There is a great debate going on as to whether we should open more oil drilling off the coasts of the United States. What do you think? 1. We should drill for new oil both on and off-shore in the US. 2. We should only extract new oil on US land. 3. We should only extract new oil off-shore. 4. We should not open any new drilling for oil anywhere in the US.

Off-shore Drilling

How Much Is There? Proven Reserves: Resource that we know is there (90 % chance) AND we can extract it at current prices with current technology. Proven Reserves: Resource that we know is there (90 % chance) AND we can extract it at current prices with current technology. We can increase Proven Reserves by We can increase Proven Reserves by 1) Finding new reserves 2) Improvements in technology 3) Changes in economic conditions

Note: We never totally extract all of the energy, it just becomes too difficult to recover after a while. Note: We never totally extract all of the energy, it just becomes too difficult to recover after a while. Unproven Reserves: We think that it is there based on testing/experience. Unproven Reserves: We think that it is there based on testing/experience.OR We know that it is there, but it is too expensive to extract with current technology/economics.

World Proven OIL Reserves: 2011 Many experts believe that Canada may actually have reserves as high as 2 trillion barrels. Iraq may have more than 360 billion barrels The US may have an additional 100 billion barrels in the Arctic.

How Long Will It Last ? Rate Equation

This is really a bad approximation because it does not take into account changes in rate of use. This is really a bad approximation because it does not take into account changes in rate of use. The demand for energy has been constantly increasing, so the rate equation time is probably too long, but still interesting. The demand for energy has been constantly increasing, so the rate equation time is probably too long, but still interesting.

Exponential Growth Amount of growth depends on the rate of change of the amount with time. Time Amount

Doubling Time In general, if our percentage growth per unit time is P (%/unit time) then the time for our initial quantity to double is DT where: In general, if our percentage growth per unit time is P (%/unit time) then the time for our initial quantity to double is DT where: Example: If P = 10%/year, then

Between 1960 and 1970, US energy consumption grew by 4.5%/yr. This would mean energy use would double in only 70/4.5 =15.5 years! Between 1960 and 1970, US energy consumption grew by 4.5%/yr. This would mean energy use would double in only 70/4.5 =15.5 years! With a constant rate, if we double our reserves, we double their expected life. With exponential growth, doubling reserves will only add a short amount of time. With a constant rate, if we double our reserves, we double their expected life. With exponential growth, doubling reserves will only add a short amount of time. Obviously, exponential growth in energy demand CANNOT go on for very long. Obviously, exponential growth in energy demand CANNOT go on for very long.

Is It Really Exponential? Prices Matter An important lesson from history is that energy prices matter a lot. Before 1973, US energy consumption appeared to be growing exponentially at a rate of more than 4% per year. An exponential growth curve fit the data very well. These statistics imply that energy growth should have been between 4 % and 4.5 % for many years to come. However, that turned out to be very, very wrong.

The graph below compares the exponential forecast (based on data from ) with what actually happened. The exponential model predicted 88 quads more energy consumption in 2003 than there actually was, an error of 89% (186 quads predicted vs. 98 quads of actual consumption). The simple exponential growth model looked good during the period before 1973 because energy prices were low and relatively stable. When prices rose sharply, demand dropped as energy users (especially in industry) began conserving energy.

Which of the following has the most impact on oil prices? 1) Oil Companies 2) World Events 3) President of the United States 4) Congress

Hubbert Analysis Works for just about any natural resource. (Not just fossil fuels) Works for just about any natural resource. (Not just fossil fuels) Initially a new resource shows a period of rapid growth. Easy to find, new markets, etc. Initially a new resource shows a period of rapid growth. Easy to find, new markets, etc. As high quality, easy to find resources are depleted, production will peak and then decline. As high quality, easy to find resources are depleted, production will peak and then decline.

Hubbert Analysis In 1956 Hubbert predicted US oil production would peak in late 60’s or early 70’s. In 1956 Hubbert predicted US oil production would peak in late 60’s or early 70’s. It peaked in It peaked in 1970.

Production will have a “Bell Shaped” Curve. Production will have a “Bell Shaped” Curve.

Table II-1. Projections of the Peaking of World Oil Production. Projected Date of World Peak Production Source of ProjectionBackground Bakhitari, A.M.S.Iranian Oil Executive Simmons, M.R.Investment Banker After 2007Skrebowski, C.Petroleum journal Editor Before 2009Deffeyes, K.S.Oil company geologist Before 2010Goodstein, D.Vice Provost, Cal Tech Around 2010Campbell, C.J.Oil company geologist After 2010World Energy Council World Non-Government Org LaHerrere, J.Oil company geologist 2016EIA nominal case DOE analysis/information. After 2020CERAEnergy consultants 2025 or laterShellMajor oil company No visible peakLynch, M.C.Energy economist