5 Myths About Energy in America

It's probably not possible to overestimate the importance of energy to America's future. We're currently in the midst of spirited debates over global warming and high gas prices. And there are sharp differences of opinion over the safety of nuclear power and offshore drilling. Energy is fundamental to everything we do, and Americans have very strong opinions about it.

Against this backdrop, Daniel Yergin, a Pulitzer Prize-winning author and energy expert, has written The Quest: Energy, Security, and the Remaking of the Modern World. Yergin's aim was to write a book that covered "the entire energy spectrum to see how all of these elements fit together."

He recently had a wide-ranging chat about energy with Chris Hill, host of Motley Fool Money. During their conversation, I was particularly struck by several instances where the reality of a particular situation is actually quite different from what most people believe. After listening to the interview and seeing Yergin talk at a recent investor conference, I've listed below five myths about energy in America today.

Myth No. 1: The world is about to run out of oil.
Yergin believes that this isn't exactly true. In his book, he discusses evidence from studies of oil fields and oil wells that show that "the world is clearly not running out of oil." In fact, the "estimates for the world’s total stock of oil keep growing."

Yergin understands that this is very surprising for people to hear. Essentially, "[T]echnology opens up new frontiers and there's new supply coming on, including in the United States." Ultimately, Yergin disagrees with the peak oil adherents, those who believe we're running out of oil. He writes, "[T]he world has decades of further production growth before flattening out into a plateau -- perhaps sometime around mid-century -- at which time a more gradual decline will begin."

Myth No. 2: We import all of our oil from the Middle East.
In the interview, Yergin said that a lot of folks that he talks to think that we import all of our oil from the Middle East. Actually, that number is a "pretty small share nowadays." Yergin finds it interesting how much people talk about ending our dependence on Middle East oil when in fact, we "don’t have much dependence on it." In a recent article, Fool writer Morgan Housel makes this exact point by noting that oil imports from the Persian Gulf have declined from 14.1% in 2001 to 9.2% this year.

So, where do our oil imports come from? Canada is the No. 1 source and Mexico is No. 2. In Yergin's book, he shows that the US was 78% self-sufficient in terms of overall energy in 2011 (this includes natural gas, coal, nuclear, and renewables).

Myth No. 3: Conservation isn’t a meaningful part of our energy strategy.
When I think of conservation, I think of hairy people and Earth Day. That's a big mistake, according to Yergin, who believes that conservation has the potential to have the most positive impact of all on our overall energy policy.

In our interview, Yergin told us that the US is "more than twice as energy efficient as it was in the seventies and early eighties when the era of the oil crisis began." In his book, he talks further about companies Dow Chemical (NYSE: DOW  ) , Boeing (NYSE: BA  ) , and Duke Energy (NYSE: DUK  ) that have made tremendous progress in this area. In order to illustrate the conservation mindset, he quotes James Rogers, CEO of Duke Energy, who said, "[W]e need to create a business model in which reducing megawatts is treated the same way from an investment point of view as producing megawatts."

Myth No. 4: Electric cars will have a huge impact on our auto fleet over the next 10-20 years.
Yergin isn't entirely sure that the electric car will gain traction, and feels that the next five years will be critical. When asked whether he'd "buy," "sell," or "hold" the electric car, he chose to "hold" it.

That's not to say that he doesn't see exciting possibilities in this area. Already, we have GM's (NYSE: GM  ) Chevy Volt on the market. And Tesla Motors (Nasdaq: TSLA  ) is showing that "a green car could also be a supercar." With FedEx (NYSE: FDX  ) and UPS (NYSE: UPS  ) committed to expanding their fleets of electric trucks to deliver their parcels, there is certainly a possibility that electric vehicles could be a game-changer in the energy world.

Yergin cautions, however, that even under the most aggressive scenario, "[O]nly about 3% of the automobile fleet by 2020 would be electric vehicles." Ultimately, he wants to see what happens over the next five years or so before getting too optimistic about this emerging trend.

Myth No. 5: Wind and solar are clearly the key to our future energy needs.
Wind and solar, according to Yergin, are still pretty small compared with the overall power business, and still need "to demonstrate that they can provide large-scale electricity competitively."

So he would hesitate to make one bet on any future energy approach. You have to "have a portfolio because we don't know the answer." He paraphrases Winston Churchill by saying that safety in energy "lies in variety and variety alone." Yergin believes that the bottom line is that we have to diversify, which must be "the starting point for energy strategy today and tomorrow."

Myth No. 6?
Some say the subject of energy is just too big for any one person to write an authoritative book about. After listening to Yergin and reading much of The Quest, that statement might just be the biggest myth of all.

One thing we do know for sure is that there are incredible opportunities for investors right now within the energy sector. To learn more about one idea that we're particularly excited about, take a look at this free report, which highlights the "one energy stock you’ll ever need." It's completely free -- click here to get your report right now.

John Reeves does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares of United Parcel Service and FedEx. Motley Fool newsletter services have recommended buying shares of FedEx and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On October 27, 2011, at 4:44 PM, devoish wrote:

    Good afternoon,

    Windbreaker here.

    First, myth number two. I don't know anybody who thinks we get most of our oil from the middle east.

    Myth number four, about electric vehicles. under the "most agressive growth scenario" far more than 3% of the fleet would be electric, more like 10%. Already the combined electric and hybrid sales are at 2.5% and more offerings are coming.

    Myth numbe three - conservation. We are no where ear the best we can do at conservation. When folks say it is not a large part of our strategy, who has a strategy? I am not sure what a seller of megwatts means by getting paid to produce less megawatts, but, I know our President wants to spend tax dollars helping people save money through conservation.

    Myths number one and number five are opposite sides of the same coin. Wind and solar do not neccessarily have to get more affordable even though they are, as oil keeps getting more expensive.

    And none of that adds in the cost of trying to pretend that the atmosphere and the oceans have the capacity to store enough waste CO2 without incurring additional cost. Oil depends upon upon passing those costs onto other industrys and people.

    Best wishes,

    Steven

    I am not in the oil is over camp, but

  • Report this Comment On October 27, 2011, at 4:55 PM, DJDynamicNC wrote:

    Part of the problem with expanded oil production is that we continue to allow the producers of oil to externalize their costs. If you price in the carbon and pollution damage accurately, oil becomes much less attractive as a power source, at least as it is currently harvested.

    This is heavily distorting the market in a most damaging way.

  • Report this Comment On October 27, 2011, at 5:26 PM, CluckChicken wrote:

    "Myths number one and number five are opposite sides of the same coin."

    I do not see why this is so. In 2009 about 1% of the electric generated in the US was from oil and about 3.5% from Renewable sources (could not find a breakdown but this usually means solar and wind). The price of Natural Gas is far more likely to have an impact on the advancement of wind generation than oil will. Gas plants are about as kind to nature as wind but require a far smaller foot print to generate a lot more power.

    The price of oil will more likely have an impact on the sales/advancement of electric vehicles. If we get 4 months of gas prices above 4.50 nationwide I suspect you would see a very large demand increase for the various types of electric vehicles.

    Solar has had a major price drop over the last couple years and with a few other advancements announced recently (see 3M) and its future of being a kind of omnipresent energy generator is not that far off. I do not see it replacing primary energy generation but seems like it could easily be 25% of a typical household need.

  • Report this Comment On October 27, 2011, at 8:24 PM, BentMike wrote:

    The idea that Duke Energy is some sort of leader in conservation is simply digging up press release BS, not real research. I am here in NC working for a renewable energy concern and Duke Energy is no better than an impediment to conservation.

    JR does make pretty noises, but that is about it.

  • Report this Comment On October 27, 2011, at 8:32 PM, hbofbyu wrote:

    My neighbor put a small wind turbine on the edge of his property line so it is actually closer to my house than to his. The incessant noise of that damn thing drives me crazy and keeps me up at night. It's all legal because our city leaders think they are saving the world by "going green". I'll take oil anyday over that infernal machine.

  • Report this Comment On October 27, 2011, at 9:39 PM, TMFBane wrote:

    Thanks for all of your comments, everyone. There are definitely significant differences of opinion on a number of these issues.

    I agree that we may not be taking into account all of the costs associated with oil. Understandably however, governments have been hesitant to introduce additional taxes in the current environment in order to better reflect the true costs.

    Here's a link to a story I stumbled across yesterday about the wind and solar industries. There definitely seems to be challenges there at the moment:

    http://www.nytimes.com/2011/10/26/business/energy-environmen...

  • Report this Comment On October 28, 2011, at 1:05 AM, maiday2000 wrote:

    Thanks for one of the first common sense articles on energy that the MF has put out in quite some time. I hope to God that you have replaced Selena Maranjian as the primary editorialist on energy issues for the MF.

  • Report this Comment On October 28, 2011, at 10:53 AM, ContraryDude wrote:

    How can you write an article about "energy in America" without even a mention of natural gas? The choices are not just oil vs. alternative energy (wind or solar). There are other options as well and natural gas, especially with the new fracking methods, is one to seriously consider given the huge, as-yet untapped reserves in this country.

  • Report this Comment On October 28, 2011, at 10:55 AM, caltex1nomad wrote:

    Did he have any thoughts on Nuclear ??

  • Report this Comment On October 28, 2011, at 10:55 AM, devoish wrote:

    The times article is a good one, at least it recognises the fact that it is a political choice between keeping oil and renewable subsidys, or keeping renewable subsidys or keeping oil subsidys, or no subsidys at all.

    It failed in not adressing the option of "feed in tarrifs".

    It also points out that some of the solar and wind companys will still be in business without grant money, just growing slower.

    The 30% tax credit deduction will stay until 2016.

    Best wishes,

    Steven

  • Report this Comment On October 28, 2011, at 11:11 AM, Turfscape wrote:

    hbofbyu wrote: "My neighbor put a small wind turbine on the edge of his property line so it is actually closer to my house than to his. The incessant noise of that damn thing drives me crazy and keeps me up at night. It's all legal because our city leaders think they are saving the world by "going green". I'll take oil anyday over that infernal machine."

    So, would you be okay if your neighbor had an oil or gas derrick there instead of a wind turbine? Or is your complaint not really about the resource?

  • Report this Comment On October 28, 2011, at 12:00 PM, TMFBane wrote:

    @contraryDude, yes, I couldn't agree more with you about natural gas. Yergin talks a lot in his book about the subject. I came across this fascinating article yesterday that you might enjoy:

    http://www.bloomberg.com/news/2011-10-26/the-energy-revoluti...

    @caltex1nomad, Yergin did talk a bit about nuclear power. He noted that prior to its nuclear accident, Japan was moving towards getting 50% of its electricity from nuclear. Now, Japan and many other companies are rethinking their nuclear strategies. This will have a big impact on the global energy outlook according to Yergin.

    Thanks again for your comments!

  • Report this Comment On October 28, 2011, at 1:07 PM, Rondo1260 wrote:

    When it comes to energy some are attracted to the all or nothing argument. The alternative energy sources won't replace oil. But, if these alternative methods can become cheaper for the individual consumer it will definitely be a positive for everyone globally. If I could afford it I would have an electric car and solar panels. It would make a lot of sense for me to have these. I don't drive very far and I own my own home. In 10 years, I probably will have both and so will many others. When it comes to energy, I'm in favor of all of the above. Let's continue to use all energy sources but just more equally.

  • Report this Comment On October 28, 2011, at 1:15 PM, sportfinance wrote:

    Great article,

    Just curious where you are pulling numbers from myth 2. I have read other articles that present the same numbers however nothing was referenced.

    Can someone enlighten?

  • Report this Comment On October 28, 2011, at 2:36 PM, ahemhmm wrote:

    I wasn't very impressed with the article I have to say, it is a basic reflection of current events looked upon from a rather blind spectator. Blind because he doesn't include any tendencies and possibilities which for example the NY times article does.

    For decades the oil industry has been feeding us stories about how much oil there is and you can pretty much pull up any number of opinions which will support whatever you would like to be in favor of, yeah we have lots of Oil, or Oil is running out, but none of these stories are reliable.

    The point is that Oil is a outdated source of energy and has to be replaced in order to allow the increasing amount of people to live on this planet in a sustainable manner. The signs of the time are telling us that. Most young people want to see themselves getting energy from some source other than oil.

    Solar is a source of energy which has barely been tapped into and there is a lot of talk now that because the subsidies are being reduced solar will end. Obviously thats not correct. The price of solar panels has been coming down a lot which has been the key factor for decades to make solar attractive. If every warehouse roof and parking lot etc in the southern part of the US was covered with solar panels it would revolutionize our world. It would create free (and quiet) energy within 5 years, it would create jobs and the demand would further lower the price of PV panels that it would become very attractive even for homeowners. I am not even mentioning the technological advances such a booming industry would and will be facing within the next 10 years. Any article that leaves out such obvious facts is not representing the complete story in my opinion.

  • Report this Comment On October 28, 2011, at 2:42 PM, DavidTVC15 wrote:

    It seems that the author is clearly contradicting himself while discussing "myth" #1. He states (or rather, quotes someone as stating) that we have a few decades of growth left before things flatten out in the middle of the century. Well, the middle of the century is about 40 years away, so to me this sounds like we're running out of oil, and a bit faster than I thought. Most scientists agree that when it comes to oil we have already picked all of the "low-hanging fruit", which is we need to resort to dangerous and poisonous technologies like hydrofracking to get the rest of it. Is this one of the "new technologies" that we should all be so optimistic about?

  • Report this Comment On October 28, 2011, at 2:58 PM, DJDynamicNC wrote:

    @DavidTVC15: +1 for that comment

  • Report this Comment On October 28, 2011, at 4:35 PM, littleblu wrote:

    I believe that the US military will be a huge driver of alternative energy research and deployment in the next few decades:

    http://idealab.talkingpointsmemo.com/2011/09/us-army-embarks...

    I remember hearing that one soldier dies per 12 convoys or so in Iraq/Afghanistan, so using locally renewable resources makes good military sense. Mobile fold-out panels, anyone?

  • Report this Comment On October 28, 2011, at 5:14 PM, jaketen2001 wrote:

    You can just rehash another person's opinions or statements. Just call the article 'Yergins such and such.' You present these statements as facts, with no links, no footnotes. Stating an opinion a second time doesn't turn it in to a fact.

  • Report this Comment On October 28, 2011, at 5:35 PM, blearynet wrote:

    I am having difficulty any original ideas from the author of this article. It seems like a rehash of the ideas of others.

  • Report this Comment On October 28, 2011, at 5:59 PM, TMFBane wrote:

    jaketen2001 and blearynet,

    Yes, the article was about an interview with Daniel Yergin, who is a renowned authority on this subject. The thinking was that some folks would want to hear the ideas of a Pulitzer-Prize winning energy expert, who has just written a book on this subject.

    All of his thinking is contained in his new book called The Quest. Here is a link to it, if you'd like to read more:

    http://www.amazon.com/Quest-Energy-Security-Remaking-Modern/...

    Finally, I think it's a fair criticism to know what I think of his views. In another piece I may review his work, which will allow me to identify the things I agree with and the things I don't agree with.

    Thanks for your comments.

  • Report this Comment On October 28, 2011, at 10:46 PM, Tomohawk52 wrote:

    @DavidTVC15 +1 from me, as well.

    It seems pretty clear to me that drilling is getting more dangerous, more difficult and more energy-intensive. Am I wrong?

  • Report this Comment On October 30, 2011, at 1:00 PM, jaketen2001 wrote:

    Yergin conveniently omits any mention of several obvious truths. First, many other experts feel that increases in domestic or NA will not be nearly enough to offset production decreases in the middle east. Second, the cost of this production is 2-10x as expensive as most of the oil in the middle east. Third, the environmental consequences of deep oil and tar sands and fracking are becoming more and more obvious by the day. Fourth, world wide demand for energy will outpace even the existing amount of oil production, however tenuous and destructive that production might be.

    The energy crisis is just as real as it ever was. North American oil production is nothing other than a footnote.

  • Report this Comment On October 30, 2011, at 1:09 PM, moreco2 wrote:

    Electric cars are basically mini-coal fired power plants on wheels. If you don't like that, then you will have to greatly increase the use of nuclear power to generate electricity if you want plug-in cars to be in common usage. You have no other choice unless you allow for significant expansion of our oil and gas exploration and production. Because we are surrounded by idiots those are highly unlikely scenarios.

  • Report this Comment On October 30, 2011, at 1:18 PM, moreco2 wrote:

    PS - "Appleton’s argument that fracking materials could spill into the environment and cause “some public-health emergencies” has been refuted by US Environmental Protection Agency chief Lisa Jackson, who told Congress that no such contamination has occurred because of fracking, which has been going on for decades."

    http://www.nypost.com/p/news/opinion/opedcolumnists/anti_dri...

  • Report this Comment On October 30, 2011, at 2:28 PM, walithomas wrote:

    And you believe our chief EPA bureaucrat because????

  • Report this Comment On October 30, 2011, at 2:35 PM, walithomas wrote:

    I am heartened by the sane comments here on a most difficult subject. Since I walked away from the Nuclear Navy in 1974, I have been advocating solar energy. The sun will be with us for another billion years as will the hi level nuclear waste if we don't send it to the sun!

    By the way, renewable energy portfolios include hydro power as a large percentage.

  • Report this Comment On November 03, 2011, at 6:27 PM, tem01 wrote:

    It would be extremely interesting to see just how many of the Yergin detractors know anything about the subject of energy in general or hydrocarbons in particular.

    If you want references for Prof Yergin’s statements go to the library or bookstore and read the book. He has referenced linked to about every other sentence to back up his statements. The same is true for the bible of the industry he wrote many years ago called “The Prize”

    There is currently no shortage of oil, there was no oil shortage in 1973 nor during the recent run-up to $150/bbl. Gas is being produced in excess driving the price down so far as to make it near imprudent to even drill for it and the fracing going on has been going on for several decades without any evidence of real problems other than anecdotal scare stories designed to destroy the industry.

    There will never be a shortage of energy but the choices made for how any individual uses that energy should be commensurate with the real costs, not those cut by 70-80% using my tax dollars to build plants, run cabling and reduce the standard of living for many.

    All hydro power is being turned off, solar and wind will never be reliable and the scare industry will have to be knocked aside before nuclear can ever be revived.

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