

60%

70%

Oil Natural Gas

Imp

ort

s

20052030

20052030

SECURITY CONCERNS: U.S. IMPORTS CONTINUE TO INCREASE

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• Excessive dependence on imported oil from OPEC and Excessive dependence on imported oil from OPEC and others.others.

• Potential of excessive dependence on imported natural gasPotential of excessive dependence on imported natural gas

• World oil production may soon peak and begin to decline.World oil production may soon peak and begin to decline.

• Record trade deficit ($764 billion in 2006) driven by energy Record trade deficit ($764 billion in 2006) driven by energy pricesprices

• Increased global competition from China, India and others.Increased global competition from China, India and others.

• Supply disruptions by natural disasters or terrorismSupply disruptions by natural disasters or terrorism

• National security concernsNational security concerns

SERIOUS RISKS TO U.S. OFINCREASING ENERGY IMPORTS

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PRES. BUSH: “REDUCE OIL IMPORT DEPENDENCE”

First Thing to do: Stop Digging!Just to keep oil imports at current level will require an additional 5

MMbpd U.S. production of liquid fuels by 2030

Imports held at 2005

level

Projected Production

Supply Gap

0

5

10

15

20

25

30

millio

n b

arr

els

per

day

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Remember the 1970s? Stagflation. . . RecessionRemember the 1970s? Stagflation. . . Recession That was only a short-term disruptionThat was only a short-term disruption

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• World Oil Demand is Rising• U.S. Energy and Economic Security is

Increasingly at Risk• World Oil Supply will Peak and Decline• Military Preparedness and Homeland Defense

Requires Secure Fuel Sources• Current Energy Policy Relies on Middle East• Energy Options are Limited

America’s Unconventional Fuel Resources Can Help Bridge the Gap to Future Fuels

STRATEGIC ISSUESSTRATEGIC ISSUES

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AMERICA’S OIL CONSUMPTION 22 MILLION BARRELS A DAY

Use by Sector Percent of Total

Transportation fuels 67 %

Industrial 25 %

Residential 4 %

Commercial 2 %

Electricity generation 2 %

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U.S. Alternative Oil:U.S. Alternative Oil: 2 - 4 Trillion+ Barrels2 - 4 Trillion+ Barrels

World Conventional Oil:World Conventional Oil:2 - 3 Trillion Barrels2 - 3 Trillion Barrels

U.S. ALTERNATIVE OIL RESOURCES RIVAL TOTAL WORLDWIDE CONVENTIONAL OIL RESERVES

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U.S. RESOURCES AVAILABLE

Slide courtesy of the U.S. Department of Energy

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____________________________________________________________________________________________________

COAL FIELDS OF THE UNITED STATES –COAL FIELDS OF THE UNITED STATES –LOWER 48 STATESLOWER 48 STATES

Note: Alaska alsoalso has substantial coal reserves.

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EASTERN & WESTERN OIL SHALE RESERVESEASTERN & WESTERN OIL SHALE RESERVES

U.S. Geological Survey’s Reserve Estimate: U.S. Geological Survey’s Reserve Estimate: 2.1 Trillion Barrels2.1 Trillion Barrels

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RESOURCE POTENTIAL OF 500+RESOURCE POTENTIAL OF 500+MILLION DRY TONS PER YEARMILLION DRY TONS PER YEAR

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COAL, OIL SHALE, AND BIOMASS PLANTSCOAL, OIL SHALE, AND BIOMASS PLANTS

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A PLAN TO REPLACE IMPORTED OILA PLAN TO REPLACE IMPORTED OIL

• Goal of 5% reduction per year for Goal of 5% reduction per year for 20 years, beginning in 2010.20 years, beginning in 2010.

• We must start programs now as We must start programs now as lead times are long.lead times are long.

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• Energy is inherently very large scale.- It’s not computers or

electronics- No magic bullets

• Long time to build capacity & savings• Long lifetimes• Inherently expensive

The only solution: Start Early!

WHY SO LONG TO MITIGATE?

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SSEB STUDY

“American Energy Security: Building a Bridge to Energy Independence and a Sustainable Energy Future”

U.S. faces 4 oil-related risks:• World oil production may soon peak• Dependence on unstable foreign supplies• Increasing global competition for oil• Natural disasters (e.g. Katrina) and terrorism

To mitigate these, U.S. must produce its own liquid fuels

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SSEB STUDY - 2

This study:• Developed a plan for the U.S. to establish

energy security and independence through the production of alternative oil and liquid fuels from U.S. domestic resources that include coal, biomass, and oil shale

• Emphasized need for domestic enhanced oil recovery programs using CO2, increased transportation fuel efficiency, and sensible energy conservation

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SSEB STUDY - 3

The study focused on:• Oil market analysis and forecasts• U.S. resource assessment of biomass, coal, oil

shale, CO2 enhanced oil recovery (EOR) • Technology assessments and cost estimates for

biomass, coal, and oil shale to liquid fuel production plants and CO2 EOR

• Forecasts and analysis of the U.S. economy• Environmental challenges and benefits • Policy recommendations to stimulate growth of the

alternative liquid fuels

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SSEB STUDY - 4

Impacts on variables of interest:• GDP, inflation, and interest rates• Oil imports• Price and price volatility of liquid fuels• Federal, state, and local government revenues• Federal budget deficit• U.S. trade deficit• Industry sales and profits• Employment created (industries and occupations)• Capital formation and requirements• Export opportunities• Personal income

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THE PATH TO U.S. ENERGYSECURITY AND INDEPENDENCE

i

Conventional Oil Production

CTL

Biomass

Oil Shale

EOR

Import Gap

Trans.Eff iciency

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5

10

15

20

25

30

MM

bp

d

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ESTIMATED CONTRIBUTIONS OF EACH RESOURCE TO ELIMINATION OF U.S. OIL IMPORTS IN 2030

15%

16%

24%

29%

16%

Coal-to-Liquids

Transportation Effiiency

Biomass

Oil Shale

Enhanced Oil Recovery

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TOTAL LIQUID FUELS CONTRIBUTIONSFROM EACH INITIATIVE IN 2030

Initiative MM Barrels/day Total

Contribution Required in 2030

Percent Contribution to Total U.S. Liquid

Fuels Requirements CTL 5.6 20 Oil Shale 3.0 11 EOR 2.8 10 Biomass 4.5 16 Transportation Energy Efficiency

3.0 11

TOTAL 18.9 68

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REDUCTION IN U.S. OIL IMPORTS

0%

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30%

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50%

60%

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80%

90%

100%

2007 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

U.S

. O

il I

mp

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s

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ECONOMIC IMPACT

Summary of the Economic Impacts of the AES Initiatives (billions of 2005 dollars)

2020 2030 AES Initiatives Capital Expenditures $51 $53 AES Initiatives O&M Expenditures $49 $132 Total Industry Sales Generated $182 $332 Jobs Created 894,000 1,403,000 Industry Profits $8 $14 Federal, State, and Local Government Tax Revenues Generated

$56 $94

Reduction in U.S. Trade Deficit $250 $625 Source: Southern States Energy Board and Management Information Services, Inc., 2006.

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ECONOMIC IMPACT OF THE AESINITIATIVES WILL BE ENORMOUS

The AES initiatives will reduce risk and lower oil prices, facilitate an industrial boom, create millions of jobs, foster new technology, revitalize the manufacturing sector, enhance economic growth, and help eliminate the trade and budget deficits. In 2030 they will generate annually (2005 dollars):

• New investments of nearly $200 billion• One-third of a trillion dollars in increased industry sales• More than 1.4 million new jobs• $14 billion in profits• Nearly $100 billion in increased federal, state, and local

government tax revenues • A reduction of over $600 billion in the U.S. trade deficit

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THE AES INITIATIVES WILL CREATE $100’SOF BILLIONS OF SALES FOR INDUSTRIES

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THE AES INITIATIVES WILL CREATE MILLIONS OF NEW JOBS IN DIFFERENT INDUSTRIES

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100

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THE AES INITIATIVES WILL GENERATE MILLIONS OF PROFESSIONAL AND SKILLED JOBS

0

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10000

15000

20000

25000

30000

Jo

bs

2020 2030

THE AES INITIATIVES WILL CREATE SKILLED, WELL-PAYING JOBS NOT

SUBJECT TO FOREIGN OUTSOURCING

The AES initiatives will create many jobs in two categories that states and localities are eager to attract:

1. College-educated professional workers, many with advanced degrees

2. Highly skilled, technical workers, with advanced training and technical expertise, many of them in the manufacturing sector

The initiatives thus generate jobs that are disproportionately for highly skilled, well-paid, technical and professional workers, who provide the foundation for entrepreneurship and economic growth. These are the high-skilled, high-wage, technical and professional jobs that states seeks to attract

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THE AES INITIATIVES WILL GENERATE $100’S OF BILLIONS OF TAX REVENUES FOR

FEDERAL, STATE, & LOCAL GOVT.

$0

$10

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Federal Tax Revenues State & Local Govt. Tax Revenues Total Tax Revenues

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2020 2030

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BENEFITS TO A STATE

• Volumes and timeframes of oil displacement

• Total industry sales

• Industry profits

• Total (direct and indirect) employment created

• Specific jobs created by occupation

• Tax revenues for the state and local governments

• Technology development and spin-offs

• Revitalization of coal mining regions

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BENEFITS TO A STATE OF A 30,000BARRELS/DAY COAL LIQUEFACTION PLANT

• Development & Construction Expenditures: $2.5 billion• Annual O&M expenditures: $400 million• Direct development & construction jobs: 2,000 +• Development & construction payroll: $100 million• Annual direct O&M jobs: 400• Annual O&M payroll: $25 million• Expenditure, job, and payroll multiplier: 2.0 – 2.6• Total new jobs annually: 1,000+• Annual industry profits: $50 million+ (national)• Annual state & local govt. tax revenues: $10 - $20 million

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HOWEVER, UNLESS AGGRESSIVE MITIGATION INITIATIVES ARE BEGUN SOON……..

It could happen again!

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THANK YOU!

ROGER H. BEZDEK, PH.D.

PRESIDENT

MANAGEMENT INFORMATION SERVICES, INC.

202-889-1324

[email protected]

www.misi-net.com

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LOCAL CONTACT INFORMATION

While in Australia through July 6,

Dr. Bezdek can be contacted via ASPO Australia

Association for the Study of Peak Oil and Gas

www.ASPO-Australia.org.au

International Australia