Despite Near-Term Energy Woes, Experts Optimistic

Greg Flakus

Rising oil prices are having an impact on the world economy and, by driving up gasoline prices, becoming an issue in the U.S. presidential election campaign. Tensions in the Middle East, turmoil in Africa and rapidly rising demand in China are driving oil prices higher. But experts see many positive developments in the world energy sector.

The biggest development of an alternative to oil in recent years has been the expansion of natural gas production in the United States, using technologies that free up gas trapped in shale rock.

That is one of the reasons experts speaking at the annual IHS-CERA conference here in Houston earlier this month expressed optimism about the world's energy picture.

John Larson, vice president of consulting group IHS-Global Insight, says the shale production not only favors the prospect of producing more vehicles that run on natural gas, but also favors the expansion of renewable sources of energy such as wind and solar.

"One of the things that natural gas does and, sort of, the lower prices, is that it actually creates a reserve energy that can enable or allow the expansion of these renewables," said Larson.

Larson says gas can be used to run electrical generators when the wind doesn't blow or the sun isn't shining, but he says low-cost natural gas also provides a market challenge that wind is, so far, better able to meet.

"Wind and natural gas are actually fairly close -- they are cost comparable in terms of how much it costs to generate one megawatt hour for wind versus one megawatt hour for natural gas. Solar is about five times higher," Larson explained.

The expansion of U.S. natural gas production could also help revitalize U.S. manufacturing, says Royal Dutch Shell's Chief Executive Officer Peter Voser.

"If you have affordable and abundantly available gas… there could be a great rebirth of manufacturing industries in the United States," noted Voser.

Transportation fuel costs might also be brought down by using natural gas, instead of corn, to produce the ethanol that is now a required additive in gasoline.

Steven Sterin is chief financial officer of the Dallas-based Celanese Corporation, which has developed a way of doing it.

"It is a thermochemical process that either uses natural gas or coal or other carbon sources, hopefully in the future, bio-sources, as those develop, to produce very large scales of very economically attractive ethanol," Sterin noted.

A change in U.S. law is needed for this to happen here, but Celanese is now working with China to produce ethanol from coal.

Petroleum will be the dominant transportation fuel for many years to come, but experts say the world's dependency on it can be greatly reduced by the development of alternative fuels.

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