Energy institute executive: Commodity prices low now, but demand will grow

Phil Castle, The Business Times

Christopher Guith
Christopher Guith

While low commodity prices affect energy development for now, fossil fuels will continue to play a major role in meeting long-term demand.

And efforts to ban hydraulic fracturing or prohibit drilling on federal lands could prove economically disastrous, according to Christopher Guith, senior vice president of policy for the U.S. Chamber of Commerce Global Energy Institute.

Speaking at a briefing hosted by the Grand Junction Area Chamber of Commerce, Guith offered an overview of energy trends as well as the possible implications for proposed policies that would leave mineral resources in the ground.

A combination of increasing supplies and decreasing demand has pulled down the price of oil and natural gas, Guith said. That, in turn, has affected the energy industry in the United States.

The effect is even more pronounced, he said, because the U.S. has become the largest producer of oil and natural gas and largest exporter of liquid petroleum products in the world. “That hits us a little harder than it used to.”

The effects of the coronavirus pandemic on energy demand and travel could further affect commodity prices, he said.

Over the long term, though, world demand for all energy is expected to increase 47 percent between now and 2050, Guith said. Most of that demand will come from developing countries. With more than a billion people who still live without electricity, developing countries are turning to coal-fired plants to generate power.

The United States derives its power from the most diverse mix of sources in the world. While power from solar energy, wind turbines and other renewable sources has grown 70 percent, fossil fuels still account for 79 percent of power, Guith said.

The increasing use of natural gas to generate electricity when the sun doesn’t shine and the wind doesn’t blow constitutes the “backbone” of the clean energy economy, he said. “We can’t have renewables without gas.”

Even as drivers use more electric vehicles, crude oil still accounts for about 80 percent of transportation energy, he said.

Given the growth of the U.S. energy industry, proposed policies that would ban hydraulic fracturing or prohibit drilling on federal lands would prove economically disastrous, Guith said.

Yet, many candidates running for office in the 2020 election have advocated such policies, he said.

A study conducted by the Global Energy Institute estimated a ban on fracking would eliminate 19 million jobs between 2021 and 2025, while reducing gross domestic product by $7.1 trillion over the same period.

The institute estimated a ban on energy leasing on federal lands would reduce annual GDP by $70 billion, result in the loss of a total of 380,000 direct and indirect jobs and cut royalty and rental fees for federal and state governments $11.3 billion a year.

While the effects of climate change must be addressed on a global basis, there’s some good news in that air pollutants in the United States have dropped, Guith said. The air in U.S cities is cleaner than most foreign cities. “We have the cleanest air in the world.”