US: May 26, 2008


NEW YORK - US environmental advocates are nervous that record crude oil prices will lead to a boom in production of fossil fuels like motor fuel from coal, Canada's tar sands, or shale in Colorado that would emit more planet-warming gases than conventional oil.


"High oil prices are a double-edged sword," said Deron Lovaas, an automobile expert at green group the Natural Resources Defence Council.

Rising crude prices were once a no-brainer for US greens; the steeper the price, the more likely car-pooling and public transportation would rise in the world's largest oil consumer and eventually tame demand.

But it is no longer an easy reaction as global demand rises as cars and highways multiply in places like China and India while global reservoirs of quality crude oil that refiners prefer to process become harder to find and drill.

The oil price leap to $135 a barrel -- almost double the price at this time last year -- has been more abrupt than the gradual rally since 2002, leading to fears of a rush to unconventional fossil fuels and a breakdown of US barriers to drilling in protected places.

"The signals that (record oil) could send are a little scary," said Chris Walker, the North American director of The Climate Group, an international non-profit.

On balance, greens said record oil would sharpen support for alternative energy and cut demand. They were cheered by the US Department of Transportation's saying on Friday that US highway miles driven in March fell the first time for that month since the last major oil shock in the late 1970s.

They also said growing US support for regulating greenhouse gases that would lead to a cap-and-trade program would cut energy demand by providing more incentives for an array of alternative fuels.

But a nagging worry is that record oil could slow the movement toward cap-and-trade as opponents argue that consumers already faced with record energy prices and the credit crunch should not have to face more immediate costs.

"Another potential downside is that we drop our vigilance in terms of understanding that we need to have enforceable federal programs when it comes to ... fuel economy and greenhouse gas emissions," said Frank O'Donnell, president of the non-profit Clean Air Watch.


ENERGY-INTENSIVE PLAYS

Greater development of oil sands in Alberta, Canada, is the top worry of US greens. Companies mine the tarry refinery feedstock using heavy equipment and steam blasts fired by large amounts of natural gas, which emits high levels of carbon dioxide, the main greenhouse gas.

Companies have already poured $100 billion into the sands and hope to triple production by 2015. Sustained high oil prices could encourage more mining, greens said.

Oil shale in Colorado, which then-called Exxon explored in the late 1970s, but then dropped once the oil price fell, is another worry. Companies hoping to develop shale want to melt oil from the rock with enormous underground heaters that likely would have to be fired by new power plants.

Turning coal into motor fuel is another energy-intensive option, one being explored by the US military and companies like Peabody Energy Inc Rentech Inc.

"Now these things are economically viable with record oil," said Walker, "that could be the downside."

(Editing by Matthew Lewis)


Story by Timothy Gardner


REUTERS NEWS SERVICE