Russ: This is the BusinessMakers show, heard on the radio and seen online at thebusinessmakers.com. It's featured guest time of the show, and my guest, a repeat guest on the BusinessMakers show, is John Hofmeister, founder and CEO for Citizens for Affordable Energy. John, welcome back to the BusinessMakers show.
John: Glad to be here, Russ.
Russ: You bet. Well, first, tell us about Citizens for Affordable Energy.
John: It's a not-for-profit, non-partisan foundation that has one purpose in mind, and that is to educate grass roots Americans on the reality of our energy and environmental go-forward plan, or plan that could be.
John: So we spent 100 percent of our time engaging stakeholders all across the nation, and even around the world, on the future of energy, the future of the environment, what makes practical common sense, and what we need to do to deliver.
Russ: I worry about that sometimes, that the rank and file, the general population, does not understand how important is to us. They go to a light switch, they turn it on, it comes on, they get in their car, they drive. They might get a little mad when gasoline goes up, but come on, and then people get interested in alternatives and sun and wind, and say, "Why don't we do that?" And I've paid enough attention to this by interviewing people like yourself, and even launching the EnergyMaker show, to just know it's vitally important to who we are and our lifestyle, and it's not necessarily hasn't been a real stable source of power for us. I mean, do I have that right?
John: We had a great 20th century, when it comes to energy in the United States. We had more energy throughout the century than we really needed. We always lived with a surplus. We lived with security and comfort of affordability, and we had a lifestyle dependent upon energy, which we have now taken for granted.
John: We just take for granted the material comforts of either transportation fuels and going where we want to go, whenever we want to go, or the material comforts of living in a home surrounded by cool or warm air, lots of light, almost anything that we can motorize, we motorize with electricity, and so we really improved the quality of life, and we've come to a point where we don't think about it because we take it for granted. That has led to a disinterest, and really knowing and understanding what's at stake when it comes to energy, and only in the last, say ten years, have we suffered the imposition of higher prices or the threat of shortages, other than the embargoes that we had 30, 40 years ago. So it's only now that we're starting to wake up to the fact that maybe that wonderful 20th century is going to be hard to duplicate unless we do something different.
Russ: Right, and at the same time, the rest of the world decided that they too would like to drive Buicks, and their populations and their economies are growing, and so there's like, really, competition for energy, correct?
John: Well, the world's now at seven billion people. Two billion have basically the energy they need. There's about three billion that would like to have more energy, but don't know how to get it, and there's another two-plus billion that don't have any modern energy to rely upon. There's still using wood, and they're still using the sun only when it shines as their source of light. So they are without any form of energy, and all seven billion people like to think of themselves as co-equals on this planet.
John: So they're striving for more energy, and then we run into the problem of how government and energy, expressed as politics. How politics between the governmental sector and the energy sector get in the way of each other, and the politics of energy ends up rationing energy, rather than developing energy. It is responsible for the escalation of prices, the fear of - the insecurity of supply, and we don't seem to be very good at resolving a politics of energy to do what's best for our people.
Russ: And well, didn't that show up in the debate on the Keystone pipeline, which is still not resolved, but it looks like it's going to happen now, isn't it?
John: Something as simple and basic as the Keystone pipeline. Let's be clear: the 1,700-mile pipeline on top of the 160,000 miles of pipeline we already have.
John: A pipeline that touches on the Ogalala aquifer in part, over which they're already 25,000 miles of pipeline. It's an absurdity of money politics to defer decision in the interest of one person's re-election campaign, and denying people affordable energy flowing smoothly from Canada to the Gulf coast, all because of the short-term political expediency of one man.
Russ: Well, and I - just to set the record straight, I happen to know for a fact that you are, generally speaking, a Democrat, correct?
John: I'm a registered Democrat.
John: I have real issues with the Obama Administration's energy policies over these past four years, including the two years of their campaign, where I tried to advise, through my connections, on a different path. My suggestions were not accepted. Others were. And so I continue to work with Administration, or against the Administration, as the case may be, to get a much more rational energy outlook, and the nation needs it.
Russ: Well, it seems rational even in helping them politically, because it seems like it would create jobs, and it would create lower fuel costs, which have all sort of implications - positive implications - in the economy. It just doesn't make sense.
John: Follow the money, Russ.
John: And whether it's a Republican policy, or Democratic policy, follow the money. That's the problem with our system. It's a money-based, special-interest system that doesn't take the public into account, that really takes moneyed interests into account, whether those are companies; whether those are environmental groups, or what have you, it is a money game, and this country had better come to grips with the electoral process, because if it continues to be special-interest money driving solutions, we're going to drive ourselves into third-world status because we're not doing what's necessary for the economy.
Russ: Frightening, frightening. Okay, but there has been some good news in the energy front, and forever, we've been fighting for energy independence. For ever there's been a group thinking we needed cleaner energy for sure. In fact, back to energy independence, we're trying to get independence from a group of people that are unstable and unfriendly, and suddenly through, it seems like, innovation in the industry, this production of Shell oil and gas has people talking about an abundance. Now, is there an abundance of energy there?
John: Let's put it in perspective. In the 1970s and ‘80s, the United States of America produced ten million barrels of oil a day. Up until late 1980s, we were on a path to continue that production, but it became so difficult, for political reasons, all kinds of obstacles to growing production. At the same time, other nations opened up tremendous opportunities for American companies to go elsewhere, which seemed so much easier, because they were invited. They were incentivised, and so we found that we could meet our needs with oil imports, and not put - poke so many holes in the ground in this country. From the 1980s, to 2008, we dropped to 5 million barrels a day of production. We lost 50 percent of our production. So when people talk about this renewed source of production, from 2008 to 2011, we get all the way back to six million barrels a day.
Russ: Oh, wow.
John: But back in the 1980s, when we produced ten million barrels a day, we only needed 12 or 13 million barrels a day for consumption, but in 2008, we needed 20 million barrels a day, and we're producing five. So we needed 15 million barrels a day just to get through the day, which amounts to about 10,000 gallons a second. So since 2008, we've gained a million barrels. Prospects look good on private lands, state permits. Federal government has no say in this, fortunately, because they can't get their act together. So with private land owners, state permits, companies cooperating with the public, we're getting increased production, both oil, natural gas liquids, and natural gas. That's all to the good, but putting it in perspective, today we need 18 million barrels a day. We're at six. A year or two from now, we could be at seven. We could be at eight. We could possibly get back to ten, but I haven't met yet anyone who shows a plan to get past ten million barrels a day, which we produced 30 years ago.
I'm all for moving forward, but it doesn't close the gap with 18 million barrels a day, unless we do something very different, and this is what I advocate. Let's start using natural gas as a transportation fuel. Let's turn natural gas into two types of transportation fuel. One, compressed natural gas, or CNG, particularly for medium-duty and heavy-duty trucking. We can build the infrastructure, we can build the trucks. That would represent about 20 percent of the closing of the demand gap between supply and demand. That's equivalent of about two million barrels a day. Let's do the equivalent of three million barrels a day of natural gas, and turn it into methadol. Methadol, mixed with gasoline, at the rate of three million barrels of day, plus the two million barrels a day for trucking, basically gets us to 15 million barrels a day of production domestically, and then if we get improved efficiency, which we're headed towards, that reduces demand by about two million barrels a day. So we're at the equivalent of 17. To get to 18, 19, or 20, guess what?
We have two wonderful neighbors, to the north and to the south, who also produce oil and natural gas - Canada and Mexico. And guess what else? We have something called the North America Free Trade Agreement, which enables us to work borderless when it comes to tariffs and so forth. We could meet all of our needs, up to 20 million barrels a day, by doing what we could do in the U.S., and working with Mexico and Canada to close the gap. We're there. We are at energy independence, and the numbers work.
Russ: Okay, well it sounds a little bit complicated, but it does sound good, particularly when you contrast it to the peak oil people of just a few years ago. I mean, it sounded like we were going to lose all of our capabilities, and this is so much better than that.
John: Don't write off peak oil ____. The peak oil folks have concentrated primarily on conventional oil, and they're just about right. So much of what we're talking about is called unconventional oil. Unconventional supplies of natural gas. Unconventional means molecules trapped in shale layers, either as gaseous, liquid, or solid molecules, and so we have all three - liquid, gaseous, and solid - to go after, but it does, you're right, take new technology, more innovation, hydraulic fracturing with horizontal drilling. It's very different and it's more expensive than conventional oil. So peak oil at the conventional level is probably behind us.
Russ: All right. John, I really appreciate you coming in and updating us on the energy challenges.
John: We can do a lot, and most importantly, we can make energy more affordable. The fact that energy could be more affordable by focusing on domestic resource production, and by substituting natural gas for imported oil, could give consumers a lot more disposable income to buy other things, which can only help the broader economy. I maintain that the energy system that we can work on, and we didn't talk about electricity, but we could do that another time. Rebuilding the American 20th century energy system into a 21st century system could be the economic engine that produces enough economic value, that it's a tie that lifts all ships and puts our economy on a five to seven percent growth trajectory for decades to come.
Russ: Well, thank you very much, once again, for being with us.
John: Thank you.
Russ: You bet. That's John Hofmeister, former President of Shell Oil Company, and now founder and CEO of Citizens for Affordable Energy. This is the BusinessMakers show, heard on the radio and seen online at thebusinessmakers.com.