When it comes to gasoline, are Americans transforming from the world's chief gluttons to models of moderation? According to Philip Verleger, the energy economist, that is more or less the country's direction, with surprising consequences.
Verleger spells out this scenario in a note to clients, his version of the narrative of coming fossil-fuel abundance that we have heard elsewhere. Verleger's 11-page note is as oil-bullish as his most enthusiastic colleagues, who as a group say the U.S. is on the cusp of near energy independence. The oil-abundance narrative is a global one, and asserts flatly that peak oil theory is wrong.
Where Verleger diverges is in ascribing most of the responsibility for this U.S. oil boom not to more prolific oilfields, but to consumer efficiency. "[Gasoline] use will drop significantly by 2020 thanks to conservation, natural gas substitution and the ethanol mandate," Verleger told me in an email.
By 2022, 36 billion gallons of renewable fuels must be blended into gasoline, in line with a George W. Bush-era law. On top of that, President Obama has raised the bar for vehicular fuel efficiency to 54 miles per gallon, up from the current 30 miles a gallon. Plus long-haul truckers are making a shift to natural gas fuel, Reuters reports.
Verleger's report segregates out 26 states in the center of the U.S., what he calls "Middle America." These states, he says, currently produce 1 million barrels a day of oil more than they consume. By 2020, he calculates that this figure will surge -- to a range between 4 million barrels a day and 8 million barrels a day. "The surpluses occur in large part due to the decline in the consumption of petroleum, which everyone seems to ignore," Verleger told me.
It would be hard to be more optimistic than Verleger about oil's future (and by implication, pessimistic about the near-term future of more expensive clean-energy technologies, and about global warming).
One implication if he is right is that the U.S. is likely to develop the means to become an oil exporter. But Verleger thinks that politics will keep American oil at home -- it will be anathema to ship oil to China, he writes, and public support for drilling, founded in a yearning for energy independence, will fall away. Writes Verleger:
A strong backlash against exploration is likely when the public becomes aware that oil will be shipped to China. Access to public lands could be drastically curtailed, and environmental regulations would likely be tightened. The argument that the United States must drill to achieve energy independence would no longer apply.
Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.