Energy is a commodity that we often take for granted. On Monday, Ambassador Bill Richardson treated members of the Harvard community to a unique perspective on major trends in the industry. Richardson-a former eight-term Congressman-served as Energy Secretary for two-and-a-half years in the Clinton Administration. Prior to that, he was U.S. Ambassador to the United Nations and acted in a senior capacity as a negotiator for the U.S. government in various hostage situations.
With the U.S. importing 56% of its oil, Richardson focused on how the energy supply is inextricably linked to U.S. foreign policy. He pointed to the emergence of new power players in oil production: Russia, Norway, and Mexico. These countries have resisted requests from OPEC to cut production, lessening the cartel’s ability to influence prices (oil prices recently reached two-year lows).
Richardson said that the events of September 11 could result in a dramatic change in the future energy supply for the U.S. He cited changing relationships with Iran and Libya-if trade sanctions on these countries were lifted, they could become major oil suppliers to the U.S. In addition, Iraq (with production capacity of two million barrels per day) cannot be ignored, though the future path of U.S.-Iraqi bilateral relationships is far from certain.
Richardson also touched on some contentious domestic energy issues. The Artic National Wildlife Refuge (ANWR) in Alaska has proven to be the focus of intense debate for more than a decade. This region contains one of the best remaining prospects for significant oil discovery in the United States, but it also contains some of the last true remaining “wilderness” in the country. The debate is split along party lines, with Republicans championing exploration and Democrats advocating environmental protection and increased use of alternative energy sources.
The huge forecast increases in energy demand, coupled with constrained supply, may force Americans to rethink their energy consumption habits, Richardson said. For example, if car manufacturers modified automobile designs to reduce fuel consumption by 5%, this would translate into a saving of two million barrels of oil per day.
Richardson also discussed the recent power crisis in California. The high-profile failure of the deregulated electricity markets there had three root causes: annual increases in electricity demand of 15% driven by Silicon Valley industries; dependency on other states for electricity supply; and failure to remove “price caps” on the wholesale electricity market.
Richardson paid tribute to members of the HBS community who worked with him during his time in office, including Matt Willis (NJ), who before coming to HBS acted as his International Advisor, and Chris Howard (NK), who assisted Richardson in hostage negotiations. Richardson encouraged young people to spend at least some of their career in public service or the non-profit sector. “You can make a difference, and it’s good to give something back,” he concluded.