Energy Economist Dismukes on Gas Prices and Louisiana's Global Impact

June 30, 2022

President Tate and David Dismukes

For more than 30 years, David Dismukes has worked in consulting, academia, and government service. He’s currently the executive director, director of policy analysis, and professor of LSU’s Center for Energy Studies. He is also a professor in the Department of Environmental Sciences in the LSU College of the Coast & Environment. In this episode of the “On Par with the President” podcast, the energy sector expert discusses gas prices, energy supply, and Louisiana’s global impact.

Full Transcript

David Dismukes sits down with special guest Raphael W. Bostic, the president and chief executive officer of the Federal Reserve Bank of Atlanta, during LSU’s Energy Summit 2018. Photo courtesy of Brian Baiamonte.

David Dismukes hosts LSU’s Energy Summit 2017, “Operating in a New Energy World.” Photo courtesy of Brian Baiamonte.

David Dismukes hosts LSU’s Energy Summit 2017, “Operating in a New Energy World.” Photo courtesy of Brian Baiamonte.

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[00:00:00] President William F. Tate IV: Welcome to "On Par with the President." David Dismukes is an energy sector expert. He is executive director, director of policy analysis and professor at LSU's Center for Energy Studies. He is also a professor in the Department of Environmental Sciences in the LSU College of Coast and Environment. For more than 30 years, he has worked in consulting the academy and government service, analyzing the economic, statistical, and public policy issues in energy in its regulated industries. Let's tee off. Professor, you've been a part of the LSU community for more than two decades, actually three. How did your journey bring you to Baton Rouge and LSU?

[00:00:57] Dr. David Dismukes: Uh, it's interesting. Um, I, I went through the typical kind of university faculty recruitment, you know, job application process when I finished school. And, and I distinctly remember, you know, going through a number of different interviews at differing universities and wanting to stay somewhere on the Gulf coast and running into the job application for LSU and for the Center for Energy Studies. And I distinctly remember reading, it was a long description, and it had all these different requirements and well, as well as attractive qualities.

[00:01:28] You know, you need to be able to do research, but you have to be able to interact with people. You need to be able to, you know, raise money, but you need to still be able to publish, all these different things. And I'm reading it out to my wife and she goes, "That sounds like a perfect job. Why don't you apply for it?" and it was in the region. We wanted to stay on the Gulf coast region because of family and other things. So I applied for the job. And, I thought, well, we never heard anything back until later in the spring. And then I get a phone call and you probably remember the day, this was before cell phones, when you had the voice recorder that you had to push.

[00:01:56] President William F. Tate IV: Right

[00:01:56] Dr. David Dismukes: And there's a message waiting for me when I get home. And, um, they were ready to have an interview. We came out here and, um, had a great interview, loved the campus, uh, loved the whole idea, the Center and, and, and, and its unique relationship here, uh, at LSU. And they made me that offer, and I came here.

[00:02:12] President William F. Tate IV: Right. So as an economist, you could study any area, any part of the markets that exist? What, what got you interested in energy?

[00:02:20] Dr. David Dismukes: Well, I've always been, even throughout my graduate career, in energy. I wrote my master's thesis on nuclear power. My PhD dissertation was on clean air markets and power generations. So when I was in school, I was doing that. But you know, you and I probably grew up in the same generation. We were probably the first generation to have to think about energy. You know, going back to the seventies, you think about the energy crisis, the gasoline lines back in those days, you probably remember that sitting in the, in the hot car that may not have had air conditioning.

[00:02:44] President William F. Tate IV: It was tough.

[00:02:45] Dr. David Dismukes: Yes. Uh, the rationing, the green stamps, all those things back in the old days, uh, you know, and those rolling into the, the late seventies, the early eighties with the Iranian crisis. And it was just, you know, a backdrop probably for, you know, for our generation and probably the first generation that had to worry and think about energy as a resource and what it meant, not only just from, from an economic perspective, but these environmental concerns that started, you know, in 1969 and throughout the seventies, et cetera.

[00:03:08] So it was always a backdrop. And when I got into economics, one of my core areas that I studied in was economic development. And, and obviously energy is important for economic development. It's important for economic growth. But really what kind of turned me over it, wasn't like when I was six years old, I said, "I wanna be an energy economist" or something like that. Like most people, I, I got a job. That was what really kind of pushed me over the edge to really focus and concentrate in that area. And my major professor had this opportunity. He was working on a consulting basis, advising state governments on the prudence of nuclear power plant investments at that time.

[00:03:40] And he asked me, he said, "Look, I, I need somebody like you to come help me out with this. Can you come work with me? And, you know, go to school, work with me and do this?" And I said, "Sure, why not?" And I just kept doing that. I kept expanding into other areas in terms of power generation, resources, energy efficiency, renewables, et cetera. And, and, and I, again, I kind of continued that with my master's thesis, my PhD, and that's where I decided to kind of lay my stake.

[00:04:04] President William F. Tate IV: So if you had to describe what's changed from those days when you were laboring with your major professor to today. What do you think is different?

[00:04:14] Dr. David Dismukes: Everything. I mean that, and that's the great thing about the business is it's it's always changing. I mean, it's probably changed since we've been at this table this morning. There are just so many things that influence, um, um, the sector itself, whether it be geopolitical, economics, technology, the short run, long run, public policy, obviously a big thing, regulation, uh, and all those have changed dramatically.

[00:04:36] We've seen, I think if you think big picture about what's changed the most in energy, uh, you know, technology has gotta be one of the biggest things. Uh, we, we have resources today that nobody ever dreamed we would've had a decade ago. Uh, you think about the unconventional revolution in oil and gas. You think about where we are with renewables, with solar, and with wind. Uh, I hope in the next 10 years, we'll be talking about how storage technologies and batteries have changed. Um, just it's, it's just a constantly changing, evolving field.

[00:05:04] President William F. Tate IV: Louisiana is one of the top five states in both natural gas production and proved reserves. Can you explain the importance of that for the state? And what about for the rest of the country? We often talk about the relevance for Louisiana, but what does it mean for the totality of the US?

[00:05:20] Dr. David Dismukes: We are a very large producer and we continue to have significant reserves, not only here in Louisiana, but in the offshore Gulf of Mexico. Uh, those are important from an economic perspective here because not only do we get the economic activity of the extraction and all the support work that goes along with extraction and production, but those are feed stocks into a very big and important critical component of our manufacturing economy here, which takes those hydrocarbons and turns them into things, right? The resins that are in the carpets here, the shampoo that we use in the mornings. I mean, just about everything that you touch in a given day is touched by modern chemistry and those hydrocarbons. And that's why it's important, not just for us, but, uh, for, um, for the rest of the country. And we did a study this last year for Entergy, uh, looking at the importance of restoring critical energy infrastructure and what that means, not just for Louisiana, but for the rest of the country.

[00:06:11] And how turning on just a small place that produces nitrogen down in south Louisiana, how important that is to assure that all the refineries in the, in the, in the, in south Louisiana are open and they have fuel and they have diesel and gasoline during, you know, a period this last summer where we, we had already high gas prices even going into that, that tropical season. So it is important, not just for us, but for the rest of the country and as well as even

global impacts. I mean, what we do in natural gas here in south Louisiana is, is very important uh, today. Particularly when you think about the crisis in, in, in Eastern Europe right now. And natural gas prices are high for a reason, and that is, you know, Western Europe and Eastern Europe are not using natural gas supplies from Russia. And they're pulling a lot of those from south Louisiana.

[00:06:54] President William F. Tate IV: Wow. So we're part of the big global...

[00:06:57] Dr. David Dismukes: We are. We are. And it's a big part.

[00:06:58] President William F. Tate IV:

[00:06:59] Dr. David Dismukes: Mm-hmm

[00:06:59] President William F. Tate IV: Yeah.

[00:06:59] Dr. David Dismukes: Mm-hmm

[00:07:00] President William F. Tate IV: Well, one of the experiences I had here last, uh, summer was my first hurricane. Talk to us a little bit about the relationship between hurricanes and energy.

[00:07:10] Dr. David Dismukes: So, uh, they're pretty complicated relationships and they've changed over time. If I had to really point to one thing that makes Louisiana, where Louisiana is different in its energy economy today, as opposed to when I started here, it's this whole interrelationship with the global economy, whether it's through commodity chemicals, which are nothing more than reformed hydrocarbons, to crude oil exports, which nobody, they weren't even allowed when I started working here in the nineties, early nineties, uh, to the export of natural gas. Those are all, those have all changed. And so when hurricanes come through, they, they disrupt that. They impact that critical energy infrastructure.

[00:07:45] They, uh, impact supplies. They impact prices. And they ripple, not just through the United States, but through global prices. And not only that, as I know you appreciate, they impact the communities where all this infrastructure's located. I certainly hope this becomes a, a light year for us. We could use the break after having two years of pretty tough storms. Um, but if we, we see something like that this year in the midst of all the other challenges that we've got going on, it, it, it could be very, very detrimental for us locally, but really for, for, for U.S. energy supplies and for U.S. prices.

[00:08:19] President William F. Tate IV: Sobering.

[00:08:20] Dr. David Dismukes: Sobering. It is. I've spent the last 10 years giving happy talks, because energy's been a good subject and that everything's been rosy. And then just all of a sudden in the last 12 months, things have just, you know, because of geopolitical concerns, the world changing, et cetera. You know, we're in a position where I think we're transitioning into things that are difficult again. And it was like that from 2005 to about the last recession, you know, 2005, all the way, 2008, 2009, where all we could expect were high prices, disruptions, starting with Katrina. Uh, that really put the U.S. Energy economy on its heels. If you think about kind of a boxer and just keep getting hit and hit in the corner and things didn't really correct themselves until we kind of had that reboot with the recession. And then coincidentally, we had the unconventional revolution at that time.

[00:09:04] President William F. Tate IV: So talk to us about gas prices. That's, that's the topic of the day related to any energy right now. Folks wanna know, when is it gonna get back to whatever the normal is? I guess, $3 a gallon? When are we gonna see the slope go downward?

[00:09:18] Dr. David Dismukes: I don't know. Uh, you know, I, I, it does seem that we're in a unique transition period right now. The irony and the frustrating thing about all of this is unlike energy crises we've had in the past and big price run ups, which have all been precipitated, uh, by resource constraints. We don't have enough oil and gas here. We've got to import it from other places, et cetera. This isn't one of those kind of problems. We still have plenty of oil and gas in the United States. Haynesville is still one of the largest producing natural gas reserves in the country. Uh, the, um, the Permian basin is still an enormously large producer of crude oil, as well as the offshore Gulf of Mexico.

[00:09:54] And we've got reserves that are all over the place. We still have record levels of reserves of both oil and gas. So it's frustrating to be surrounded by all that, I guess, wealth of energy resources, and yet not be able to communicate that into production and getting those prices down. And the energy business is no different than any other business in the sense that it is tied up with a lot of these same supply chain frustrations that many other industries are having.

[00:10:19] So as long as those persist in our economy, I think you're gonna still continue to see those in oil and gas and in gas prices as well. So the disappointing news in all this is you're likely this summer to not see gas prices go down, we're still getting some more creepage, uh, on crude oil prices, which

continues to put pressure on, on, on gasoline prices. And I suspect it'll be a pretty expensive summer. It's gonna be a real expensive summer for households regardless of what energy commodity they're buying, whether it's gasoline or electricity, or even their residential, uh, retail natural gas. Natural gas is over $9 per thousand cubic feet. And we haven't seen prices like that since before the last recession.

[00:10:59] And that should be as, as problematic as the gasoline, cause those feed right into our utility bills. Um, and those could get worse. And we're heading into, uh, tropical season for the summer, that could create production, uh, disruptions in the Gulf of Mexico and in other places that just could wreak havoc on prices. That's the wild card. That really could send everything, you know, even higher. Um, unfortunately the only thing that's probably gonna get prices to go down is if we go into a recession, and we start to destroy demand and, cause we're not, you know, the supply constraints that we have right now, aren't producing more.

[00:11:33] So we're gonna have to back off. You know, if markets are gonna recalibrate, the demand side of this equation's gonna be the one that has to correct that. And we're already seeing slowing signs. Although the economy still seems pretty healthy in a lot of places. Consumers are still pretty resilient. Household saving levels are pretty high. Spending is pretty high. I'd start watching consumer confidence numbers. And when those start to deteriorate, those will probably start correcting those. It's not a real, super happy story in all of this, because those are the kinds of corrections you don't like to see.

[00:11:59] You'd rather see supply increasing. Um, but just given what's going on here domestically, some of the challenges we have post COVID in an industry that was really, was really challenged before we went into COVID. I think a lot of people forget about that. And then the geopolitical things that get thrown on top of this that make it a lot more difficult to navigate. If that weren't going on then maybe this is a solution that could work out with OPEC, et cetera. But, even that becomes a challenge now. So I don't, I don't have a lot of high expectations on that as we move through not only the summer, but as we move through the balance of the year. I'd like to be wrong.

[00:12:33] President William F. Tate IV: I wish you were. Well, at our university right now as part of our strategic initiatives, energy is part of the scholarship first agenda. What do you see as the future of this industry, and in particular think about it through the lens of what, what's the important research that might be happening or going on in the energy sector that you think will be impactful?

[00:12:58] Dr. David Dismukes: I think that the two big things are integration and storage, really, are from a, from a research perspective. Because that's where we, we are having our challenges. And we're probably gonna see a lot this summer. I think the summer's gonna be a challenging time. Uh, as we get thin on resources, a number of power pools in the south in the, in the southwest and in the west are anticipating some, some big challenges. And, and, and I think you're gonna hear a number of discussions about, uh, challenges of inter, integrating renewables with that and that being part of the problem as, as, as opposed to being part of the solution. I think we've got a lot of work to continue to do that. And so there's a lot of research on how we bring solar and wind and other renewables that are intermittent in nature and integrate those in with fossil fuels. And how do we make that transition and continue to do that, uh, without compromising reliability and resiliencies of our systems.

[00:13:46] So that's, that's gonna be one thing. Uh, and the other thing is gonna be stores. Because of that intermittency of these, these technologies, we're gonna have to find ways of storing energy, whether it be directly through, uh, batteries technologies, or indirectly through making hydrogen or ammonia or other products that are generated from renewables during off peak time periods when the wind's blowing at two o'clock in the morning. Things like that. Uh, those are all gonna be big challenges as we move, uh, into the future. And then integrating not just the power system itself, but our manufacturing and chemical sector into a world where we are using less and less hydrocarbons and using other substitute products as well.

[00:14:26] President William F. Tate IV: Here's a hard question for you.

[00:14:27] Dr. David Dismukes: Alright.

[00:14:28] President William F. Tate IV: You never get anyone to say, I don't want clean air or clean water or a healthy place to live. Everyone does. But we're dependent on energy in very traditional forms, fossil fuel and electricity. What do you tell someone, just a regular citizen, about sustaining, you know, things they like to do in their lives day to day, and actually this real challenge with energy, and how it, they merge to potentially be unhealthy? How, how, how do you, how do you say, how do you manage that?

[00:15:00] Dr. David Dismukes: Right. I mean, I, I think you see that and, and people recognize that as it does come down to a lot of the decisions that you, as an individual make. When you're going out and buying appliances, which appliance do you want to choose? The one that's a little bit more or the one that's less, but that one will save, it's an investment that you're making. Cause

not only does it help the environment, but by using less energy, you're gonna wind up saving money as well, right? We have, as a society, such a current preference for money and a time value for money, having things today, as opposed to waiting.

[00:15:27] If I think about some of the bigger challenges, it's getting over that kind of big hurdle, cause from an individual decision making perspective, that's what you're asking people to do is to pay a little bit more now, uh, to get those benefits over time that come, not just to the environment, but to your own wallet and your own pocket as well. And, and those, and those are the big challenges to try to communicate to people.

[00:15:46] President William F. Tate IV: A big part of what I've noticed at LSU is the great research here. When I, uh, came in as president I wanted to really focus on scholarship first. You clearly have been authoring, really important papers. And so it's exciting to talk about it. One of them you have on greenhouse gas inventory, which estimates our greenhouse gas emissions. Talk a little bit about the importance of this study, what you found, and how this information might be applied and used in society.

[00:16:15] Dr. David Dismukes: Yeah. So a great question. That was a important study. It was, um, one that we did on behalf of the governor's office. Uh, it was an important input into the policy making and opportunity evaluation process that the governor's climate task force used in terms of, uh, defining the, the policies and plans that they thought would be best to meet his goal of carbon neutrality by 2050. And so it was, you know, before you get started on that, you gotta have to know what the problem is to begin with. Where are those emissions coming from? What are their magnitude? How are they growing over time?

[00:16:49] And so what we did was, you know, decompose, estimate and decompose those by sector and give, um, stakeholders, particularly this task force, uh, an understanding and appreciation of, of the, the scope of the problem and the challenges we have here and where, you know, they need to think about targeted measures and, and, and strategies. One of the things that make us unique, uh, relative to other states is our industrial profile. Uh, our industrial, uh, emissions are somewhere around 60% to 62% of all our greenhouse gas emissions. You compare that to the national average, which is somewhere around 20% to 30%. That suggests a differing strategy for us, as opposed to let's say New Hampshire, Vermont, or even California for that matter. And I think that was really the importance of that. And again, I think it underscores some of the, the things that we do at the Center in terms of kind of making this bridge

between academic work, uh, and how that gets applied and in real life into policy.

[00:17:45] President William F. Tate IV: The LSU Center for Energy Studies is an important piece here at the institution. Project a little bit your hopes for the Center in the future. What, what do you, where do you want it to be positioned for our area, for the state, and the world?

[00:17:59] Dr. David Dismukes: Well, I, I hope we continue to do some of the, the, the good work that we've done in the past. I, I hope we continue to maintain this, this strong service component that we have and the integration that we have with the community. That is one of the unique things. And I think probably one of the, the best things I love about my job is in continuing to do that. Uh, working with students, I think students now who are interested in energy based careers, have a lot of uncertainty on what to do and what fields and how they should craft their education to meet those requirements in the future.

[00:18:31] So those are important. Uh, one of the things I'm finding with a lot of the projects that we do, and our initial carbon capture project was this way, and that is they require team efforts. They require a lot of interdisciplinary work. You're gonna need people that are in the law school. You're gonna need sociologists. You're gonna need people in communications to help, uh, the public at large understand what carbon capture and some of these alternative chemical production activities require. You're gonna need, obviously, people in physical sciences and the engineering, etc. And a lot of the teams that we've put together to look at these issues are that way. And I hope that we're there to help facilitate that.

[00:19:04] President William F. Tate IV: Well, we like to ask all our guests some fun questions, but in your case, I don't know you you've got such a tough deal. But first fun question, how would you pitch or sell to others interested in the field, "Come to LSU and be involved?"

[00:19:18] Dr. David Dismukes: Oh, this place sells itself. I mean, it's really easy. I, you know, the other thing about my job is I do get to bring lots of, we have lots of events and I bring people in from all over the country. I've been doing this for, for decades and we've had, and, and I'd never have a hard time recruiting people to come down and visit. They always wanna see our culture, our food, and when they come here and they see the campus, it's, it's beautiful. They get to meet the people. And when you, particularly, if you're in the energy

business and you're in Louisiana and you're in ground zero of all of that, uh, it, it's, it's a pretty easy sell.

[00:19:47] President William F. Tate IV: Well, you're in a serious, serious business. So what do you do for fun?

[00:19:52] Dr. David Dismukes: Not a whole lot, but, um, I, I, I do landscape a lot, work with my wife, uh, outside a lot, exercise. I try to do that a lot. Uh, I read. Uh, I do play golf badly, um, but that's a, that's about it.

[00:20:08] President William F. Tate IV: I wanna thank you for being with us here today and thank you for the great work you're doing in this Energy Center. We need more of it. I hope you can recruit like crazy.

[00:20:17] Dr. David Dismukes: Okay.

[00:20:18] President William F. Tate IV: And bring a bunch of zealots who want to help us figure out how to deal with the really pressing problems of energy in the state, the country and the world. Thank you, sir, for your service.

[00:20:28] Dr. David Dismukes: Thank you.