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Monday, April 25, 2011

U.S. Energy: Overview and Key Statistics


Carl E. Behrens
Specialist in Energy Policy

Carol Glover
Information Research Specialist


Energy supplies and prices are major economic factors in the United States, and energy markets are volatile and unpredictable. Thus, energy policy has been a recurring issue for Congress since the first major crisis in the 1970s. As an aid in policy making, this report presents a current and historical view of the supply and consumption of various forms of energy.

The historical trends show petroleum as the major source of energy, rising from about 38% in 1950 to 45% in 1975, then declining to about 40% in response to the energy crisis of the 1970s. Significantly, the transportation sector has been and continues to be almost completely dependent on petroleum, mostly gasoline. The importance of this dependence on the volatile world oil market was revealed over the past five years as perceptions of impending inability of the industry to meet increasing world demand led to relentless increases in the prices of oil and gasoline. With the downturn in the world economy and a consequent decline in consumption, prices collapsed, but then recovered to a much higher level than in the 1990s. As the world economy showed signs of recovery upward pressure on oil prices began to appear again. With the crisis in Libya and other Arab nations in the Spring of 2011, oil and gasoline prices began again to approach their former peak levels.

Natural gas followed a long-term pattern of consumption similar to that of oil, at a lower level. Its share of total energy increased from about 17% in 1950 to more than 30% in 1970, then declined to about 20%. Recent development of large deposits of shale gas have increased the outlook for natural gas consumption in the near future. Consumption of coal in 1950 was 35% of the total, almost equal to oil, but it declined to about 20% a decade later and has remained at about that proportion since then. Coal currently is used almost exclusively for electric power generation, and its contribution to increased production of carbon dioxide has made its use controversial in light of concerns about global climate change.

Nuclear power started coming online in significant amounts in the late 1960s. By 1975, in the midst of the oil crisis, it was supplying 9% of total electricity generation. However, increases in capital costs, construction delays, and public opposition to nuclear power following the Three Mile Island accident in 1979 curtailed expansion of the technology, and many construction projects were cancelled. Continuation of some construction increased the nuclear share of generation to 20% in 1990, where it remains currently. Licenses for a number of new nuclear units have been in the works for several years, and preliminary construction for a few units has begun, but the economic downturn has discouraged action on new construction.

Construction of major hydroelectric projects has also essentially ceased, and hydropower’s share of electricity generation has gradually declined, from 30% in 1950 to 15% in 1975 and less than 10% in 2000. However, hydropower remains highly important on a regional basis.

Renewable energy sources (except hydropower) continue to offer more potential than actual energy production, although fuel ethanol has become a significant factor in transportation fuel, and wind power has recently grown rapidly. Conservation and energy efficiency have shown significant gains over the past three decades and offer encouraging potential to relieve some of the dependence on oil imports.



Date of Report: April 4, 2011
Number of Pages: 38
Order Number: R40187
Price: $29.95

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Wednesday, April 20, 2011

Energy Tax Policy: Issues in the 112th Congress


Molly F. Sherlock
Analyst in Economics

Margot L. Crandall-Hollick
Analyst in Public Finance


As in most Congresses, energy tax policy is expected to be actively debated in the 112th Congress. At the beginning of the 112th Congress, the debate may center on the President’s FY2012 Budget. This budget proposes a number of changes in energy tax policy with the intent of correcting perceived distortions in the market and encouraging conservation and the use of renewable energy. Specifically, the proposal seeks to eliminate a number of existing tax incentives for fossil fuels, while expanding select incentives for commercial building energy efficiency and promoting manufacturing of advanced energy technologies. Later in the first session of the 112th Congress, the debate may shift to the evaluation of a number of temporary energy tax provisions scheduled to expire at the end of 2011. Many of the provisions scheduled to expire were granted a temporary extension as part of the Tax Relief, Unemployment Reauthorization, and Job Creation Act (P.L. 111-312), enacted in December 2010.

Energy tax policy involves the use of one of the government’s main fiscal instruments, taxes (both as an incentive and as a disincentive) to alter the allocation or configuration of energy resources and their use. In theory, energy taxes and subsidies, like tax policy instruments in general, are intended either to correct a problem or distortion in the energy markets or to achieve some economic (efficiency, equity, or even macroeconomic) objective. In practice, however, energy tax policy in the United States is made in a political setting, determined by fiscal dictates and the views and interests of the key players in this setting, including policymakers, special interest groups, and academic scholars. As a result, enacted tax policy embodies compromises between economic and political goals, which could either mitigate or compound existing distortions.

The economic rationale for government intervention in energy markets is commonly based on the government’s perceived ability to correct for market failures. Market failures, such as externalities, principal-agent problems, and informational asymmetries, result in an economically inefficient allocation of resources—in which society does not maximize well-being. To correct for these market failures governments can utilize several policy options, including taxes, subsidies, and regulation, in an effort to achieve policy goals.

Current energy policy reflects efforts to achieve both current and past policy objectives. Recent legislative efforts have primarily focused on renewable energy production and conservation to address environmental concerns. In contrast, past efforts attempted to reduce reliance on foreign energy sources through increased domestic production of fossil fuels. Legislation enacted in the 111
th Congress focusing on encouraging renewable energy production and conservation reduces reliance on imported, foreign oil, while also addressing environmental concerns by reducing the use of fossil fuels. Favorable tax preferences given to domestic fossil fuel energy sources also promote domestic energy production, reducing the demand for imported oil.


Date of Report: April 14, 2011
Number of Pages: 31
Order Number: R41769
Price: $29.95

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U.S. Oil Imports: Context and Considerations


Neelesh Nerurkar
Specialist in Energy Policy

Despite long standing concern by policy makers, U.S. oil imports have generally increased for decades. Two periods stand out as exceptions: the early 1980s and the last five years. Both periods were characterized by high oil prices, economic volatility, and attention to energy policy. U.S. oil imports fell each year between 2005 and 2010 to reach just under 50% of U.S. liquid fuel consumption, its lowest level since 1997. The economic downturn and higher oil prices were a drag on oil consumption, while price-driven private investment and policy helped increase domestic supply of oil and oil alternatives.

Among the sources of net U.S imports, about a quarter of net imports come from Canada and another half come from countries that are members of the Organization of the Petroleum Exporting Countries (OPEC). Almost 20% of imports come from the Persian Gulf (from OPEC countries in the region). Global oil supply disruptions can shift import trends and raise prices for oil produced at home and imported. This is true even if the disruption occurs in countries that are not normally sources of U.S. imports. Even anticipation of disruption risks can have similar impacts.

Reliance on oil imports is of particular concern to policy makers when oil prices increase. Increased fuel costs for households and businesses can reduce spending on other goods and services that might be domestically produced, send more wealth abroad, and cause economic dislocations, such as greater unemployment. Economic forecasters estimate a sustained $10 increase in the per barrel price of oil can reduce U.S. economic growth by 0.2% in part due to how much U.S. consumption is met by imports. However, even in a scenario where the U.S. produced as much oil as it consumed, an increase in international oil prices would still raise oil costs for households and businesses and cause economic dislocations, but wealth associated with the increase may remain in the country.

Oil import volumes are expected to remain roughly flat over the next two decades. There is a growing consensus that U.S. imports passed their high-watermark in 2005. Such forecasts are predicated on expectations that current laws supporting fuel efficiency and domestic supply are not reversed and that oil prices continue to rise. While volumes may remain flat, rising prices could still increase the cost of oil imports.

There is congressional interest in further reducing the potential risks posed by import dependence. Policy options generally fall into four categories: 
  • Direct trade policy regarding oil imports, 
  • Long-term measures aimed at reducing the need for imports through greater domestic supply (conventional and alternative) and greater fuel efficiency to reduce demand, 
  • Short term energy policy tools like the release of oil stored in the Strategic Petroleum Reserve (SPR), and 
  • Foreign policy measures aimed at making foreign sources of oil more secure (not covered in this report).


Date of Report: April 1, 2011
Number of Pages: 22
Order Number: R41765
Price: $29.95

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Tuesday, April 19, 2011

Fukushima Nuclear Crisis

Richard J. Campbell
Specialist in Energy Policy

Mark Holt
Specialist in Energy Policy


The earthquake on March 11, 2011, off the east coast of Honshu, Japan’s largest island, reportedly caused an automatic shutdown of eleven of Japan’s fifty-five operating nuclear power plants.Most of the shutdowns proceeded without incident. However, the plants closest to the epicenter, Fukushima and Onagawa (see Figure 1), were damaged by the earthquake and resulting tsunami. The Fukushima Daiichi plant subsequently suffered hydrogen explosions and probable nuclear fuel damage, releasing significant amounts of radioactive material into the environment.


Date of Report: April 4, 2011
Number of Pages: 7
Order Number: R41694
Price: $19.95

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Thursday, April 7, 2011

Fukushima Nuclear Crisis

Richard J. Campbell
Specialist in Energy Policy

Mark Holt
Specialist in Energy Policy


The earthquake on March 11, 2011, off the east coast of Honshu, Japan’s largest island, reportedly caused an automatic shutdown of eleven of Japan’s fifty-five operating nuclear power plants.Most of the shutdowns proceeded without incident. However, the plants closest to the epicenter, Fukushima and Onagawa (see Figure 1), were damaged by the earthquake and resulting tsunami. The Fukushima Daiichi plant subsequently suffered hydrogen explosions and probable nuclear fuel damage, releasing significant amounts of radioactive material into the environment.


Date of Report: March 24, 2011
Number of Pages: 7
Order Number: R41694
Price: $19.95

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Keystone XL Pipeline Project: Key Issues


Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Neelesh Nerurkar
Specialist in Energy Policy

Linda Luther
Analyst in Environmental Policy

Vanessa K. Burrows
Legislative Attorney


Canadian pipeline company TransCanada has filed an application with the U.S. Department of State to build the Keystone XL pipeline, which would transport crude oil from the oil sands region of Alberta, Canada, to refineries in the United States. Keystone XL would have the capacity to transport 700,000 barrels per day, delivering crude oil to the market hub at Cushing, OK, and further to points in Texas. The project is expected to cost more than $7.0 billion, of which at least $5.4 billion would be spent on the U.S. portion. TransCanada is planning to build a short additional pipeline so that oil from the Bakken formation in Montana and North Dakota can also be carried on the Keystone XL pipeline.

The construction of petroleum facilities connecting the United States with a foreign country requires a Presidential Permit from the State Department based on a determination of national interest. An element of that determination for the Keystone XL project is the preparation of an Environmental Impact Statement (EIS) pursuant to the National Environmental Policy Act. On April 16, 2010, the State Department’s draft EIS for the Keystone XL project was released for comment to the general public and interested state and local agencies. Subsequently, the U.S. Environmental Protection Agency determined the EIS to be inadequate. On March 15, 2011, the State Department announced that it expects to issue a supplemental draft EIS in mid-April 2011. It will be available for 45-day public comment. The State Department also announced that, following issuance of a final EIS, it will solicit additional public comment and host a public meeting before making a determination on granting a Presidential Permit. The State Department estimates that it will release a final EIS and final Record of Decision and National Interest Determination by the end of 2011. Whatever the State Department’s decision, legal challenges appear likely.

Opponents to the Keystone XL pipeline project, primarily environmental groups and affected communities along the route, object to the project principally on the grounds that it supports “dirty” Canadian oil sands development, that it could pose an environmental risk to groundwater, and that it promotes continued U.S. dependency on fossil fuels. Arguments criticizing the greenhouse gas emissions of oil sands production are based to some degree on the belief that limiting pipeline capacity to U.S. markets may limit output from Canada’s oil sands.

Proponents of the Keystone XL pipeline, including Canadian agencies and petroleum industry stakeholders, point to energy security and economic benefits, such as job creation. Some contend that the Keystone XL project secures growing Canadian oil supplies for the U.S. market, which could offset imports from other, less dependable foreign sources. They also claim that if oil sands output cannot flow to the United States, infrastructure to export it to Asia will develop. Further, having recently permitted the original Keystone pipeline, the State Department could face a consistency challenge if it were to come to a different conclusion on similar environmental issues for the Keystone XL permit.

International pipeline projects like Keystone XL are not subject to the direct authority of Congress, but numerous Members of Congress have expressed support for, or opposition to, the pipeline proposal because of its potential environmental, energy security, and economic impacts. Congress may have an oversight role stemming from federal environmental statutes that govern the pipeline’s application review process.



Date of Report: March 21, 2011
Number of Pages: 19
Order Number: R41668
Price: $29.95

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