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Why Oil Energy Independence May Not Be a Good Idea Dennis Silverman Dept. of Physics and Astronomy U C Irvine October 30,

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Presentation on theme: "Why Oil Energy Independence May Not Be a Good Idea Dennis Silverman Dept. of Physics and Astronomy U C Irvine October 30,"— Presentation transcript:

1 Why Oil Energy Independence May Not Be a Good Idea Dennis Silverman Dept. of Physics and Astronomy U C Irvine October 30, 2008

2 World Proven Oil Reserves by Region (2003): Total 1,150 BBls, 31 BBls yearly usage. 63% is in the Middle East. Iraq has 10% of the reserves. 80% are in nationalized oil companies.

3 U. S. Oil Usage The US uses about 8 billion barrels of oil a year. This is about one quarter of the worlds oil usage. We import about 2/3 of our oil. From the world’s oil reserve bar chart, our 64 billion barrels of oil would last only 8 years if we truly went oil energy independent. We would of course have to triple our drilling wells to do so, and then abandon them after 8 years. The world’s oil stocks look like we could use them at the current rate for about 40 years. The true world reserves are not know to a factor of two, and the 1,200 billion barrels here is optimistic to some, and pessimistic to others.

4 U. S. Offshore Oil Reserves

5 Outer Continental Shelf Offshore Oil Drilling is Not Energy Independence The blue areas are the 68 billion barrels of reserves that are already allowed for drilling on the continental shelf. The white areas are the 18 billion barrels that are not yet allowed or leased on the further than 3.3 mile outer continental shelf. Even drilling all of these would only give us an extra 2 years of total oil use. ANWR at 4 to 12 billion barrels would only give us an extra one year of total oil use. But even if the current rate of California extraction on the near offshore drilling could be continued at the outer continental shelf, it would take about 100 years to extract the 10 billion barrels or one year’s worth of total oil use. If we drill, baby, drill all of the banned areas plus ANWR at say 28 billion barrels total, that will only add 2.3% to the world’s total reserves, and hardly effect the price of gasoline.

6 Ways to Achieve Some Oil Energy Independence The Alberta tar sands are estimated to hold 180 billion barrels of recoverable oil. –The cost of recovery is estimated at $50 a barrel. –This is probably low. –The oil also has to be extracted after heating by natural gas, which will cut down our (California) natural gas supply from Canada. The new CAFE standards will lower average new auto fuel usage by 30% in 2020, and should be further improved in the future. Future plug in hybrids or electric cars will change from oil usage to other fossil fuels or to CO2 free electrical sources. Immediate fuel savings can be implemented by driving at the speed limit, using our better mileage car, combining trips, car pooling, and public transportation. As Greenspan now points out, allowing financial firms to make investments inimical to their long term existence, and thereby causing a worldwide recession, will also reduce oil consumption.

7 The Cost of Oil Oil reached $147 per barrel because 81% of purchases in oil futures were by speculators like hedge funds that were not actually going to take delivery of the oil. Since oil is a fixed resource, its price rises directly proportional to the money thrown at it. Oil companies used to make a profit when oil cost only $20 a barrel. At the present $70 a barrel, oil imports at 14 million barrels a day (out of our total of 21 billion barrels a day), result in an outflow of $365 billion a year. However, those dollars will eventually, I believe, find their way back to the US in purchasing goods, services, real estate, stocks, bonds, or US companies.

8 Other Reasons That We Don’t Need Oil Energy Independence Ruling out a certain market increases the demand and the cost of our oil from allowed markets. It also lessens the cost of oil from the banned market to our international competitors, such as China. So limited energy independence acts as a subsidy to China. Allowing US oil companies more drilling does not decrease the cost to the consumers, but only adds to excessive oil company profits.

9 The Stability of Our International Oil Supply We import oil from many sources. The Persian Gulf vulnerability from Iran can be ameliorated by westward running pipelines from Saudi Arabia and Iraq. Oil exporting countries rely heavily for their economy and government on the revenues and cannot turn them off for long. They also cannot engage in wars that would endanger their oil facilities. We have a strategic oil reserve with 707 million barrels of oil. Even a loss of oil say from Venezuela or Nigeria or Mexico at about 1.1 million barrels a day could be handled for one and ¾ years from our strategic reserve. It could also be handled by conserving temporarily about 5% of consumption.

10 Oil Import Sources We use 21 million barrels of oil a day. 14 million barrels a day are imported. Principle suppliers are –Canada 2.5 million barrels per day –Mexico 1.3 million –Venezuela 1.2 million –Nigeria 1.1 million –From the Middle East we get 2.5 million: Saudi Arabia 1.6 million Iraq 0.7 million Kuwait 0.2 million

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