Transportation and Growth Committee
Tucson-Pima Metropolitan Energy Commission
TUCSON - PIMA 2001 TRANSPORTATION ENERGY ASSESSMENT
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.
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.
Tucson Area Major Transportation Fuels Consumption
1992 - 2000
a. “Use Fuel” sales reported by the source. New data reflect changes in fuel categories subject to tax.
Source: Arizona Department of Transportation, Motor Vehicle Division
Tucson Area Transportation Fuels Consumption Per Capita
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.
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
Tucson Area Transportation Fuels Prices
1992 - 2000
(Dollars per Gallon)
a. 90 percent regular, 10 percent premium
c. 1982-84 = 100.
Sources: Arizona Energy Office, Arizona Department of Commerce (Lundberg data); Bureau of Labor Statistics, U.S. Department of Labor.
Tucson Area Transportation Fuels Expenditure
1992 - 2000
Source: Tables 1 and 4.
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
Tucson Area Income
a. Expressed in 1982-84 dollars.
Source: Economic and Business Research Program, Eller Center, University of Arizona