Think back to early 2004. Oil cost around $40 per barrel—on the high side compared to the previous few decades but not much out of the ordinary. Gasoline still cost under $2.00 a gallon for most of the country. The evening news was more concerned with wardrobe gaffes by Janet Jackson (too little, at the Super Bowl) and President Bush (too much, on the USS Abraham Lincoln) than with energy prices.
In retrospect, these were the last days of "normal." Almost everyone in business, the media, and government assumed that the world had plenty of cheap oil. And hardly anyone outside the fossil fuel industry had heard of peak oil, the idea that we were nearing physical limits to global oil production and a new period of oil price and supply volatility.
We now know that the world's conventional oil production would effectively stop growing the very next year, setting off a sickening global economic rollercoaster ride. The complacency of 2004 would change to worry by 2005 as the price of oil surged past historic highs, and to outright panic in 2008 when it crossed the once-unthinkable $100 barrier. It would spark massively increased investment in alternatives like tight oil, tar sands oil, shale gas, renewable energy, and nuclear power—all while the global economy made painful adjustments to the new normal of $80-plus oil.
By now you'd think we'd be chastened by the last ten years, and would be planning cautiously and conservatively for our nation's energy future. Instead, almost everyone is once again assuming that we've got plenty of (admittedly more expensive) oil, and that there's nothing to worry about.
Such short-sightedness isn't necessarily surprising for Wall Street, where only the current quarter's figures matter; nor for the news media, where energy-literate journalists are sadly few and far between. But it's quite another matter to see it in a federal government agency, especially one whose most important functions include projecting the future of the country's energy needs and resources.
In this respect, the Energy Information Administration's (EIA) recently released Annual Energy Outlook 2014 (AEO 2014), which foresees impending and long-term US oil abundance, is not just surprising—it's a dangerous return to a 2004 way of thinking.
Although few would disagree that the EIA's data collection and dissemination activities are world-class, its projections in AEO 2014 are, like most of its previous projections, overly optimistic and unlikely to be realized. The risks to long-term American energy security are obvious if the EIA's projections of low-priced energy abundance don't work out.
Good news sells, and doesn't rock any boats, but policy makers and politicians comforted by rosy forecasts are unable to understand the risks and properly prepare the country for long-term energy sustainability. It's unfortunate—and yes, dangerous—that rosy forecasts are exactly what the government's premiere energy fortune teller continues to offer, despite its dismal track record.
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