Llewellyn King: Happy days for U.S. energy consumers

There is something extraordinary happening on Main Street, in the suburban strips, and at country stores: Workers are lowering the prices on the signs for gasoline. Veterans of the energy crisis that began in 1973 and has continued, with perturbations, ever since, are trying to get their heads around this enormous reversal of fortune: there is no energy crisis for any fuel in the United States as winter approaches.  

That was the message delivered loud and clear at the annual Energy Supply Forum of the United States Energy Association (USEA). Indeed the main problem, if there is one, is that oversupply is driving down some fuel prices, like for oil and natural gas, which could result in higher prices later as producers curb production.

"Who would have believed it?" asked Barry Worthington, president of USEA. This year the forum, which has been known to be filled with alarm and foreboding predictions, was full of robust confidence that the nation will breeze through the coming winter, and that consumers will pay less to stay cozy than they have for several winters — but especially the last one.

Stocks of gas and oil are plentiful. It is not just that heating oil will be cheaper, nature will also play a part: the National Oceanic and Atmospheric Administration predicts a mild winter. No one is expecting a repeat of last winter's "Polar Vortex," which brought some big utilities close to being unable to meet customer demand in the extreme cold.

Mark McCullough, executive vice president for generating at American Electric Power (AEP), which serves customers in 11 states, described how the giant utility came close to the edge. This winter, McCullough thinks, things will be fine. But he is less sanguine about the future of AEP and its ability to deliver electricity in 2016 and beyond, if the Environmental Protection Agency holds firm on its proposed rule to curb carbon emissions from coal-fired plants.

AEP, which straddles the Midwest, has the largest coal-fired fleet in the country. McCullough said that his company had just come off extensive efforts with the so-called mercury rule and now was plunged into a very difficult situation. McCullough was joined by oil producers and refiners in worrying about another proposed rule from the EPA on ozone. Neither the utilities nor the oil producers and refiners feel that the EPA's proposed ozone regulation can be met.

In short, in a buoyant energy world, there are clouds forming. But unlike the last 41 years, these clouds are regulatory rather than resource-generated; public policy in their origin, rather than in the scheming of foreign oil cartels. Indeed, Robert Strout of BP confidently predicted that in a little more than 20 years, the United States could be energy self-sufficient.

The other problem going forward, in the new time of bounty, is energy infrastructure. The industry needs more pipelines to facilitate the shift from coal to gas; better infrastructure to get the new oil to the right refiners. (Refiners actually favor moving oil by train as well as by pipeline.)

USEA's Worthington, a veteran of energy crises of the past, said ruefully the other thing that might happen is that excessive domestic production and falling prices will lead to a period when producers will stall new production and prices will rise. "Markets do work," he said, commenting on the cycles of the hydrocarbon market.

For now, with international economic activity waning, and hydraulic fracking unlocking oil and gas at an astounding rate, this is a bonus time for the American consumer. For people like myself, who have spent more than 40 years commenting and reporting on the bleak energy future, this is indeed a time of astonishment. We had heard predictions of doom if China industrialized, expectations of steadily declining U.S. production, and more and more of our wealth being exported to buy energy.

Now, if Congress acts, we will be a serious exporter. This winter of our discontent is made glorious summer by fracking, as Richard III did not quite say. Astonishing!

Llewellyn King (lking@kingpublishing.com) is host and executive producer of "White House Chronicle'' on PBS and a longtime publisher, editor, writer and international business consultant.