Geopolitical issues are driving up the cost of oil and eroding U.S. energy security and could trigger another recession, according to energy experts.

But fuels derived from natural gas could help avoid a future oil crisis if they're poised to effectively compete in the oil-dominated transportation sector, members of the U.S. Energy Security Council said yesterday at a meeting of energy industry leaders.

"The U.S. is really facing an energy security paradox. We've expanded domestic oil supply, we've reduced demand through fuel efficiency, and yet gas prices in 2012 were at record high and OPEC revenues were at record highs," said Anne Korin, co-director of the Institute for the Analysis of Global Security and an adviser to the Energy Security Council.

"So drilling more and using less aren't going to solve our problem, which is price," she said. "So in order to solve the price problem, you have to focus on fuel competition."

Korin and co-author Gal Luft argue in their new book "Petropoly" that OPEC is increasing U.S. insecurity by driving up oil prices to balance their national budgets, particularly in the wake of the Arab Spring.

OPEC governments started handing out perks to their populations in response to the uprisings that have destabilized numerous regimes in the Middle East over the last two years. But the more a government spends on gifts for its people, the bigger its budgetary needs become, and if its main budget input is oil, it will need to sell oil at a higher price per barrel, Korin explained.

This puts the United States in a precarious position. A spike in crude oil prices has preceded nearly every major economic downturn in the United States since the 1970s. If the United States remains oil-dependent and prices continue to rise, it could trigger another recession.

World oil demand expected to rise
Growing demand in China and India compounds oil supply issues, which could bring global oil consumption up to 98 million barrels per day over the next three years while global production remains at around 86 million barrels per day, said John Hofmeister, former president of Shell Oil Co. and founder of the nonprofit group Citizens for Affordable Energy.

Oil production in Brazil, East Africa and the Arctic faces institutional and technological barriers, and with the Middle East in a such a volatile state, no one knows where that supply will come from, he added.

"Who will assure America can get its 20 million barrels a day?" said Hofmeister. "The answer is, if we don't do it ourselves, no one will."

That's where domestically produced natural gas could step in.

Compressed natural gas (CNG), liquefied natural gas (LNG), methanol, diesel, gasoline and even ethanol are all natural gas-based fuels that could potentially replace oil-derived gasoline and diesel. CNG-powered heavy-duty vehicles are economically attractive because of their large fuel cost savings, and there is strong interest in using them in the trucking industry, especially in fleets (ClimateWire, Nov. 30, 2012).

According to a study from the Massachusetts Institute of Technology, methanol could be the most promising option for large-scale market penetration of a natural gas-based fuel for light-duty vehicles because of its low fuel cost and low additional cost relative to powering a vehicle with gasoline.

Methanol can be made efficiently, has already been established commercially for use in the chemical sector, is relatively inexpensive because of low natural gas prices and produces less greenhouse gas emissions compared to other natural gas-derived liquid fuels, said Daniel Cohn, a research scientist at the MIT Energy Initiative.

The cost for a vehicle to run on methanol is thousands of dollars cheaper than running it on CNG or LNG in both the light-duty and heavy-duty vehicle sectors. In addition, recent MIT work by Cohn and his colleague, Leslie Bromberg, has indicated that a flex fuel-type passenger vehicle running on methanol could be potentially 30 percent more efficient than a vehicle powered by gasoline.

Electric cars may not help much
Electric vehicles powered by natural gas-generated electricity, or power derived from renewable sources such as wind and solar, could also help reduce U.S. oil dependency as well as reduce greenhouse gas emissions. Cohn, however, said he doesn't see electric cars saving the United States from an oil crisis anytime soon.

"I don't think there's any way electric vehicles can have any significant impact in the foreseeable future on the world oil market when you take into account the high vehicle cost," he said. "They're a difficult sell in the U.S. and even more difficult in places like China and India."

But the business case for natural gas vehicles may not end up being all that attractive, either. Bloomberg New Energy Finance anticipates that natural gas prices will increase over the next 24 months and could reach as much as $6.50 per million British thermal units by 2020, up from $2.75 at the end of last year.

Indeed, the natural gas industry needs prices to go up in order to see a return on its investments, said Ethan Zindler, head of policy analysis at Bloomberg New Energy Finance. "A lot of people will lose a lot of money if gas prices stay at $3.50 [per million British thermal units]," he said.

In the last Congress, the Energy Security Council helped propose the "Open Fuel Standard Act," which would require that no less than half of every auto manufacturer's fleet by 2014 be able to run on non-petroleum fuels in addition to, or instead of, petroleum-based fuels (ClimateWire, Oct. 26, 2011).

Electric and natural gas vehicles would qualify to help meet the quota, but feasibly so, too, would cars that can run on liquid fuels derived from coal, which are much worse in terms of greenhouse gas emissions.

Seeking more bipartisan support
The bill had bipartisan support, but failed to pass. Yesterday, the Energy Security Council vowed to renew lobbying efforts on Capitol Hill and to look for more allies in the private sector.

Increasing the number of alternatives is important not just for the transportation sector, but across the energy sector, said John Block, former secretary of Agriculture under President Reagan.

"I think we need to make it easier to drill for gas and oil and mine for coal," he said, adding that ethanol is also an important energy source in the transportation sector. By minimizing subsidies, reducing regulation and opening up U.S. trade, entrepreneurs will find creative solutions to America's oil crisis, he said.

But retired Vice Adm. Dennis McGinn, president of the American Council on Renewable Energy, cautioned that energy security and national security should not be achieved at the expense of environmental security.

Natural gas is a win environmentally because it produces less local pollution and less carbon dioxide emissions than traditional petroleum and electricity generated from coal, he said. But it's necessary to consider the degree to which natural gas should replace other types of energy sources and the full life-cycle emissions associated with fuels derived from natural gas.

"We could find ourselves years down the road with a price on carbon, and if we are overinvested in a portfolio of transportation energy that's overly carbonated -- to use that term -- I think it would really be a mistake," he said.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC., 202-628-6500