It will take many decades for the U.S. to transition away from using fossil fuels for transportation, so oil and natural gas will continue to be important, U.S. Energy Secretary Steven Chu told attendees at IHS CERAWeek in Houston. But that transition must start soon, based on supply and demand trends and the need to reduce emissions.

"Over the long haul, the costs of oil and energy will rise in coming decades," he said. "We will be living in a carbon-constrained world. Let's get moving now and get the American invention machine going. Time is running out and the train has left the station. The Chinese know it, the rest of the world knows it, and they are already moving on it."

DOE in funding more R&D on fuel alternatives and has asked for two new studies conducted by the National Petroleum Council to start this spring: one on "prudent" oil and gas development in North America, and one on future fuels projected to 2030 for cars, heavy-duty trucks, planes, railroads and other modes of transportation.

DOE is spending nearly $13 billion to promote U.S. competition in five areas: advanced combustion engines; next-generation biofuels that do not compete with food sources; electric vehicles; natural gas, including methane hydrates; and hydrogen and fuel cell technology.

This include a loan of $5.9 billion to Ford Motor Co. to raise its fuel economy on 2 million vehicles per year, $600 million to support 19 pilot projects in biorefineries, and $2.5 billion given to three car companies to build an electric car. Some $2 billion has been given to 30 battery and component factories.

Chu cited continued strong growth in oil demand across the world, particularly in Asia, with U.S. demand remaining relatively flat. "Asian demand will increase tremendously, with the OECD (Organization for Economic Cooperation and Development) countries down slightly, but the overall trend is upward."

Natural gas, meanwhile, is a key enabler of renewable energy and helps supplement wind and solar projects, he said. The DOE has a long history of supporting natural gas, having spent $137 million on shale-gas research, he reminded the group, with that funding concluding in 1992. Since then, shale-gas production in the U.S. has increased exponentially.

Chu said natural gas is much cleaner than coal and should be used to fuel electric-power plants. "Hydro and natural gas are the first responders. Natural gas will play a role in the transition.

"Oil is an ideal transportation fuel so it will be with us in the coming decades. People are getting better and better at recovering oil (from reservoirs). It's up to a 35% recovery, I think. But we are trying to reduce our dependence on imported oil…we have a problem and so eventually, we will have to use it in a cleaner way."

Chu said research is ongoing to blend oil with other fuels, find substitutes for oil, and trap and sequester all the unnecessary carbon dioxide that is a byproduct of burning oil.

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