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TUCSON-PIMA 2001 TRANSPORTATION ENERGY ASSESSMENT Transportation
and Growth Committee Tucson-Pima
Metropolitan Energy Commission September 2001 TUCSON - PIMA 2001 TRANSPORTATION ENERGY ASSESSMENT EXECUTIVE
SUMMARY
As Greater Tucson prepares to plan and implement an
acceptable transportation system for the next two decades, energy and economic
impacts should figure prominently in the community’s decisions. The
following assessment update by the Tucson-Pima Metropolitan Energy Commission
shows that total expenditures for transportation energy increased more than 60
percent during the last two years. In
1998, $480 million was spent locally on gasoline and diesel fuels. In 2000,
expenditures for those same fuels increased by $300 million annually to a total
of $780 million. This increase is more than seven times larger than the $40
million city sales tax currently identified as a possible funding solution for
local transportation “improvements.” The
per capita energy costs of transportation are five times greater than the per
capita public costs of operating and maintaining the current local system. With
oil prices increasing and “vehicle miles traveled” growing three times faster
than local population growth, transportation energy consumption and costs are
likely to increase significantly, especially if we fail to account for these
costs during the current planning phase. Future cost and availability of
petroleum resources constitutes one of the most important factors for choosing effective
investments in the expansion and mix of future transportation modes. The
consensus among experts is that the peak of world oil production will occur
during the next two decades, a time when world population growth (and
subsequent energy demand) will increase by 2.5 - 3 billion more people. After
this production peak, average demand will exceed average supply and prices for
all goods and services, as well as oil, will increase. Dr. Helmut J. Frank, the Commission’s
consultant and author of this report, advises that recent changes in oil supply
and prices do not, in any way, confirm the theory of imminent resource
exhaustion. He points out that historically, these conditions typically lead to
two modes of economic adjustment: 1) substitution of alternative sources and
technologies and 2) increased conservation. The
good news on Tucson’s energy front is that the metro region consumed 9 percent
less energy per capita overall in 1998 than 1992. This positive trend is saving
the local economy $200 million annually and is the result of increased
energy-efficiency of residential, commercial, and public buildings and
continuing investments in renewable energy sources. The more recent trend of
increased transportation energy consumption and expenditures, however, is
canceling overall per capita energy savings and leaves us more vulnerable to
future price increases and uncertainties in world petroleum markets. During the past decade, approximately 10 percent of
total metropolitan income was spent on imported energy for all uses. Energy and
transportation policies which extend the status quo expose the local economy to
increased economic risks. On the other
hand, policies which foster investments in energy-efficiency, renewable energy
technologies, and alternatives to single-passenger vehicle transportation will
improve Tucson’s future economy -- creating new jobs, lowering costs, and
generating further investments. Bob
Cook, Chair Transportation and Growth Committee Tucson-Pima Metropolitan Energy Commission TUCSON METRO AREA TRANSPORTATION FUELS CONSUMPTION By Dr. Helmut J.
Frank I. Recent
Developments This report surveys and analyzes
consumption patterns of transportation fuels for the Tucson Metro Region. For statistical purposes, the Region is
identical with Pima County. The report
covers only the major fuels consumed in road transportation, gasoline and
diesel oil. Fuels used by aviation and
railroads are not covered, and neither are fuels that represent only a minor
portion of total road transportation, such as compressed natural gas and liquid
natural gas. The study covers the periods 1992-1998,
previously reported, and extends the analysis to 1999 and 2000. Data sources are primarily the Arizona
Department of Transportation and the Federal Department of Energy and are noted
in the various tables. In a few
instances where data were either not available or deemed unreliable, the author
prepared estimates which should be considered preliminary and subject to later
revision. 1.
Volumes Consumed Motor gasoline consumption in the Tucson
Metro Area amounted to 406.3 million gallons in 2000 (Table 1). This was 23 percent more than eight years
earlier. Significantly, gasoline use
rose only slowly during the first six years, less than the area’s population
(1.1 percent annually versus 2.7 percent), so that usage per capita declined
during this first period (Table 2). In
the final two years (1998-2000), however, gasoline consumption accelerated to
7.4 percent annually, triple the population growth, and per capita usage
increased significantly. These trends parallel those for the
nation as a whole. During the late
1980s and early 1990s, the average efficiency of passenger cars increased
annually, in conformance with the prescribed federal CAFE standard of 26.4 mpg,
and the proportion of cars and trucks did not vary very much. In the late 1990s, however, the growing
popularity of heavier vehicles (trucks, SUVs and vans) with higher fuel
consumption resulted in a drop of average miles per gallon, and thus increased
per capita consumption. Consumption of diesel oil used in
transportation (so-called “Use Fuel”) has followed the same trends as gasoline
consumption but increased steadily between 1992 and 2000. The rate of increase during 1992-98 far exceeded
that for gasoline (15 percent annually versus only 1 percent) but it slowed
during the last two years to an annual rate of increase below that for gasoline
(5.3 percent versus 7.4 percent).
Diesel oil, of course, does not fuel most personal vehicles or small
trucks. However, heavy trucks with
diesel powered engines carry much of the merchandise consumed by the local
population, and changes in its quantities and prices are reflected in the cost
of goods consumers buy, and thus in their total expenditures for fuels. The number of vehicles registered in
Pima County increased more slowly than population between 1990 and 1995 but
faster since then, to 670,000 in 2000
(Table 3). Total vehicle miles traveled increased sharply during both
five-year periods, from less than 15 million to over 20 million miles per
day. Miles traveled per capita
increased steadily to 24 miles per day in 2000. Miles traveled per vehicle increased in the early 1990s but has
leveled off since then, at 31 miles per day. 2.
Fuel Prices Gasoline and diesel oil prices generally
follow similar patterns since they are made from the same raw material, crude
oil, which is processed by oil refineries typically producing a wide range of
petroleum products. Their prices do not
run exactly parallel, however. Consumption patterns vary with the season, with
gasoline usage highest during the summer vacation months and diesel oil (which
is made from the same cut of the barrel as heating oil) in greater demand
during the colder months. Also,
gasoline in about one-third of the country is subject to new, more stringent,
air quality standards which require it to be oxygenated by blending it with
ethanol or other additives, and this raises the cost of production. Diesel oil has not been subject to such
standards until now, but these are scheduled to take effect in the next few
years. Prices of both products reflect the cost
of the raw material (including transportation), refining costs, refining
margins, margins of distributors of retailers (including state and federal
taxes). The cost of crude represents the largest of these items,
and this is clearly reflected in
Arizona motor fuel prices. Between 1992
and 1998, crude oil prices, which are determined on the world market, fell
sharply. West Texas Intermediate fell
from over $20 per barrel to an average of about $14 per barrel, a drop of 30
percent. (In early 1999 the price of
crude approached $10 per barrel, a level not seen since before the first energy
crisis in the early 1970s.) Both
gasoline and diesel prices fell during this period, though not as much as the
price of crude (5.0 to 6.7 percent, respectively). Adjusting for inflation, the decrease was much sharper, 18-19
percent (Table 4). This trend was completely reversed,
beginning in 1999, when the members of OPEC decided to make major cutbacks in
member production. Crude prices rose
sharply, climbing as high as $35 at one point in 2000. (Recently, they have
ranged between $28 and $30 per barrel.)
Tucson area gasoline prices between 1998 and 2000 rose some 40 percent
to an average of $1.48 per gallon while diesel oil reached and estimated $1.65
per gallon, a 42 percent increase during the two years. Even in inflation
adjusted dollars, the two-year increases were large, 23.3 and 27.7 percent,
respectively. Part of these increases, which have
persisted into 2001, is due to the failure to expand U.S. refining capacity in
line with growing demand. This has
resulted in very high operating rates, and led to stock draw-downs to extremely
low levels and to very tight supplies, especially at times when several major
plants were forced to shut down for periodic maintenance or because of
accidents like fires. In addition, the
failure to increase refining capacity stems from the very low refinery (and
marketing) margins during the period of oil surplus, which caused low profits
or even losses for that segment of the industry. Finally, a contributing factor has been the difficulty of finding
suitable locations for new refineries, for environmental and other reasons. 3.
Consumer Expenditures Tucson area expenditures for major road
transportation fuels have taken a dramatic jump in the past 2-3 years. During the early 1990s, they had risen
quite slowly, about 3 percent per annum, since lower prices offset larger quantities
consumed (Table 5).* Beginning in 1998,
however, transportation fuel expenditures rose sharply, at an average annual
rate of 27 percent for both gasoline and diesel oil. In 2000, total spending for these fuels reached nearly 780
million or 61 percent greater than just two years earlier. Both gasoline and diesel oil contributed to
this increase. The main culprit was the sharp increases in prices-- 13-19
percent annually versus about 7 percent annually for volumes. Even in inflation-adjusted dollars,
expenditure increases ran in the double digits. Tucson area population, during these two
years, rose at an average of 2.5 percent p.a., slightly slower than in the
previous six years. In contrast to
1992-98, when per capita fuel usage (especially gasoline consumption) fell, per
capita purchases of both fuels rose sharply during the last two years. Gasoline consumption per capita increased
from 427 to 469 gallons, (4.8 percent annually while diesel oil use grew from
115 to 125 gallons per capita, or 4.3 percent annually (Table 6). With both volumes and prices rising more
rapidly than population during the past two years, per capita fuel expenditures
took a major jump. Gasoline spending
rose from $453 per capita in 1998 to $695 in 2000, and diesel fuel from $133 to
$206 per capita, increases of about 24 per cent annually. Spending on both
fuels combined reached a level of over $900 per capita in 2000, compared with
$586 two years earlier, increases of over 50 percent. This was much fast than the rate of inflation; even in
inflation-adjusted dollars the increases were around 45 percent for the two
years, or over 20 percent annually. __________ *Total dollars spent on gasoline in the
early 1990s were, in fact, virtually flat, and only diesel oil spending saw
major increases, due to greatly expanded volumes sold. It should be noted that long-distance
freight carriers frequently pass through Phoenix and thus have the option of
filling up there or in Tucson. Phoenix
is supplied by refineries in California, where petroleum prices are typically
higher than in West Texas and New Mexico, where the bulk of Tucson’s supplies
originate. However, the size of the differential varies and this may affect
diesel oil sales in the Tucson area. II. SHORT-TERM OUTLOOK The United States this spring has
experienced, if not an energy “crisis”, then a period of tight petroleum fuels
markets and high prices. Gasoline
prices nationwide reached an average $1.60 a gallon and are still above $2.00 a
gallon on the West Coast. (They were
also that high in the summer of 2000 in the Chicago-Milwaukee area.); The
question arises whether the supply conditions are a short-term phenomenon or
whether they indicate a long-term trend toward ever-greater scarcity and higher
prices. Oil markets have been subject to very
wide swings in prices virtually since its very early years in the 19th
century. The post-Word War I period has
been no exception; each time the market signaled growing scarcity of resources
appeared to be imminent, conditions reversed a few years later. There is no
conclusive evidence that this time will be any different. True, U.S. production has been declining
for some 30 years but world oil markets are now highly developed, to the point
where the U.S. has had little difficulty supplementing shrinking domestic
supplies with increased imports from a great variety of Western and Eastern
Hemisphere sources. World oil markets
have been tight at times, mainly due to political events like the Arab-Israeli
War in 1973 and the Iranian Revolution in 1979, not to geological
constraints. (Long-term supply
prospects are discussed in the following section.) A major force influencing world crude
oil markets since the early 1970s have been the inconsistent policies of the
Organization of Petroleum Exporting Countries (OPEC). In the early 1980s, OPEC held down production and tried to keep
prices high, only to lose markets to conservation and expansion of alternative
supply sources. When production
restraints were removed, the market was flooded with oil on several occasions.
In early 1999, they sank to less than $11 a barrel. This shocked OPEC members
into changing their tactics. Instead of
aiming for maximum production, they decided to set firm price targets, to be
enforced by frequent changes in production levels. Since decisions are subject to unanimous vote of the 11 members,
this is not an easy thing to achieve.
The current target price of a “basket” of OPEC crude, roughly in line
with West Texas Intermediate crude at $28 a barrel. However, the unusually low prices two years ago discouraged
investment in new producing capacity, both in the U.S. and abroad. Also, two major producing countries, Iraq
and Iran, have been unable to develop their reserves under U.S. and U.N. boycotts. As a result, little spare producing capacity
to meet demand surges, such as occurred in the summer of 2000, when prices
briefly reached $35 a barrel, is currently available. If crude oil has not been in short
supply in the U.S., the same cannot be said of natural gas. Gas exploration has been discouraged by
prices comparable to the very low oil prices, both domestically and in Canada,
the only major source of imported supplies.
Recently, gas supplies have been severely strained, and prices have more
than doubled (at times more than that).
This reflects both supply and demand factors. On the demand side, the heating season in he colder regions was
more severe than normal. Also, natural gas demand for generating electricity
has been expanding rapidly, since very few coal- burning plants and no nuclear
plants are being built. With electricity in short supply both on the West Coast
and in the Northeast, many new gas-fired plants are being rushed to completion
in the near future, and the demand for natural gas to fuel them is escalating. On the supply side, conditions for
natural gas differ fundamentally from those for crude oil. While there are huge potential supplies of
gas worldwide, these are heavily concentrated in such places as Central Asia and
the Persian Gulf which cannot supply markets in the Western Hemisphere at
prevailing prices. Gas reserves are
highly concentrated in such remote areas as the Persian Gulf and Central Asia. Making gas from these regions available to
the U.S. would entail expensive liquefaction at the source into liquid natural
gas (LNG), shipment in specialized tankers and regasification at the point of
destination. Limited quantities of LNG
are likely become available from some Western Hemisphere sources (Venezuela, Trinidad)
and possibly Nigeria. But a reversal of
tight gas markets will require that the current prevailing price of around
$4.00/MCF will be maintained so as to offer incentives to producers in the U.S.
and Canada to increase production, expand pipeline capacity and storage
facilities, and possibly attract significant imports from overseas. This will
take more than the normal time to accomplish since specialized equipment and
experienced manpower were lost during the period of low prices and need to be replaced.
In contrast to crude oil, the problems
with refined products, including gasoline and diesel oil, recently have been
serious and persistent. Refining
capacity has scarcely grown for several years, largely due to the low refining
margins (and even losses) that prevailed during the period of crude oil
surplus. Also, it has been difficult to
find suitable locations for plant expansion and new plants, given concerns over
air pollution and other environmental aspects.
With demand expanding rapidly, refineries were operating at very high
rates during much of the past year, especially in late winter when demand for
heating oil was high and stocks were depleted to dangerously low levels. (Heating oil comes from the same middle of
the barrel as diesel oil, and their prices tend to move parallel). Overhaul and maintenance of refineries were
postponed to rebuild stocks, and the result was a breakdown in several large
plants at home and overseas. Conditions
have been particularly serious on the West Coast, which is an isolated market
that cannot be readily supplied from other sources. There have been other problems as
well. Last summer, a major pipeline to
the Middle West had operating problems, contributing to the shortages in the
Chicago area. Additionally, higher
standards for gasoline emissions came into effect in about a third of the
country, requiring refiners to produce so-called “reformulated” gasoline
containing ethanol, which was in short supply.
All these factors contributed to a sharp run-up in gasoline and
distillate prices on commodity exchanges, where world oil prices are set by
supply and demand. The higher prices,
of course, were passed on to distributors and retailers, both of whom had been
operating at very slim margins prior to the shortage. Economic growth has been slowing this
year, both in the U.S. and elsewhere.
In the short term, lower demand increases are likely to dominate oil
markets. A shortage of crude thus is
not expected, barring unforeseen events like a supply interruption in a major
producing country. However, no
immediate relief of the tight refining situation is in sight. This would require prompt construction of
new plants, which implies overcoming existing obstacles to their location, or a
leveling of consumer demand through reduced driving and/or a significant switch
to more energy efficient vehicles. With refineries operating in excess of 90%
of capacity and other facilities stretched to the limit, the danger of spot
shortages always exists. Following the
price run-up in late winter, wholesale gasoline prices have already declined
substantially, and retail prices are beginning to ease somewhat, as always with
a considerable time lag. We certainly
cannot expect to see a return to the low prices of two years ago, though the
very high prices of the last few months should be behind us for now (with the
West Coast a likely exception). III. LONG-TERM OUTLOOK The recent lack of spare capacity in
crude oil production, tightness in petroleum products markets, and consequent
price run-up raises serious questions as to whether these conditions were
strictly temporary or provided a taste of things to come, perhaps in much
greater measure. Two opposing views prevail on this
question. One, which we call here the
“pessimistic” one, foresees the imminent peaking of world crude oil reserves,
followed in a relatively few years by declining production and end of the oil
era. Adherents of this view call for
urgent changes in consumer behavior and national policy designed to adapt to a
new world of oil scarcity. The opposing
view, the “optimistic” one, considers the petroleum resource base as quite
adequate to support growing world consumption, believing that technology and
economic incentives will suffice to ward off scarcity for many years to come.
In fact, it denies the notion that the world will ever run out of oil. We examine the basis for both positions,
giving arguments pro and con of each, and concluding with the policy
implications as the author sees them. 1.
The Pessimistic Scenario This view is held by many, especially
physical scientists led by geologists.
It is well presented by L. B. Magoon of the U.S. Geological Service
(USGS) in which he summarizes projected world production by recent forecasters,
all of whom envisage a peaking of world oil production in the next 10- 20 years
or sooner. The pioneering model for this work was done by American geologist,
M. King Hubbert, who developed a model for projecting the peak year of U.S. oil
reserves, which would be followed by a decline in production a few years
later. Applying his model to the U.S.
oil industry, he predicted in 1956 that peak production would occur in
1970. This turned out indeed to be the
case, and Hubbert’s methodology has been widely accepted among his colleagues
and others. The model has been criticized for
several assumptions and omissions and its applicability to the world outside
the United States seriously questioned.
First, it utilizes a logistics curve assumed to be perfectly symmetrical,
i.e., its peak represents the midpoint between rise and decline of
production. Thus, the period of decline
is shown to be equal to that of growth, while in actuality there may be a
stretched-out tail which would permit a period of adaptation to the declining
volume of oil available. The length of
such a period cannot be readily predicted; rapid increases in oil demand
stemming from high rates of population increases and economic growth would tend
to preclude the production tail from stretching out while major technological
breakthroughs in oil exploration and discovery would have the opposite
effect. However, the long-term trend is
clearly one of increased oil scarcity and higher prices. Second, the United States is an “old”
oil region whose resources have been thoroughly explored since oil was
discovered in Pennsylvania, in 1859.
There are number of other old oil areas elsewhere (e.g., Eastern Europe)
where this is the case, and others are in the process of becoming old territory
(e.g., the North Sea). But there are vast regions, especially in offshore
regions, which have been only lightly explored, if at all. Some estimates of world oil resources have
increased significantly over the past 20 years (and longer), as a result;
estimates of world oil resources vary widely.
A recent assessment by the U.S. Geological Survey puts the mean
potential reserve growth outside the United States at 612 billion barrels with
a range from 192,000 billion barrels (95% probability) to over 1 trillion
barrels (5% probability). Estimates of
undiscovered reserves show a similar wide range. Third, the Hubbert type curve does not
take into account future technological improvements at a rate greater than have
occurred in the past. These have
accelerated greatly in recent years (e.g., better seismic techniques, drilling
platforms that permit exploration in deep waters, enhanced recovery methods),
permitting operations in many regions that were off limits in the past. Neither does it consider the effect of
changing oil prices on exploration; there is a vast difference between $15 a
barrel oil, when many marginal wells become uneconomic, and $30 a barrel oil,
when incentives to operate older fields with marginal productivity and search
for new ones in remote and difficult places, becomes much more attractive. Also, at higher prices, it becomes economic
to start producing from such alternative sources of oil as Canadian tar sands
and Venezuelan heavy oil, all of which can increase available reserves. Finally, no consideration is given to
the rate at which oil demand will increase over the long term. At the recent slow rate of growth of 1.1
percent annually, world demand for oil would reach a level of about 33 billion
barrels in 2020, versus 26.7 billion in 2000; at a 3 percent growth rate, it
would reach 48 billion barrels.
Assuming the present level of proved reserves is maintained, these would
last about 30 years in the slow case and 20 years at the high rate. (See the
discussion of future reserves in the last section.) 2.
The Optimistic View The optimists began by attacking the
whole idea that oil is becoming scarce has little basis in fact. The Club of Rome predicted, in the early
1970s that the world was running out not only of energy but also of raw
materials in general. This has proved
not to be the case; in fact, raw material prices now are significantly lower
than 30 years ago, a clear indication that supplies are ample and expected to
remain so. Even oil prices today are still relatively low. Crude oil, currently in the $26-$28 a barrel
range, is only about $6 a barrel when adjusted inflation since the early 1970s,
at the time of the first oil crisis.
Oil prices then rose from $2 a barrel to over $8. Since then, their annual average has ranged
from a high of $16 a barrel in 1980 to a low of $4 a barrel in 1999. On the physical level, estimates of oil
resources have consistently increased during the past 30 years. Proved reserves, at over 1 trillion
barrels, are 50% greater than 30 years ago and have maintained their current
level for the past decade despite unfavorable conditions. Resource base estimates (production to date
plus current reserves plus potential reserve growth and estimates of
undiscovered resources) have risen from around 1.4 trillion barrels to over 2
trillion currently, based on conservative estimates. More speculative estimates range up to several times that
number. Natural gas estimates are even
greater. In addition, there are large
reserves of non-conventional oil like Canadian tar sands and Venezuelan heavy
oil fields. They are already being
exploited at today’s prices and could become much more important if crude oil
prices should go significantly higher in the future. In the optimists’ view, the entire
concept of limited oil resources is not very meaningful. While admittedly the
planet’s exhaustible resources by definition are finite, the view is that we
will never “run out” of oil. If it
becomes scarce and expensive, the market will respond by providing alternative
sources. The oil industry has always alternated between periods of feast and
famine. At low prices, marginal wells
will be shut down and exploration cut back.
When demand increases again prices will rise and provide incentives to
expand. Resources will be drawn back
into the industry, technology will improve (permitting exploration in more
difficult regions) marginal wells will be restarted and tertiary recovery
techniques (raising average recovery rates) will become more widely used. Proved reserves will increase; they are
viewed not as a fixed resource but as an inventory supporting current
production that will be increased when and if needed. There is evidence that the U.S.
Department of Energy subscribes to this optimistic view. Its current 20-year outlook projects a 2020
crude oil price of $22.41 per barrel
(Reference Case), with a range of $15.10 per barrel for the low demand
case and $28.42 per barrel for the high demand case. Among other forecasts only
that of the International Energy Agency forecasts a higher figure ($30.04 per
barrel). All figures are in 2000
dollars. 3.
The Author’s Views I have areas of agreement with both the
pessimistic and the optimistic viewpoints, but feel that both contain serious
omissions that make their implications questionable for policy purposes. I
agree with the pessimists that the world oil industry is becoming “mature,”
i.e., that the easiest finds have been made, and that, over the long term,
costs are increasing. In large measure,
this is because the fortuitous huge discoveries in the Middle East in the 1940s
and 1950s have caused a “discontinuity” in the historical development of the
industry, i.e., finds of this magnitude are unlikely to recur. My main disagreement with the pessimists is
two-fold. First, they apply a
methodology that was well suited to conditions in the United States, which has
been extensively explored (and exploited) to the rest of the world, where this
is often not the case. A great deal
more information has to be generated before one can be certain where and when
peak production will occur in currently producing areas and new finds are
occurring frequently, though only a few of these can be considered “major”
(containing 500 million barrels or more of recoverable reserves). The pessimistic
view also commits a serious error, in my opinion by down playing the economic
and technological forces that help
shape the industry over time.
Increasing scarcity of oil will signal to investors that additional
resources should be directed toward development of alternative fossil fuel
sources, including natural gas and unconventional sources of oil. This will occur as returns on investment in
crude oil become less profitable and investment in alternative sources becomes
more attractive. Also, rising costs of oil will tend to slow down demand
increases because consumers will have incentives to practice greater
conservation, and also because many importing countries, especially the
developing oil-poor ones’, ability to pay for imported oil is limited. My main disagreement with the optimistic
view is that it ignores the many constraints that exist to developing and
exploiting the world’s large oil resources.
I will mention only two of the major ones: geographical distribution and
negative impacts on the environment. Oil reserves and resources are heavily
concentrated in the Persian Gulf region, which contains almost two-third of
proved oil reserves. OPEC countries as
a whole control over three-quarters.
(The U.S. share is 2.8%).
Natural gas reserves are similarly concentrated in the Middle East and
the Former Soviet Union. In the Persian
Gulf, all countries except the largest producer, Saudi Arabia, are operating at
or near maximum producing capacity.
However, two others, Iran and Iraq, have been unable to develop their
oil industries, and even to maintain existing facilities, because of political
obstacles. For Iran, this is due to
rabid anti-Western policies, including support of extremist groups in various
places. For Iraq it has been its continuing refusal to satisfy the victors in
the 1990 Gulf War that it has indeed given up its ability to produce weapons of
mass destruction. These conditions are
likely to continue, and probably become aggravated, especially in the absence
of a solution to the Israel-Palestine problem.
Thus, even Western-friendly governments like Saudi Arabia, Kuwait and the United Arab Emirates, feel
they have to go slow in permitting Western companies to operate within their
borders. Persian Gulf oil producers
will also face decisions of how speedily to develop their vast oil resources.
They may not consider it in their interest to accommodate rapidly growing
demand for oil, since that would shorten the life span of their oil fields,
cause inflation and social instability. The conclusion one must reach is that,
even if vast oil resources remain to be found, these may not be developed at
the rate consuming countries would prefer to see. Environmental considerations likewise
raise serious questions for continued reliance on oil. All phases of oil -- production,
transportation refining and consumption--have negative impacts on the
environment. Some can be reduced to
acceptable levels by the application of better technologies, e.g., minimizing
emissions from oil refineries, avoiding oil spills at sea and by pipelines,
setting lower limits on emission by oil burning engines. Others cannot be readily reduced, especially
emission of CO2 from burning fossil fuels.
At the moment, U.S. policies lag behind those of other industrial
countries, but this of course can be reversed as increased evidence of global
warming impacts becomes available. Taking
the long view, the world has gone through several energy cycles. Coal replaced wood with the beginning of the
Industrial Revolution, oil replaced coal in many uses during the 20th century,
and alternative sources will undoubtedly replace oil during the 21st century in
the many uses where such options exist.
A vast array of clean, non-exhaustible energy sources are becoming
increasingly available and commercially practicable. Wind power, solar applications in various forms, fuel cells,
hydrogen and, possibly, nuclear fusion promise to make increasing contributions
to the energy mix. Other technologies, as yet hard to predict, may come to the
fore. The length and speed of this
transition cannot be fully predicted as it depends on the interplay of many
forces. We must not jump to the
conclusion that several years of apparent scarcity confirm the theory of
imminent resource exhaustion. Tight
conditions and high prices, followed by ample supplies and lower prices, is
part of the historic pattern for the oil industry. Conditions have tended to
reverse themselves, albeit typically with considerable time lags. In the
future, the overall trend is toward a decreasing ratio of petroleum resources
per capita. The long-term conditions of population growth and demand increases
combined with shrinking supplies of recoverable oil will predictably cause
significant prices increases that are higher than the rate of overall
inflation. Of special local concern is the recent
trend of higher expenditures for transportation fuels and their impact on the
local economy. During the past decade, approximately 10% of total metropolitan
income was spent on imported energy for all uses. Energy policies which foster
investments in energy-efficiency, renewable energy supplies, and alternatives
to single-passenger vehicle transportation will improve Tucson’s future
economy. Stay tuned. REFERENCES Adelman, M. A. (1972), The World
Petroleum Market. Johns Hopkins Press
for Resources for the Future. American Petroleum Institute (December
1995), Discussion Paper #081, Are We Running Out of Oil? BPAmoco (annual), Statistical Review of
World Energy Energy Project of the Ford Foundation
(1974), A Time to Choose, America’s Energy Future. Ballinger Harris, DeVerle and Michael Rieber ( 1996), Commentary and Critique of
“Accounting for Mineral Resources, Issues and BEA’s Initial Estimates”.
Nonrenewable Resources, Vol. 5, No. 1 Odell, Peter R. and Kenneth E. Rosing
(1983), The Future of Oil, World Oil Resources and Use. Second edition, Nichols Publishing. Company U.S. Department of Energy, Energy
Information Administration (December
2000), Annual Energy Outlook 2001 With Projections to 2020 -------(2000), U.S. Crude Oil, Natural
Gas, and Natural Gas Liquids Reserves, 1999 Annual Report U.S. Geological Survey, World Energy
Assessment Team (2001), World Assessment Summaries, Survey Data Series 60. Tucson-Pima Metropolitan Energy
Commission, web site
(www.tucsonmec.org), various studies. Table 1 Tucson Area
Major Transportation Fuels Consumption 1992 - 2000 (Million
Gallons)
_____________________________________________________ a.
“Use Fuel” sales reported by the source. New data reflect changes in fuel categories subject to tax. b.
Estimated.
Source:
Arizona Department of Transportation, Motor Vehicle Division Table 2 Tucson Area
Transportation Fuels Consumption Per Capita 1992-2000
_______________________________________________________ a. Beginning in 1998 reported volumes
decreased because of changes in “Use Fuel” subject to tax. b. Pre-2000 census figure. New figure: 843,776. Source:
Table 1; Economic and Business Research Program, Eller Center,
University of Arizona. Table 3 Tucson Area
Vehicles and Miles Traveled 1990 - 2000
_________________________________________________________ a. Includes estimated 15% local traffic b. Estimate made in early 1999 Source:
Transportation Planning Division, Pima Association of Governments; Motor
Vehicle Division, Arizona Department of Transportation Table 4 Tucson Area
Transportation Fuels Prices 1992 - 2000 (Dollars per
Gallon)
________________________________________________________ a. 90 percent regular, 10 percent
premium b. Estimate c. 1982-84 = 100. Sources: Arizona Energy Office, Arizona Department of Commerce
(Lundberg data); Bureau of Labor
Statistics, U.S. Department of Labor. Table 5 Tucson Area
Transportation Fuels Expenditure 1992 - 2000 (Million
Dollars)
______________________________________________________ Source: Tables 1 and 4. Table 6 Tucson Area Per
Capita Transportation Fuels Expenditures
______________________________________________________ a. Old definition. See Table 2 b. New definition. See Table 2 c. 1982-84 = 100 Sources: Table 5 U.S. Bureau of Labor Statistics Table 7 Tucson Area
Income
___________________________________________________ a. Expressed in 1982-84 dollars. Source: Economic and Business Research Program, Eller Center,
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