Can Natural Gas Break Our Oil Habit?

Natural gas is the only fossil fuel capable of getting good press these days. Its fans regularly rhapsodize about its merits, calling it an extraordinary fuel that's cheap, domestically abundant, and clean. Well, cleaner than oil, at least. Meanwhile, everyone from Texas oilman T. Boone Pickens to the Sierra Club is promoting natural gas as the key that America needs to free itself from its century-long addiction to oil. After all, the nation's appetite for oil means that nearly 60 percent of the petroleum consumed each year must be imported, much of it from unstable or unsavory regimes in the Middle East, Africa, and Latin America.

Pickens, along with a growing number of groups, wants America to slash its oil consumption by making better use of natural gas. In theory, the plan sounds simple. Around 22 percent of the natural gas burned each year is used to generate electricity. If wind energy were substituted for gas at power plants, the freed-up natural gas could be used instead to fuel ground transportation systems, starting with diesel-burning fleet trucks and buses. Advocates say this plan could cut U.S. oil imports by up to 38 percent.

Yet if the nation makes the switch from oil to natural gas to run its vehicles, will it simply be trading one foreign-dependent fuel for another? The answer is, probably. But to what extent is very hard to say. "Welcome to uncertainty," says Gordon Kaufman, a professor emeritus and oil and gas expert at the Massachusetts Institute of Technology's Sloan School of Management.

Currently, only 16 percent of the natural gas America consumes is imported. That's much better than oil, of course, but it doesn't eliminate foreign supplies. And while most of what is imported today comes from Canada by pipeline, Canada is increasingly using more of its gas domestically. That means any expansion in U.S. demand would almost certainly have to draw upon other foreign sources, which would ship it to U.S. ports as liquefied natural gas, or LNG.

Russian roulette. It's not encouraging to look at where the Earth's concentrations of natural gas lie. Three countries have more than 55 percent of the world's proven reserves: Russia (25.2 percent), Iran (15.7 percent), and Qatar (14.4 percent). Other countries that have fairly substantial reserves include Saudi Arabia, the United Arab Emirates, Nigeria, and Algeria. "It is hardly politically a smart move to rely on these countries for supplies," notes Martin Blunt, a professor of petroleum engineering at London's Imperial College. Russia, for instance, has twice used its gas resources as a political weapon by turning off supplies to its European neighbors, most recently last winter.

Moreover, even if U.S. companies wanted to buy Russian gas, not much would be available in the short term. While Russia pipes a lot of gas to Europe, it hasn't gotten heavily involved in the LNG market so far.

Natural gas is also gaining in popularity worldwide. Global consumption could increase more than twofold in coming years, and that could make for a very competitive and unreliable international market. Exporting countries will ship gas to wherever they can get the best price. And countries like Japan and South Korea, which are much more reliant upon imports than the United States, have shown a willingness to pay top dollar. Japan imports more than four times as much LNG as the United States, while South Korea imports nearly 58 percent more. "We would be competing with everyone," says Steve Gabriel, an expert on natural gas markets at Resources for the Future. "If we have to get into the international market, we might have a problem."

So, what about those bountiful domestic supplies that proponents talk about? Can they free the country from the clutches of foreign suppliers? Perhaps, but probably not entirely. The Energy Information Administration says that U.S. dependence on foreign natural gas could drop from 16 percent to 3 percent by 2030 if it takes full advantage of so-far untapped reserves. That would include tapping unconventional sources, mainly from shale, opening up Alaska's gas fields, and mining the gas beneath the ocean along the outer continental shelf.

"But those are big 'ifs,' " says David Pumphrey, deputy director of the energy program at the Center for Strategic and International Studies. For instance, there's a fair amount of political and environmental opposition to going after the Alaskan and OCS gas. Some are worried, for example, that an Alaskan pipeline could damage Arctic permafrost.