US energy demand has grown since 1983 at an average rate of almost 2% per annum, reaching the equivalent of 50 mbpd of oil last year. Primary energy production, on the other hand, has grown by an average of just 0.7% per annum over the same period, leaving the US with a widening gap between domestic demand and supply. The latest forecasts from the US Department of Energy in its Annual Energy Outlook show energy demand 30% higher by the year 2020. Considerable development of gas reserves, both in the US and Canada, and a further jump in oil imports to almost two-thirds of aggregate oil demand, would be needed to match such a rise in consumption.
A growing energy deficit is not the only problem facing the US. Under-investment in new capacity and a congested and ageing infrastructure, which impedes the flow of energy between regions, are also adding to the nation’s problems - as reflected in miniature in California. The oil, gas and electricity sectors all display similar inefficiencies, with soaring demand running ahead of production and transportation systems that are suffering from many years of under-investment.
Surging growth in gas demand over the past few years has led to a rise in gas pipeline utilisation and yet more wear and tear on some of the older lines. Average utilisation rates in pipelines leading to areas of large demand are over 90% and can rise to well over 95% during peak demand periods. The electricity transmission grid is also highly congested and does not have enough capacity to allow electricity to flow from areas of excess capacity to areas of shortage when demand is at its highest. Furthermore, generating capacity is growing at only half the rate of electricity sales, raising utilisation rates and boosting electricity imports from Canada.
Oil imports are now required to supply more than half of annual consumption and the proportion covered by such imports is expected to rise to over 60% by 2020. The Bush Administration’s National Energy Policy focusses on ways of halting or reversing the decline in domestic oil supplies, including the opening up of part of the Arctic National Wildlife Refuge to exploratory drilling. However, even if drilling takes place in the Refuge and a significant find is made, it is likely to take the best part of a decade before any new oil reaches the consumers. One of the most pressing problems for the US over the next decade will be to supply its oil product markets by means of an ageing refining system that has barely grown for fifteen years and is now being made to run close to capacity for most of the year.