Kill Oil with Natural Gas and Electricity

Publication Date: September 2009

Publisher: Manhattan Institute for Policy Research. Center for Energy Policy and the Environment

Author(s): Peter Huber

Research Area: Energy

Keywords: Natural Gas, Oil; Energy

Type: Report

Coverage: United States


Chasing carbon, we're often told, will get us over oil, too. Most of the rest of the world doesn't believe it. About 80 percent of the world's people live in poor countries that are as eager as we are to get beyond oil. The people who can least afford to be wrong have also accepted the inconvenient economic truth: coal, gas, and uranium are the only practical, affordable substitutes for oil, and will remain so for a very long time to come. They're cheaper, and plentiful supplies are scattered all over the planet.

Oil can be beaten. Its share of the U.S. energy market peaked just shy of 50 percent in 1977; today, it's under 40 percent. The global trends have been similar. Gas and coal grabbed half of what oil lost. Uranium took the rest. Oil now depends on transportation for over 70 percent of U.S. demand. A similar blend of coal-gas-uranium electricity and straight gas can squeeze oil off the highway, too.

Natural gas currently powers about 10 million vehicles worldwide - most notably buses and urban fleets of trucks and delivery vehicles. Oil owes much of its hegemony on our own U.S. highways to decades of bungled government policy that left vast amounts of gas stranded underground and countless potential buyers unable to buy it at any price. Getting gas to the highway was never a priority.

It should have been. Gas-handling technologies had improved quite enough to make natural gas a practical alternative when the Arabs embargoed their oil in 1973. Larger vehicles can easily accommodate the larger tanks that compressed gas requires to provide acceptable range. In much of the world, gas is cheaper. At current levels of production, gas could power all our U.S. wheels, and we could almost certainly increase production enough to cover all the wheels and all current uses too.

Electric cars are certainly coming as well, and the poor will embrace them too when the hardware gets cheap enough. But no foreseeable battery pack is going to move forty-ton trucks cross-country, batteries will remain impractical for most heavy-duty vehicles of any size, and the cheapest way to light the grid is to burn coal.

Absent new carbon mandates, gas will first be used to displace oil. Carbon mandates will instead promote the use of gas to displace coal, a policy that will be quietly welcomed by the autocrats who control 80 percent of the world's easily accessible oil. The world's poor will ignore the mandates and adopt ostensibly greener technologies only piecemeal. As a result, the most touted hardware will probably end up raising carbon emissions, not lowering them. Using gas to beat oil is the best carbon strategy because it costs less, not more, so the 80 percent of the planet that emits more than half of the greenhouse gas can embrace it, too.

Our fossil-fuel policy should be to continue developing gas-extraction technologies, promote their use in the United States, and by improving what we already do so well, help kick oil out of hundreds of millions of furnaces and engines worldwide. At home and abroad, the less affluent will be delighted to join the rich in swatting down oil with cheaper gas, and will reduce carbon emissions as they do.