Geopolitics and the US Energy Security Outlook

Guy Caruso October 10, 2011

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US Energy Snapshot

70% Energy Self Sufficient2nd largest natural gas producer3rd largest oil producerLargest global reserves of coal, but….

Action on Climate Change High Priority for AdministrationTransport sector tied to petroleum based fuelsOil imports problematic & domestic supply issues under reviewShale Gas a major positive new developmentNeed to improve efficiency and promote cleaner alternatives

but transformation will take time, technology and dollars

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US Energy: Confronting a Precarious LandscapeUS Energy: Confronting a Precarious Landscape Continued but uneven demand growth

driven by population, GDP growth, and living standards, particularly in emerging economies

Concentration of conventional resources, reliability of delivery systems threatened by chokepoints

“Peak Oil” concernsmore a function of “Above Ground” issues than resource endowment, but technologically challenging resources now being questioned; system is unsustainable long term

New Players Emerging new agendas, business models, leverage and alliances – New Rules/Institutions?

Impact of the Economic Crisis, Volatility & Regulatory Uncertainty

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Energy trade flows will expand, placing additional strain on an already massive and vulnerable system of infrastructure.

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2000 2030

EXPANDING FLOW TRENDS

CHOKE POINTS

Source: NPC Global Oil and Gas Study 2008

Middle East and North Africa (MENA) accounted for more than 1/3 of global production of oil and

other liquids

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Energy Security Implications:

Dependency vs. Vulnerability

--US oil import dependence lessens but..

Global Market Transmits Disruption to All

Redundant Capacity vs. Cost

US Force Exposure Likely to Remain High

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Recognized Challenges – How to Respond?Recognized Challenges – How to Respond? Must transform the way we produce and consume energy

Energy efficiency is a key componentbut investments often have short term payoff, so focus on information and incentives

Renewables are increasingly competitiveintermittency and grid connection problems remain – pursue smart grid and incentives

Preservation of role for coal requires solution on carbon capture and storage, but CCS not demonstrated on commercial scale & requires new infrastructure, so proceed with RD&D investments

Nuclear energy requires large capital investment and faces safety, waste and proliferation concerns – jury still out on precise role especially in the aftermath of Fukushima

Evolving acceptance of conventional fuelsviability must be ensured even as we move to transformation – but message is mixed and relegated to back pages

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Security & Foreign Policy Objectives

Promotes/Supports Sustainable Environment

DefensibleNatural

GasOil

Energy Efficiency

Nuclear

Renewable

Energy

Coal

Economic Objectives

Environmental Objectives

Policy Model

Affordable/Accessible

Supports Economic Growth & Employment

Environmentally Benign

Low/no emissions

Reliable and Secure

Carbon Capture

and Storage