1. Exploiting Crude Oil 12.2a

2. Dependency on Foreign Oil The U.S. depends on foreign sources for over 60% of its crude oil. Dependency is increasing Consequences: trade imbalances, economic disruptions, military actions, coastal oil spills.

3. How Fossil Fuels Are Formed Crude oil, coal, ________ gas Derived from the remains of living __________ Paleozoic and Mesozoic eras (100-500 mya) much of Earth covered with _______ and shallow ____________ Lower layers had ________ conditions- dead stuff broke down ___________ Organic matter buried by ___________, __________ and heat converted it to fossil fuels

4. Energy Flow Through Fossil Fuels. Fig 12-11

5. Crude Oil Reserves ___________ Reserves: Geologists’ ___________ guesses as to where oil or natural gas may be _______--- and how much may be found ___________ Reserves: when exploratory drilling _______ _______ and further drilling is conducted to determine the ________ and _______ of the oilfield.

6. Probability P50 (50% ___________) of 700 million barrels means that a total of 700 million barrels is just as likely as _____ to come from the field. Which is more _________? P05? or P90? Oil producers may prefer ______ to give the impression of a large reserve for _____________ or economic reasons

7. Recovery Oil production (______________) is not at a constant rate __________ at first when under pressure- __________ Recovery- 25% of the oil in field. Further removal possible (50%-60% more) but more _________ and expensive- _________ or Tertiary Recovery use substances like steam to ______oil into wells

8. Economics of Recovery Depends on __________ of a barrel No oil company will spend _______ to get oil than they can sell it for. When prices are low, not worth it to do _______________ production. When prices are _______, some oil fields are ___________ to do secondary or tertiary production.

9. Declining U.S. Reserves and Increasing Importation Until _______, discovery of new oilfields kept ________ with U.S. demand 1970, new discoveries fell _______, but consumption continued to __________ This was predicted by a geologist named M. King ___________- –thought oil exploitation would follow ____ curve- – and that ______ would be 1965-1970 U.S. relied more and more on _______ oil

10. Oil production and consumption in the U.S (Fig 12-12 pg 333)

11. The Oil Crisis of the 1970s OPEC: Organization of ______________ Exporting _________________ Formed a _______ group of countries that decided to ______ ___________ in order to raise the price of oil 1973 OPEC began an oil ________- agreed not to ______ oil to the U.S. or anyone who gave military or _______ _____ to Israel during the Arab-Israeli war

12. Effects of OPEC’s Embargo Prices went up almost ___________-- the U.S. had very little in ____________ Spot ____________ occurred that led to widespread ____________ OPEC agreed to sell oil at the price of ____________ a barrel -up from $2.50 (about $29 a barrel today) OPEC continued to raise prices to _____ ($64) ____________ our economy- inflation, unemployment, recession

13. U.S. Effort to Increase Production More ______________ drilling Construction of __________ ___________ (with prices high, it became worth it to bring it into production) Reopened fields for secondary and ____________ recovery (high prices made it _____________ it)

14. Effort to Decrease Consumption Set standards for _________ ____________. Cars to average 27.5 mpg by 1985. (averaged 13 in ’73). Speed limit _____ mph. Conservation promoted – _____________, appliances _________ breaks and support to research __________ __________ systems

15. Boycott Protection U.S. began to _____________ 599 million barrels or 53 days worth of oil We now have _________ million barrels of oil or ______ days worth of oil (at a rate of 21 million barrels of oil a day.

16. Results (Except stockpile) Steps economically _____________ when prices are _______ If prices of oil low, then many steps not be economically ___________. Results _______ __________________. –Takes time to _______ fuel efficient cars –Takes time for fuel efficient cars to ______ gas guzzlers

17. Recovery By 1980s ______________ was declining _____________ up in Alaska U.S. continued to rely on imported oil, but OPEC had ____________ from ___________, Africa, and the North Sea OPEC had difficulty ______________ members

18. Oil Glut Oil production ______________ consumption in mid 1980s Prices _____________ in 1986 from high $20s to $14/barrel Prices continued to _____________- between $10-$20/ barrel

19. Victims of Our Success ____________ ________ from 3105 drilling rigs in 1982 to 660 in 1992 _____________ from older oil fields (which cost $10-$15/barrel to pump) _________ Conservation efforts and _________ ____________. Speed limits went back up to ______ mph Tax incentives and subsidies for alternative energy _________ and ___________ many new businesses

20. U.S. oil production dropped as proven reserves were drawn down Alaska oil field reached its peak in ______ Consumption ________ People began to buy _______ ___________ (minivans, SUVs again)

21. Back to the future Oil prices in the 1990s were low but started ________________ in 1998 OPEC cut production –Just as East Asia came out of a ______________ –Demand exceeded _______________ Prices rose to over ________/ barrel in 2008 –People reduced driving and bought ________ cars –Oil companies had record _________________ –Food prices _________________ –Congress raised efficiency standards and called for increased _________________ fuels

22. Recession In September 2008, the stock market __________ –Overpriced _____________, mortgage excesses, uncontrolled stock market speculation –A ____________ economic meltdown caused job losses –Major _________________ institutions failed –Credit became ___________________ Countries fell into the worst recession in ___ years –Oil imports declined and prices ____________ –OPEC cut production to ____________ prices Countries still _______________ on a few oil-rich nations

23. Problems of Growing U.S. Dependency on Foreign Oil 12.2b

25. Trade Deficit ______ of balance-of-trade ________ ($815 billion in 2007) Same _______ to us whether produced here or _________ But, when oil produced here, ____ circulates here and helps our __________ When we buy from abroad= “foreign ____”

26. Other Costs- Ecological Exxon-Valdez oil spill estimated cost of ____ billion Other forms of pollution from drilling, ____________ and consumption Estimating total damage in dollars is difficult

27. Persian Gulf Oil Maintaining _______ ____ ______ is also a major reason for negotiating _______ agreements in Middle East U.S. maintains _____________ presence to ensure _____________ to Persian Gulf oil

28. 1991 Gulf War _______Saddam Hussein invaded __________ which produced 6 million barrels per day U.S. led forces ______ Hussein’s army ________ of Kuwait in _______ U.S. kept ongoing presence U.S. presence angered ___________ who attacked the World Trade Center and the ___________ on September 11, 2001

29. Blood for Oil? U.S.-_______ coalition invaded Iraq in 2003 to overthrow ________ and eliminate ___________ WMD __________ around the world cried “No blood for ______”- implying that oil was the real _________________

30. Was oil part of the motivation? Coalition forces immediately prepared to protect Iraq’s _____ _________, not Iraqi National _____________ _______ and British companies likely the ones to __________ Iraqi oil industry U.S. and other Western countries rely on __________ ________ Oil for ________ of imports

31. Subsidy Military ________ associated with maintaining access to Persian Gulf Oil can be considered a U.S. Govt. ___________. Before 2003, military presence= _____ billion/ year= __________________ In 2002, $30/ barrel + $61 subsidy= _____ 2008, _______/ barrel + at least $61?

32. Resource Limitations “__________ ______” Hypothesis: as your search turns up _________ eggs, you draw the logical conclusion that most of the eggs have been _________. No major oil fields in N. America found since ____________. Computer mapping helping find smaller ______________ World now using _____ BBs/year. 2020 _____ BBs?

33. Hubbert’s Peak Scientists calculate reserves at ____ BBs- Peak will occur _______ ___________ Oil Industry 1050 BBs.- Peak within _____ decade. Hubbert’s Peak, The _________ World Oil Shortage, by Kenneth Deffeyes: “After peak, oil production of crude oil will fall, ________ ____ __________ again”

34. Hubbert curves of oil production

35. Undiscovered Reserves USGS believes _______ ______ not yet discovered. Even if found, only pushes back peak a _____ __________ or a _________ At current consumption levels, ________ reserves can supply us for only _____ more years. As production declines, ________ nations will ___________ again.

36. Independence 1.We can increase the _____ _________ of our transportation system. 2.We can use ____ fossil-fuel resources we have to make fuel for vehicles. 3.We can develop ________ to fossil fuels