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1.5 Energy Independence

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Energy independence has been a non-partisan political issue in the United States since the first Arab oil embargo in 1973. Since that time, the speeches of various presidents and the Congress of the United States have continued to call for an end to the dependence on foreign oil by the United States. Nevertheless, the United States has grown more dependent on foreign oil with no end in sight. For example, in 1970 the United States imported approximately one-third of the daily oil requirement. Currently, the amount of imported oil is two-thirds of the daily requirement! The congressional rhetoric of energy independence continues but meaningful suggestions of how to address this issue remain few and far between. The economy of the United States feeds on oil and the country consumes far more oil than it can produce.

Generally, the concept of energy independence for the United States runs contrary to the trend of the internationalization of trade. The US government continues to reduce trade barriers through policies such as the North American Free Trade Agreement (NAFTA), the elimination of tariffs, as well as other free trade agreements. As a result, the percentage of the US economy that comes from international trade is steadily rising.

Increased world trade is beneficial both economically and politically insofar as it is supposed to help establish amicable relations between countries. Through mutually beneficial exchange, a great deal of this increased interrelationship will, in theory, establish opportunities for personal ties that make war (or other forms of military action) less likely. However, there are also contrary cases where countries acquire the means to be more destructive, if they so choose, through expanded economic opportunities. This type of argument has been used with regard to Iran.

Economic interdependence also makes the domestic economy more susceptible to disruptions in distant and unstable regions of the globe, such as the Middle East, South America and Africa. In fact, in many countries with proven reserves, oil production could be shut down by wars, strikes, and other political events, thus reducing the flow of oil to the world market. If these events occurred repeatedly, or in many different locations, they could constrain exploration and production, resulting in a peak despite the existence of proven oil reserves. Using a measure of political risk that assesses the likelihood that events such as civil wars, coups, and labor strikes will occur in a magnitude sufficient to reduce the gross domestic product (GDP) growth rate of a country over the next five years, four countries (Iran, Iraq, Nigeria, and Venezuela) possess proven oil reserves greater than 10 billion barrels (high reserves) and which countries contain almost one-third of worldwide oil reserves, face high levels of political risk. In fact, countries with medium or high levels of political risk contain 63% of proven worldwide oil reserves.

For example, in past years, disputes leading to withdrawal of labor (strikes) by workers in Venezuela have caused reductions in the crude oil (approximately 1,500,000 barrels per day) imported from that country. Similarly, conflicts in Nigeria between ethnic groups can disrupt the amount of crude oil (approximately 570,000 barrels per day) imported from that country. Thus, in a short time and by events out of its control, the United States can suffer an oil shortage of imported oil (to the tune of 2,000,000 barrels per day) that leaves a large gap in the required 18,000,000 barrels per day currently refined in the United States.

Furthermore, the oil industry itself has been a story of vast swings between periods of overproduction, when low prices and profits led oil producers to devise ways to restrict output and raise prices, and periods when oil supplies appeared to be on the brink of exhaustion, stimulating a global search for new supplies. This cycle may now be approaching an end. It appears that world oil supplies may truly be reaching their natural limits. With proven world oil reserves anticipated to last less than 40 years, the age of oil that began near Titusville may be coming to an end. In the years to come, the search for new sources of oil will be transformed into a quest for entirely new sources of energy.

Political and investment risk factors continue to affect future oil exploration and production and, ultimately, the timing of peak oil production. These factors include changing political conditions and investment climates in many countries that have large proven oil reserves. These factors are important in affecting future oil exploration and production.

Even in the United States, political considerations may affect the rate of exploration and production. For example, restrictions imposed to protect environmental assets mean that some oil may not be produced. The Minerals Management Service of the United States Department of the Interior estimates that approximately 76 billion barrels (76 x 109 bbls) of oil lie in undiscovered fields offshore in the outer continental shelf of the United States (which is necessary for a measure of energy security). Nevertheless, Congress enacted moratoriums on drilling and exploration in this area to protect coastlines from unintended oil spills. In addition, policies on federal land use need to take into account multiple uses of the land including environmental protection. Environmental restrictions may affect a peak in oil production by barring oil exploration and production in environmentally sensitive areas.

The government must adopt policies that ensure our energy independence. The US Congress is no longer believable when the members of the Congress lay the blame on foreign governments or events for an impending crisis. The Congress needs to look north and the positive role played by the government of Canada in the early 1960s when the decision was made to encourage development of the Alberta tar sands. Synthetic crude oil production is now in excess of 1,000,000 million barrels per day – less than 6% of the daily liquid fuels requirement in the United States but a much higher percentage of Canadian daily liquid fuels requirement. In the United States, the issue to be faced is not so much oil reserves but oil policies.

The economics of crude oil inventories provides the key to unlocking this mystery. The net cost of carrying inventories is equal to the interest rate, plus the cost of physical storage, minus the convenience yield. The convenience yield is driven by the precautionary demand for the storage. When the convenience yield is zero, a market is in full carry, future prices exceed spot prices and inventories are abundant. Alternatively, when the precautionary demand for oil is high, spot prices are strong and exceed future prices, and inventories are unusually low. The strategic petroleum reserve should be used to give the country a measure of energy independence and to thwart the efforts of the cartel to control crude oil – a world commodity.

A measure of dependency on crude oil can be viewed by various importing countries (Alhajji and Williams, 2003). In the United States, increasing crude oil imports is considered a threat to national security but there is also the line of thinking that the level of imports has no significant impact on energy security, or even national security. However, the issue becomes a problem when import vulnerability increases as crude oil imports rise which occurs when oil-consuming countries increase the share of crude oil imports from politically unstable areas of the world.

More generally, there are four measures of crude oil dependence: (i) crude oil imports as a percentage of total crude oil consumption, (ii) the number of days total crude oil stocks cover crude oil imports, (iii) the number of days total stocks cover consumption, and (iv) the percentage of crude oil in total energy consumption (Alhajji and Williams, 2003).

The dependency on foreign oil in the United States has increased steadily since 1986 and has reached record highs in the past two decades – the degree of import dependence as percentage of consumption increased from about 50% in the early-to-mid 1980s to 60% in the early 1990s (because of higher economic growth and lower oil prices on the demand side and declining US production on the supply side). Currently, 65-70% of the daily oil and oil products is imported into the United States. There have been some minor fluctuations but the changes in the amount of oil imported into the United States are usually related to changes in the US economy and the US oil production.

The United States is the only oil-importing country with significant production which is also a net importer. It is also unique in that among the net importers it has the lowest dependence in terms of net imports as a percent of consumption but it also has the highest absolute level of imports. The geo-political and economic interests and commitments raise the level of concern by US policy makers about dependence on imported oil.

In addition, commercial oil stocks in the United States have been at their lowest level in three decades. Total crude oil inventories, which include commercial and stocks in the Strategic Petroleum Reserve (SPR) are relatively low, in terms of daily coverage. Current commercial inventories are near the level at which spot shortages can occur. The past decade has seen scenarios in which the decline in commercial stocks is greater than the increase in the Strategic Petroleum Reserve, and the capacity of the Strategic Petroleum Reserve and commercial stocks to deal with a crisis is less than before the refilling program began (Williams and Alhajji, 2003). Moreover, the premature release of crude oil from the Strategic Petroleum Reserve can jeopardize national security in case of continued political problems in the oil-producing countries and weakens the ability of the United States to respond to real shortages.

Although some of the oil-importing countries have made progress in reducing their dependence on oil, the dependence of the United States on crude oil has increased in recent years from 38% of total energy consumption in 1995 to approximately 40% at the current time. This indicates two possible areas of concern regarding the extent to which crude oil influences energy security: (i) the increase in the crude oil share of energy use, and (ii) the inability or unwillingness of the United States to reduce dependence on imported oil.

It might be argued that the degree of dependence has no impact on energy security as long as foreign oil is imported form secure sources. However, if the degree of dependence on non-secure sources increases, energy security would be in jeopardy. In this case, vulnerability would increase and economic and national security of individual oil-importing countries would be compromised.

The percentage of imports from the top five suppliers can be used as a measure of the supply vulnerability to an interruption by one or more key suppliers. This is an important measure of the vulnerability of the United States to supply disruption because it shows the high level of import concentration by importing from few suppliers. The top five suppliers to oil-importing countries are Saudi Arabia, the Commonwealth of Independent States (former Soviet republics), Norway, Venezuela, and Mexico. The United States has a unique arrangement as well as location with Canada and Mexico but the political stability of Saudi Arabia is always open to discussion and question. In addition, problems in Venezuela underline the United States vulnerability to interruption from a major supplier. Venezuela has had severe problems and the potential for an interruption in oil supply always exist. Iraq crude has been off the market for several years (oil supply from Iraq is only just starting again) and conflict in Nigeria has significantly influenced oil output.

Another important measure of vulnerability is the share of world crude coming from the Gulf region. The Gulf region has been viewed historically as a politically unstable area. Incidents in the region led to the three energy crisis in 1973, 1979, and the two Gulf Wars. While a smaller share of imported oil from the Gulf producers means lesser vulnerability, it may increase vulnerability by having to rely on other sources, such as Venezuela. Whichever measure is used to assess energy dependence, the United States remains susceptible to an energy crisis because of the high dependence on imported oil. The United States has not made a significant reduction in dependence on imports since the mid-1980s and continues to import almost 70% of the total crude oil consumption.

The crude oil share in the total energy supply also reflects the dependence on crude oil by the United States. In recent years, however, this share has increased in the United States. Because of this, the United States is highly vulnerable to oil supply disruptions. Indeed, the possibility of energy crisis in the foreseeable future is greater than in previous years. Furthermore, the use of the Strategic Petroleum Reserve or government-controlled stocks to lessen the impact of an energy crisis is subject to debate. In fact, the premature release of oil stocks from the Strategic Petroleum Reserve may exacerbate an energy crisis as it depletes the stocks while shortages still exist since it can lead to stabilized (or even lower) prices and increased consumption (Alhajji and Williams, 2003).

Dependency and vulnerability to oil imports in the United States and, for that matter, in other oil-importing countries, can be reduced by diversification of suppliers and by energy diversification. In addition, diversification of suppliers has the potential to lower the relative impact of supply disruption on most countries. The political instability that swings back and forth in countries such as Venezuela, Nigeria, and Iraq emphasizes the need for diversification of suppliers and so removing the reliance on a small number of oil-producing countries.

The projections for the continued use of fossil fuels indicate that there will be at least another five decades of fossil fuel use (especially natural gas, crude oil, and coal) before biomass and other forms of alternate energy take hold. Furthermore, estimations that the era of fossil fuels (natural gas, crude oil, and coal) will be almost over when the cumulative production of the fossil resources reaches 85% of their initial total reserves may or may not have some merit. In fact, the relative scarcity (compared to a few decades ago) of crude oil was real but it seems that the remaining reserves make it likely that there will be an adequate supply of energy for several decades. The environmental issues are very real and require serious and continuous attention.

Synthesis gas (synthesis gas) fuel gas mixture consisting predominantly of carbon monoxide and hydrogen and is typically a product of a gasification. The gasification process is applicable to many carbonaceous feedstocks including natural gas, crude oil resids, coal, biomass, by reaction of the feedstock with steam (steam reforming), carbon dioxide (dry reforming) or oxygen (partial oxidation). Synthesis gas is a crucial intermediate resource for production of hydrogen, ammonia, methanol, a variety of chemicals, as well as synthetic hydrocarbon fuels.

Thus, as the reserves of natural gas, crude oil, and other forms of conventional energy are depleted, there will be the need to seek other sources, some of which are outlined in the previous sections.

Energy production such as electricity production or combined electricity and heat production remain the most likely area for the application of gasification or co-gasification. The lowest investment cost per unit of electricity generated is the use of the gas in an existing large power station. This has been achieved in several large utility boilers, often with the gas fired alongside the main fuel. This option allows a comparatively small thermal output of gas to be used with the same efficiency as the main fuel in the boiler as a large, efficient steam turbine can be used. It is anticipated that addition of gas from a biomass or wood gasifier into the natural gas feed to a gas turbine will be technically possible but there will be concerns as to the balance of commercial risks to a large power plant and the benefits of using the gas from the gasifier.

Furthermore, the disposal of municipal and industrial waste has become an important problem because the traditional means of disposal, landfill, are much less environmentally acceptable than previously. Much stricter regulation of these disposal methods will make the economics of waste processing for resource recovery much more favorable. One method of processing waste streams is to convert the energy value of the combustible waste into a fuel. One type of fuel attainable from waste is a low heating value gas, usually 100 to 150 Btu/scf, which can be used to generate process steam or to generate electricity. Co-processing such waste with coal is also an option (Speight, 2008, 2013, 2014b).

Co-gasification technology varies, being usually site specific and high feedstock dependent. At the largest scale, the plant may include the well-proven fixed-bed and entrained-flow gasification processes. At smaller scales, emphasis is placed on technologies which appear closest to commercial operation. Pyrolysis and other advanced thermal conversion processes are included where power generation is practical using the on-site feedstock produced. However, the needs to be addressed are (i) core fuel handling and gasification/ pyrolysis technologies, (ii) fuel gas clean-up, and (iii) conversion of fuel gas to electric power (Ricketts et al., 2002).

Waste may be municipal solid waste (MSW) which had minimal presorting, or refuse-derived fuel (RDF) with significant pretreatment, usually mechanical screening and shredding. Other more specific waste sources (excluding hazardous waste) and possibly including crude oil coke, may provide niche opportunities for co-utilization. The traditional waste-to-energy plant, based on mass-burn combustion on an inclined grate, has a low public acceptability despite the very low emissions achieved over the last decade with modern flue gas clean-up equipment. This has led to difficulty in obtaining planning permissions to construct needed new waste-to-energy plants. After much debate, various governments have allowed options for advanced waste conversion technologies (gasification, pyrolysis and anaerobic digestion), but will only give credit to the proportion of electricity generated from non-fossil waste.

Co-utilization of waste and biomass with coal may provide economies of scale that help achieve the above-identified policy objectives at an affordable cost. In some countries, governments propose co-gasification processes as being well suited for community-sized developments, suggesting that waste should be dealt with in smaller plants serving towns and cities, rather than moved to large, central plants (satisfying the so-called proximity principle).

In fact, neither biomass nor wastes are currently produced, or naturally gathered at sites in sufficient quantities to fuel a modern large and efficient power plant. Disruption, transport issues, fuel use, and public opinion all act against gathering hundreds of megawatts (MWe) at a single location. Biomass or waste-fired power plants are therefore inherently limited in size and hence in efficiency (labor costs per unit electricity produced) and in other economies of scale. The production rates of municipal refuse follow reasonably predictable patterns over time periods of a few years. Recent experience with the very limited current biomass for energy harvesting has shown unpredictable variations in harvesting capability with long periods of zero production over large areas during wet weather.

The potential unreliability of biomass, longer-term changes in refuse and the size limitation of a power plant using only waste and/or biomass can be overcome combining biomass, refuse and coal. It also allows benefit from a premium electricity price for electricity from biomass and the gate fee associated with waste. If the power plant is gasification-based, rather than direct combustion, further benefits may be available. These include a premium price for the electricity from waste, the range of technologies available for the gas to electricity part of the process, gas cleaning prior to the main combustion stage instead of after combustion and public image, which is currently generally better for gasification as compared to combustion. These considerations lead to current studies of co-gasification of wastes/biomass with coal (Speight, 2008).

For large-scale power generation (>50 MWe), the gasification field is dominated by plant based on the pressurized, oxygen-blown, entrained-flow or fixed-bed gasification of fossil fuels. Entrained gasifier operational experience to date has largely been with well-controlled fuel feedstocks with short-term trial work at low co-gasification ratios and with easily-handled fuels.

Use of waste materials as co-gasification feedstocks may attract significant disposal credits. Cleaner biomass materials are renewable fuels and may attract premium prices for the electricity generated. Availability of sufficient fuel locally for an economic plant size is often a major issue, as is the reliability of the fuel supply. Use of more-predictably available coal alongside these fuels overcomes some of these difficulties and risks. Coal could be regarded as the flywheel which keeps the plant running when the fuels producing the better revenue streams are not available in sufficient quantities.

Synthesis Gas

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