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Energy Blog: The Challenge When Your Supplier is Over the Hills and Far Away

Energy Blog: The Challenge When Your Supplier is Over the Hills and Far Away

With global supply chains locking up, it’s worth looking to the energy industry for some lessons.
The world’s economic leaders thought they had all but perfected the just-in-time supply chain on the eve of the pandemic in 2020. No one would say that now. Over the intervening months, we’ve seen how fragile it was all along: One container ship stuck in the Suez Canal sent global markets into turmoil, and a backlog of cargo deliveries at the Port of Los Angeles now makes these same leaders fret.

Supply is a challenge that the energy industry has long faced. I’ve written about how fuels and storage smooth the time mismatch between when energy is produced and when it is consumed, but the energy supply chain also alleviates mismatches across locations.

Energy resources such as oil and natural gas can be extracted in one far-away country and show up at our doorstep in another like magic. The fact that the large oil companies that dominated the post-World War II energy landscape were known as the “Seven Sisters” only underlined the fairy-tale aspect, since many European folk tales open with lines such as “beyond seven lands and seven seas.”

Yet, for all the ingenuity (and political finesse) involved in the global petroleum trade, the energy industry also realized that it left consumers in a vulnerable position if they lived in countries with different foreign policy aims than those of producer countries. That is why local production is so crucial.

More from the Energy Blog: The Race for Arctic Resources

Up to now, however, local energy production has been prone to rapid depletion. In the old days, this would have been firewood from the trees out back. In 19th century America, growing population far outstripped the land’s ability to reforest, and the eastern United States today has very few stands of virgin, old-growth forests.

Coal replaced wood, at first from subsurface mines close to population centers. Once those depleted, we turned to large open-pit mines in Wyoming and elsewhere.

The oil industry began with seeps in western Pennsylvania, and gas was initially manufactured from coal in city gasworks. Today, pipelines for liquid and gaseous fuels like crude oil and natural gas allow our energy supply chains to sprawl across the continent.

Take the Quiz: What Do You Know About the History of the Petroleum Industry?

The national energy supply chain isn’t perfect—its infrastructure can be vulnerable to natural and manmade disaster, cutting fuel and power when it is needed—but it is surprisingly robust. Part of that is due to the diversity of fuels and the transportation capacity built into the system. 

A lot of it is also an outcome of the energy system’s sense of space. Local energy, available when you need it, is good; less dependable local energy that can be stored is next best. Perhaps best of all is local energy that unlike nearby woodlots or coal mines, never depletes. The wind that flows past our homes and through nearby turbines, the photons that hit our rooftops, and the waste we convert on-site into heat or power: These technologies at local scale are more expensive than remote power plants, but they never run out or face embargo and they also avoid the cost—and risks—of moving energy long distances.

ASME Special Report: When Will We See the Hydrogen Revolution?

This think global, act local mindset has begun to be transformative for the energy sector by facilitating the growth of distributed renewables while reducing risk to supply-chain disruptions. Which is a good thing, and something which the global manufacturing supply chain should study.

Let me end on a note of caution.

Switching away from those hydrocarbons to a renewably electrified future is appealing because it reduces the security risks of today’s fuel mix. But in the big picture view, replacing strategic liquids and gases with critical minerals such as lithium or tungsten just shuffles the countries we worry about. Instead of fretting about oil from the Middle East or gas from Russia, we may soon worry about lithium from Bolivia and arsenic from China, two countries whose relationship status with the United States is best described as, “it’s complicated.”

As in many fairy tales, getting your wish granted doesn’t always lead to happily ever after. 

Michael E. Webber is the Josey Centennial Professor of Energy Resources at the University of Texas in Austin and from 2018-2021 was the Chief Science and Technology Officer at ENGIE, a global energy & infrastructure services firm headquartered in Paris. His series, Power Trip: The Story of Energy, is available on Apple TV, Amazon Prime Video, and local PBS stations.

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