U.S. Will meet energy needs by 2020: Citi researcher

By the end of this decade, the United States will produce all the energy it needs, the head of commodities research for Citigroup said in Chicago Thursday.

Edward L. Morse, managing director and global head of commodities for Citi, said the gas and oil boom will combine with improved efficiency to make the U.S. a net-zero importer of energy by 2020.

“I think that the chances are close to 100 percent that the U.S. will be supplying 100 percent of its energy requirements for power generation and transportation,” Morse told about 100 people at a Fairmont Hotel gathering sponsored by The Chicago Council on Global Affairs.

Morse stressed that he wasn’t speaking of energy independence, exactly, but a happy coincidence of supply and demand that still includes trade in energy commodities with other nations. “The combination of how you get there is partly exports and partly imports.I’m not saying it’s self sufficiency in the sense of autarky, but I am willing to conjecture that the likelihood is close to 100 percent that by 2020 we will be in that position.”

Morse made his prediction while sitting on a panel with two other energy commodity experts, only one of whom offered a mild challenge. “I agree with almost everything Ed said,” said Michael Levi, a senior fellow for energy and environment at the Council of Foreign Relations, “but I think it’s very important to make sure we draw the correct conclusion from it.”

While the U.S. may export more coal and gas than it needs at home, it may continue to import oil, Levi said, which leaves the nation vulnerable to volatility in oil prices. “These are not interchangeable fuels,” Levi said. ”When we talk about net-zero imports of fuel, what we’re talking about is net exports of coal, net exports of gas, but net imports of oil alongside that, so they balance each other out.”

But Morse interrupted:

“Actually not,” he said. “I think we’ll be self-sufficient on the oil side.”

“Ah,” replied Levi. “That’s a different story.”

The U.S. will get there, according to Morse, thanks to an abundance of cheap natural gas and oil from hydraulic fracturing and horizontal drilling, while infrastructure limits how much of the oil can be exported. Already the U.S. is the world leader in gas exports.

“We used to be very dependent. We were slammed by energy imports. Energy exports are now the largest segment of U.S. exports. They’re larger than agricultural goods, they’re larger than Boeing aircraft, they’re larger than anything in the capital goods sector, and they’re only going to grow more significantly.”

Meanwhile, federal initiatives on efficiency and renewable energy will stall and reduce demand at home, Morse said. “On the demand side, we’ve peaked in power-generation demand. To the extent that there’s going to be any increase it’s not going to be through the central grid, it’s going to be distributed energy, solar and wind and non-central grid users.”

On the transportation side, federally mandated efficiency standards will reduce the demand for motor fuel even if Americans drive more cars. The U.S. vehicle fleet will grow from 250 million to 305 million, Morse said, but vehicle efficiency (CAFE) standards will improve average fuel efficiency from 23 mpg to 40 mpg.

“U.S. gasoline demand will shrink from 8.9 million barrels per day to 4.8 million barrels per day” by 2025, Morse said, predicting a 2 Mbd drop in diesel too because of increased efficiency and some displacement of diesel by natural gas.

“I think the numbers directionally are very clear and you can wrap your hands around what they amount to.” The third energy expert on the panel backed Morse on the impact of CAFE standards. “This administration deserves considerable credit for its work on CAFE standards and its plans to elevate them further,” said John Kalicki, counselor for international strategy at Chevron and a senior scholar at the Woodrow Wilson International Center.

“Happily the auto industry was not in a position to argue while the administration was rescuing it from the end of its existence, but the result is that we have, not only in terms of autos but in terms of trucks, major enhancements in CAFE standards.”

Republicans and Democrats can agree that increased efficiency is good for the country, Kalicki said, and the country has continued potential, through efficiency, to save the equivalent of “two Saudi Arabias.” “The opportunity on the efficiency side is enormous, and at the same time we have higher amounts of supply and that puts us in a very nice position not only economically but strategically.”

http://www.forbes.com/sites/jeffmcmahon/2014/02/28/u-s-will-meet-energy-demands-by-2020-citi-researcher/