John S. Watson’s “Enabling the Energy Economy”

By John S. Watson, Chairman and Chief Executive Officer, Chevron Corporation

The Harbus got in touch with Chevron’s Chairman and CEO, John S. Watson, who has shared his thoughts on the future of global energy and the role it should play in the world’s economic growth.

Chevron Chairman & CEO John S. Watson
Chevron Chairman & CEO John S. Watson

 

One of the greatest challenges facing the world today is to advance the world economy and end poverty. To do so requires energy and lots of it. Every modern necessity and convenience – from the food we eat to the heat that keeps us warm in the winter to the medications that help us heal – are dependent on energy in one form or another.

Yet today approximately 1.4 billion people around the world have no access to electricity, and a billion more have access only to unreliable electricity networks. A total of 2.6 billion people still burn solid fuels – such as wood, crop residue and dung – to cook their food and heat their homes.

We cannot allow a world in which some people have access to safe and reliable energy while others do not. As more economies are developed, a growing number of people are demanding access to affordable and reliable energy.

In the past 10 years the world has added three-quarters of a billion people to the middle class. And the global middle class is set to rise from an estimated 2.3 billion people this year to nearly 5 billion by 2030. Put simply, more people will need more energy to successfully navigate through their daily lives.

The U.S. Energy Information Administration (EIA) projects global energy demand will rise more than 40 percent by 2035, and the world is going to need all forms of energy – oil, gas, coal, renewable and nuclear – to meet that demand. In fact the EIA projects oil and natural gas will remain critical – meeting over 60 percent of U.S. energy needs in 2040.

The United States has the resources and the technical know-how to play a substantial role in meeting that demand – providing affordable and reliable energy, while addressing the environmental expectations of Americans.

So it’s essential that, while we work toward discovering and developing the fuels of the future, the policies and regulations that govern the energy industry also support developing and improving existing forms of energy at home and abroad.

Unfortunately there are many examples of government interventions in the energy marketplace that hurt business and, ultimately, consumers. There have been complicated systems of production and price controls that have caused artificial shortages in the past. And in recent years we’ve seen how subsidizing one fuel over another can undermine economies and industries – underlining how important it is for governments to allow markets to work.

The United States and other energy producing nations must develop commonsense policy frameworks that not only encourage further development of energy resources, but also enable this production to reach the market. This can be achieved only if governments improve terms, encourage investments through free markets, ensure level playing fields and develop transparent policy. They must resist the temptation to pick winners and losers.

The energy industry has used technology and innovation to meet current global energy demand, while changing the energy conversation from one about scarcity to one about abundance. Much of this change is due to the shale revolution in the United States, which has made the country the global leader in combined crude oil and natural gas production for the first time in 13 years and has helped reduce the industry’s environmental footprint. As low-cost natural gas has displaced coal in electricity generation, it has lowered the nation’s overall greenhouse gas emissions.

But to sustain this energy revolution will require the U.S. government letting markets work and developing supportive energy policy in four critical areas: access, infrastructure, tax and the environment. It must provide more access to crude oil and natural gas development on federal lands while allowing those resources to get to market. It should permit sufficient pipelines and transmission systems, and loosen restrictions on the export of crude oil. Lawmakers must resist calls to single out the energy industry for punitive tax treatment and do a thorough cost/benefit analysis before passing environmental restrictions.

This will result in polices and markets that enable rather than impede our efforts to advance economic growth, alleviate poverty and improve people’s lives.