America’s official crystal ball: Five projections about the future of energy

I’ve said a number of times that I am hesitant to make predictions, because doing so is a really good way to look really dim. And I mean it. But that doesn’t mean I won’t repeat predictions others make. The US Energy Information Administration, for example, has a good reputation, and it recently came out with its annual report on US energy trends, with projections to 2040.

Here are a few things I found particularly interesting from that analysis. Unless otherwise stated, the numbers below refer to what is known as the “reference case,” the EIA’s best guess; the reference case assumes annual economic growth of 2.2 percent and inflation of 2.1 percent.

1. The United States will be a net energy exporter no later than 2026 (except if oil prices are very low). This is about as close as it gets to the mythical unicorn known as “energy independence.” That does not mean, however, that every ounce of energy will be produced within American borders. The US has considerable assets in coal and nuclear, but it will probably continue to import lower-cost oil from the Middle East and Mexico and, under some circumstances, maybe gas, too, particularly from Canada. In addition, China will likely provide a slew of solar panels. But factor in gas and coal exports, and slow or no growth in oil imports, and the result is that by and large, though, the United States will be able to row its own energy canoe. That is good for all kinds of reasons—economic stability; geopolitics; balance of trade. The United States, by the way, has been a net energy importer since 1953.

2. No one has a clue about where oil prices are going. The EIA’s analysis is all over the map. Its reference case scenario is $109 per barrel in 2040 (in 2016) dollars. But it could be as high as $226. Or as low as $43. A range that wide—more than five times between the upper and lower estimates—is really just another way of saying, “No idea.” In my opinion, even $109 looks high; it’s about twice as much as what a barrel is going for now. High prices always and inevitably encourage both innovation and efficiency, and there is already a ton of work going on in both. Moreover, in the past, there just hasn’t been an alternative to oil for vehicles; with electric vehicles getting better and cheaper, however, that could change, with big effects on oil demand. High oil prices, though, would be great for EVs, so producers will do what they can to ensure prices don’t go through the roof. But again, it’s hard to say.

The Paris-based International Energy Agency is a little more bullish on prices, at least in the near term, due to the sharply lower levels of spending on exploration in the last couple of years. Its best guess is $124 to $146 by 2040—a much tighter range. But the two agencies agree that demand, on the whole, will likely rise, making it that much more difficult to meet the goals of the Paris climate talks.

3. Energy consumption will stay steady. Already, the United States as a whole (and this is true of most of the developed world) no longer needs to use ever-greater amounts of energy to fuel economic growth. The EIA figures, for example, that total energy consumption will grow just 5 percent to 2040—much, much less than growth over that era. The reason is that the economy will continue to shift toward less energy-intensive activities, and efficiency will continue to improve. For oil specifically, as late as 2040, consumption will be less than it was in 2005, the year of peak consumption. Electricity use will continue to increase, but not by as much as in the past as older equipment is replaced and demand management systems, regulations, and more advanced appliances all promote efficiency.

4. … but the mix of energy sources will change rapidly. Specifically, the EIA sees a continuation of the trends that have marked the last decade. These are the displacement of coal by natural gas and brisk growth in the use of renewables. Coal production declined 17 percent in 2016 alone—and was at its lowest level since 1978; meanwhile, non-hydro renewables accounted for most new capacity last year, and accounts for 8 percent of power generation. And gas was cheaper than any year since 1999. The United States is well placed in this regard, with excellent natural gas resources as well as expertise in renewables—meaning domestic power production will likely keep pace with demand. Oil production will stabilize at 10 to 11 million barrels a day.

5. Americans will continue to be on the move—but transport-related energy use will still decline. No, Americans will not fall out of the love with their cars. The family road trip will continue to be a beloved (and sometimes temperamental) tradition. But rising fuel efficiency standards, for cars, trucks, rail, and planes, will more than make up for the additional miles traveled. Moreover battery-powered electric vehicles (EVs) and hybrids will cease to be novelties; together, they will account for more than 10 percent of sales by 2040, says the EIA; even fuel-cell-powered vehicles might make a mild splash by then (0.6 percent). So, it’s not so much “the road less travelled”—as the great American poet Robert Frost almost said—but more roads, better travelled.

Of course, these are projections, not facts. There are zillions of variables. If economic growth is much faster (or slower); if the Trump administration repeals the Clean Power Plan; if there is some technological breakthrough in renewables, or nuclear, or carbon capture; if efficiency regulations are weakened (or strengthened); if prices for oil or gas crash; if the Trump Administration radically alters trade patterns with Canada and Mexico—any or all of this could make for very different looking set of charts. Still, the Annual Energy Outlook is a useful precis of what and how some experts are thinking. And the story it tells is relatively optimistic. In all kinds of ways, for the foreseeable future, the United States looks set to do more with less, and cleaner, energy.