Editor’s note: This week, we will post a series of blogs that highlight some of the critical business and policy issues discussed at last Thursday’s Wharton Economic Summit 2013, held in Jazz at Lincoln Center in New York City. This post covers the topic of energy.
It wasn’t until nearly the end of the Energy Panel when the subject of green energy came up, but it did galvanize the debate.
Moderator Ann Harrison, a Wharton professor of management, asked panelist John Deutch, the Institute Professor at the Massachusetts Institute of Technology, about a past comment that natural gas was a “way station” on the way to green energy sources. He stood by his statement and reminded the audience that climate issues will confront their children and generations to come.
The question came in the context of another proposition: Will the shale energy “revolution” delay the move to green energy sources (and if so, is that a bad thing)?
The response of Janet Clark, WG’82, executive vice president and chief financial officer at Marathon Oil Corp., was that natural gas is greener than coal, which it is displacing, resulting in a win for the environment. Clark added that it is not practical to halt use of all fossil fuels until alternative sources of energy become economically viable.
At the moment, from the industry’s view, shale energy is not just economically viable—it is economically invigorating.
For speaker William R. Klesse, CEO and chairman of Valero Energy Corp., the vast increases in domestic oil and gas production in the United States has been the biggest development during his career, a growth he could not have predicted just five years ago.
“This is a windfall that is happening for the United States,” Kleese said.
“This is really a true revolution … it flipped everything upside down,” agreed Anas Alhajji, chief economist at NGP Energy Capital Management, a natural resources investment firm.
But too much of a good thing could turn bad.
Alhajji warned that serious issues are likely to arise because of limitations on the current U.S. refinery industry, and the government policy of not allowing crude oil exports. Only one outfit is allowed to export natural gas at the moment.
Environmentalists also point out the environmental risk of shale energy. Industry members on the panel downplayed the risk of pollution from hydraulic fracturing (or fracking, the method by which oil and gas are removed from shale rock). Yet the outspoken Deutch warned that these environmental concerns are legitimate. He chaired an advisory group on fracking for the U.S. Energy Department and found documented evidence that fracking fluids from deep wells had indeed reached acquifers. But the bigger threat, he warned, was from “bad completions” of wells, which have been known to lead to surface spills.
Noting the tremendous opportunity presented by fracking, Marathon’s Clark also stressed that its impact to local communities must be considered.
On March 7, 2013, the Wharton Economic Summit convened a number of experts from across the spectrum of business and economic policy, including Wharton alumni, faculty and others, to discuss some of the most critical issues faced by business leaders today. Read more about the Summit’s panels by clicking on one of the following topics: real estate, innovation or health care.