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Energy—What the Future Holds for State Policymakers

Energy—What the Future Holds for State Policymakers. National Governors Association NGA Center for Best Practices Estes Park 10 October 2005. Today’s Presentation. The Facts What It Means What We Can Do Now What We Can Start Doing (Finally) Wrap-Up. Are we on the verge of a crisis?.

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Energy—What the Future Holds for State Policymakers

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  1. Energy—What the Future Holds for State Policymakers National Governors Association NGA Center for Best Practices Estes Park 10 October 2005

  2. Today’s Presentation • The Facts • What It Means • What We Can Do Now • What We Can Start Doing (Finally) • Wrap-Up

  3. Are we on the verge of a crisis? • Probably not

  4. Do states need to act? • Absolutely

  5. The Bottom Line • Energy prices have risen dramatically • Price may be reaching all-time highs • The era of high prices is here to stay • Some people are not going to be able to pay their • heating bills this winter.

  6. Maybe—just maybe—our consumptive behavior patterns will begin to change • States need to look at • Taxes • RPS and other incentives • More creative environmental drivers Katrina exacerbates prices but will abate.

  7. The Facts

  8. U.S. Energy Consumption by Fuel, 1970-2025 (quadrillion Btu) Petroleum History Projections Take-away: We are consuming more fuel-based sources Natural Gas Coal Nuclear Nonhydropower Renewables Hydropower Annual Energy Outlook 2005

  9. U.S. Crude Oil Production by Source, 1970-2025 (million barrels per day) History Projections Lower-48 Onshore Lower-48 Offshore Alaska Annual Energy Outlook 2005

  10. U.S. Petroleum Production, Consumption, and Net Imports, 1960-2025 (million barrels per day) History Projections 58% Consumption Net Imports 56% Production Annual Energy Outlook 2005

  11. Real Gasoline Prices Over $3 today

  12. Heating Oil Prices $3 today

  13. U.S. Natural Gas Production, Consumption, and Net Imports, 1960-2025 (trillion cubic feet) History Projections 20% Net Imports Consumption 15% Production Natural Gas Net Imports, 2003 and 2025 (trillion cubic feet) Annual Energy Outlook 2005

  14. Natural Gas Spot Price, 2004-2006 (dollars per thousand cubic feet) History Projections Average is $9 Price was $2.50 in 2003 Short-Term Energy Outlook, September 2005

  15. What It Means

  16. Why We Haven’t Felt More Impact—Yet? • Increases have been gradual • Lower energy intensity • Low inflationary pressure • Growing economy • No serious supply problems • No panic or anxiety

  17. Crossroads • Prices are reaching all time highs

  18. Issue #1 • Energy has been under-priced in US • All the other OECD countries manage demand through high taxes • Its not that prices are too high; they have been too low

  19. Issue #2 • US is the most wasteful country • US uses 3 times as much electricity per capita as Japan • Huge potential to use energy more efficiently without drastic lifestyle changes • There is money to be made selling efficiency

  20. Per capita use* US: 7.8 Germany: 4.2 China: 1.1 Brazil: 1.1 India: 0.5 • n metric tonnes of oil equivalent

  21. Issue #3 • Energy pricing is being globalized • Oil prices are driven by Chinbra*, they used to be driven by US • Natural gas was priced domestically, now it is priced globally • Coal pricing in US is becoming globalized • Prices are out of our control • *China, India, Brazil=Chinbra

  22. Issue #4 • Failure of environmental alternatives • Despite RPS in 19 states, renewables will remain a single digit contributor • Cars are off limits to politicians • Demand-side incentives never take off

  23. U.S. Electricity Generation by Fuel, 1970-2025 (billion kilowatthours) History Projections Coal Natural Gas Nuclear Renewables Petroleum Annual Energy Outlook 2005

  24. U.S. Carbon Dioxide Emissions, 1980-2025 (million metric tons) History Projections 8,029 in 2025 5,789 in 2003 6,528 in 2010 Carbon Dioxide Emission Intensity, 1980-2025 (metric tons per million 2000 dollars of GDP) 558 in 2003 501 in 2010 396 in 2025 Annual Energy Outlook 2005

  25. The Blame Game • Very little blame game so far • New energy legislation has mini-fine for gouging • Oil companies keeping out of trouble—so far

  26. What states must do • Be ready to deal with people unable to pay their heating oil and natural gas bills • Urge people to conserve

  27. What States Can Do • Raise energy taxes • Gasoline • Natural gas • SUV registration • Strengthen RPS laws • Educate

  28. States need to fixenvironmental problems • Still too many gasoline formulations • Clean air battles have gone on too long-time to build cleaner and more efficient fleets • Be sure state electricity regulators get it right

  29. Wrap-up • Chances are we have averted a crisis • But there are crisis scenarios that could happen • We have avoided paradigm change for decades now • Are we are on the verge of change?

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