The rapid ramping up of oil and gas production is only half the story in North America's transformed energy security outlook. The other half is energy efficiency, dubbed the "hidden fuel" by industry watchers.
In the past, the "gas-guzzling" U.S. was criticized by its European counterparts for its addiction to SUVs and a poor record on energy efficiency, but recent years have seen something of a turnaround. Concerns still remain that the realities of lobby politics and downward pressure on domestic gas prices could set this impressive progress into reverse.
Energy efficiency gains, in combination with supply-side factors, will be responsible for the halving of U.S. energy imports by 2020, according to the forecasts of the International Energy Agency (IEA). The accepted way of measuring energy efficiency is measuring our intensity of use in British thermal units (Btu) per U.S. dollar of GDP generated, a metric which has seen a sustained fall in the U.S. through the era of rocketing oil prices.
Many headlines over recent weeks have been marking the 40-year anniversary of the 1973 oil embargo. The disastrous oil embargo against the U.S. by a Saudi-led OPEC, in retaliation for the U.S. supporting Israel in the Yom Kippur War, has been described as the moment when the U.S. "lost her energy innocence."
But recent accounts have focused more on tracking the sharp uptick in energy efficiency sparked by the oil price shock. Figures from the EIA show that the Btu/$ of GDP measure more than halved from almost 16,000 in 1950, to around 6,100 by 2012.
Much of this "efficiency revolution" has been credited to Amory Lovins, the charismatic efficiency guru who heads up the Rocky Mountain Institute (RMI). Even back in the turbulent 1970s, he was ahead of the crowd. Lovins argued that what the world needed was not more supply, but innovations in how we use those supplies, if the U.S. was to truly insulate itself from another oil crisis.
Ridiculed or ignored at the time, Lovins now has the ear of the world's leaders as energy efficiency has become an accepted and central part of the debate over America's energy future. The RMI's new report Reinventing Fire begins by recognizing that while much of U.S. prosperity so far has been built on oil, what is called for today is a faith in clean energy.
Slick animated videos and infovisuals assure us that we can achieve a 158 percent bigger economy, unlock $5 trillion in savings and become truly independent by 2050. This can be achieved through leveraging of U.S. innovative and entrepeneurial capital, with the visuals calling on deep-seated American values such as a faith in the markets, and a rousing call to "take control of our energy future."
This belief in the capacity of technology to save us is seductive. While it is notoriously difficult to predict if and when game-changing technological innovations will come along, blind faith often pays off.
The potential, for instance, of new 3-D printing technology could prove to be the next industrial revolution we see, whereby decentralized production could lead to a seriously reduced demand for freight transport. This may not be an efficiency measure as such in the vein of carbon-fiber electric cars, but one that could dramatically and quickly cut fuel demand.
And while the U.S. has been accused in the past of dragging its feet on energy efficiency measures, the country has been quietly catching up over recent years. There is still some way to go for the country that still accounts for almost one-fifth of global energy consumption. In a recent ranking of energy efficiency in the world's 12 largest economies, the U.S. managed seventh place, with European countries occupying the three first places.
But the U.S. has drawn praise more recently from the IEA, who suggest that the U.S. is on track to be one of the world's most efficient developed countries by the end of the decade, thanks to action on mandatory energy-performance standards for appliance and equipment and efficiency levels for cars and vans that compare favorably with the EU and Japan. It would seem that four decades on from the beginning of his crusade, Lovins' words are finally being heeded by decision-makers.
However, returning to our historical trajectory of energy intensity measures, when we break down the pattern over the past four decades, we notice that after the sharp drop in consumption-per-dollar immediately following the 1973 crisis, there is a considerable slowdown of progress as we hit the mid-1980s and oil prices collapse.
The takeaway being that when the pressure is off fossil fuel prices, investments in renewable energy and efficiency measures also quickly tapers off. This hindsight may prove instructive in assessing the likelihood of such investments in the U.S., given today's historically low domestic gas prices.
There is a reason why Saudi Arabia — where billions of dollars of fuel subsidies keep prices rock bottom — is one of the world's least energy-efficient countries. Criticism by efficiency activists such as Lovins centers on the movement's resilience to downward trends in fossil fuel prices on the one hand, and the formidable lobbying power of both the automotive and oil industries in the U.S. on the other. In fact, the IEA has warned that we are already seeing a reverse in key efficiency metrics as a result of low gas prices.
An American faith in technology, markets and unleashed innovation to solve the energy crisis has shifted the environmental debate from consuming less to consuming smarter. This might come as a relief to those unwilling to take a hit to the quality of services and life that today's energy-intensive lifestyles allow us.
As IEA chief Fatih Birol reminds us, while we may not be speaking of a fuel in the traditional sense, energy efficiency can be just as effective in meeting our needs as increasing supply. But it can do so economically and without sacrificing the extent and quality of services we receive.
Ultimately the supply-side boom in the U.S. appears to be the savior of an energy outlook that was suffering from depleting reserves and a continued reliance on unstable regions. But sustained gains in energy efficiency on the demand side — grounded in a genuine, sustained commitment and support for innovation — is the crucial flipside of the coin.
