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
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
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.
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