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Energy secretary predicts higher demand for oil

(Agencies)
Updated: 2009-02-20 11:30

WASHINGTON – Energy Secretary Steven Chu, a champion of renewable energy and biofuels, has no delusions about the future of oil. Global demand for it will increase over the next two decades even with more efficiency and alternative fuels, he says, and prices will again go higher.

US President Barack Obama has asked Nobel Prize-winning physicist Steven Chu to be his Energy Secretary. Obama wants Chu to review the US climate change policy and end the nation's "addiction" to foreign oil. Environmental groups have praised evidence of swift change by Obama in his inaugural week, saying it could transform Washington from a green "pariah" into a world leader. [Agencies]

Related readings:  Oil steady amid OPEC talks of more output cuts  Crude oil is getting cheaper — so why isn't gas?  Crude oil imports slump in Jan  Energy: Crude oil imports fall 8% in Jan

Chu, during an hourlong meeting with reporters Thursday, discussed the futility of predicting oil prices in the short run, the need for a national electricity transmission system, and the urgency of getting the billions of economic stimulus dollars to the nation.

For the second day in a row he indicated that the activities of the OPEC oil cartel are not one of his — or his department's — priorities.

When asked if the Obama administration would oppose expected production cuts by OPEC at a meeting next month, Chu said he was for oil price stability but couldn't say what the administration position was. He said he would look into it "to figure out what the US position should be and what the president's position is."

"I'm not the administration, quite frankly," he said.

Asked if he thought oil prices, which have plummeted, might rebound again, Chu joked: "If anyone thinks they can predict oil prices, they will be very wealthy."

But in the long run, over the next two decades, he said, he's certain the price of crude will be significantly higher than today. Crude oil has dropped from a high last summer of $145 a barrel to a recent low of about $34.

"After we get out of the deep recession the world is in now I see higher demand" for oil, said Chu, although he hoped the push to alternative fuels and greater efficiency "can help the US greatly decrease that demand."

He predicted oil will become more expensive to produce because of the decline in conventional sources and, he said, "that drives the price up."

A Nobel Prize-winning physicist, Chu clearly seemed more comfortable discussing the role his department plays in promoting science, the expected growth of wind and solar energy, and energy efficiency, than responding to questions about global oil politics and OPEC.

He said he viewed the Energy Department's primary role as one of influencing domestic energy issues and as a catalyst for energy-related science — and dealing with economic recovery.

Chu said he had directed "a sweeping reorganization" of the department's disbursal of direct loans, loan guarantees and other funding for energy development to more rapidly push out the tens of billions of dollars made available to the department under the stimulus package.

The department will process $32.7 billion in energy-related grants and has the authority to provide government backing for $130 billion in private loans, said Chu, appearing at Platt's Energy Podium, an event sponsored by the McGraw-Hill Cos. energy information company.

Chu promised — as he did in a speech to state utility regulators on Wednesday — to get the first loan approvals out by late April or early May.

On another matter, Chu said that there has been a "sea-change" in the way the country must look at electricity transmission.

Chu decline to say whether Congress should give the federal government more power to direct where transmission lines ought to be built, but he said electric transmission and distribution has become "a national issue."

"We desperately need a national transmission overlay" to be able to tap a wide range of power-generating sources including wind and solar energy, said Chu, although acknowledging there has to be "a balance" of local, state and national interests.