by Aaron Gardner, Energy Project volunteer
On May 24, 2012 the Foreign Policy Association hosted a conference on the Future of Energy. His Eminence Mr. Nassir Abdulaziz Al-Nasser, the President of the 66th session of the United Nations General Assembly, gave the keynote address. His remarks concerned sustainable energy’s importance, particularly in the context of energy poverty. He highlighted three current United Nations initiatives. One that UNA-SNY members know well is the Year of Sustainable Energy for All. Secretary General Ban Ki-Moon also launched a program called “Access to Energy for All” with the goal of eliminating energy poverty by 2030, among others. Lastly, Mr. Al-Nasser has made “sustainable development and global prosperity” one of the four main themes of his presidency.
The keynote was followed by remarks from and a discussion featuring four highly distinguished panelists. Mr. Richard A. Navarre, President of Peabody Energy, moderated. The other panelists were: Mr. Jason Grumet, President of the Bipartisan Policy Center; Ms. Mary R. (Nina) Henderson, Managing Partner of Henderson Advisory; and former Senator Byron Dorgan.
Senator Dorgan’s comments highlighted the unforeseen oil and gas abundance in which the United States finds itself. He remarked that only five years ago the Federal Energy Regulatory Commission was predicting that the U.S. would soon run out of natural gas. Mr. Grumet pointed to three key features in the current environment that he predicts will control energy policy developments in the U.S. for the foreseeable future: the gas glut, flagging energy demand, and an increasingly constrained fiscal environment. Ms. Henderson stated that two reasons the energy landscape is remarkably dynamic now are rapid advances in oil and gas extraction technology and heightened global expectations regarding energy demand and access.
The discussion period ranged over a broad spectrum of international and domestic topics. On the domestic front the questions included popular opposition to hydraulic fracturing. The panelists all concurred that the natural gas resources rendered accessible by hydraulic fracturing would eventually be developed. Senator Dorgan argued that the resources could be exploited safely with proper regulation and due care on the part of industry. Mr. Grumet said that consolidation taking place in the industry would improve its safety record. President Nasser asked the panel why oil prices frequently seem to disobey the logic of supply and demand. He stated that oil price volatility negatively impacts development planning. Senator Dorgan opined that there is no question that speculation plays a large role in oil prices. He cited research showing that where once only 30% of market participants were speculators, that figure is now nearer to 70%. Mr. Grumet agreed that there is tremendous volatility in the markets, but argued that even absent speculation there is a great deal of uncertainty regarding market fundamentals. As an example, he pointed to the unforeseen U.S. natural gas phenomenon. Returning to the issue of speculation, Ms. Henderson pointed out that although there was broad agreement that it does play a significant role in setting oil prices, there is little or no agreement as to how to identify speculators and measure the amount of speculation taking place. The session closed with Mr. Navarre’s observation that all forms of energy entail some cost, and any energy policy is thus an exercise in trade-offs and compromises.