Energy Priorities: Securing the Oil Supply
The U. S. currently uses 19 million barrels of oil per day, of which roughly two thirds is used in transportation. In this area oil is critical, because there are no alternatives to oil-based fuels. This applies to civilian as well as military activities: as far as the movement of goods and people are concerned, we are entirely dependent on oil. The only significant exceptions are the larger ships and submarines of the U.S. Navy, which are nuclear-powered.
Of the 19 million barrels we use, two thirds are imported. It has been assumed in the past that the U.S., because of its wealth and power, could always be assured of a guaranteed supply. This assumption is rapidly being eroded.
First, global demand is growing faster than supply, due to rising oil consumption in Asia. Second, most large oil reserves are now under the control of national governments, which puts significant constraints on the use of existing resources and the development of new ones. Third, the limitations of U.S. power and wealth have been made visible by protracted wars and the current economic crisis. Finally, the bulk of known oil reserves is located in the Middle East, and production is highly vulnerable to political instability, wars and other disruptions affecting that part of the world.
The United States therefore cannot count on the global market to provide for its oil needs at a stable price. It must urgently attend to extending the portion of its fuel supply that is under its national control.
This will not be achieved through “renewable” substitutes such as ethanol. Its production requires large fossil energy inputs, and it cannot be produced in quantities sufficient to cover more than a fraction of national fuel needs. We must therefore look to other solutions. These are: first, increase domestic oil production; second, bilateral agreements with potential suppliers; third, synthetic fuels.
Domestic production: There is still significant oil potential in the United States, particularly offshore and in the arctic. Many of these areas have been put off limits, primarily for “environmental” reasons. These set-asides must now be re-examined in view of both the national need and the progress in drilling and extraction technology. A master plan for opening promising areas must be developed, needed safeguards established, and resource development initiated in a planned and orderly manner.
Bilateral and multilateral arrangements: A substantial portion of yet undiscovered oil deposits lies (a) in the Russian Federation and (b) in the Arctic. The needed exploration and production development requires advanced technology as well as considerable capital, both of which can be provided by the American oil industry with government backing. There is therefore a possibility to structure a bilateral arrangement where the U.S. would provide, through its oil sector, technology and development capital in exchange for a guaranteed share of the new production. Such an arrangement could be negotiated with Russia first, and later extended to other arctic nations.
Synthetic fuel: A third approach to a secure domestic supply is the production of synthetic fuel from coal, natural gas or biomass, all resources the U.S. has in abundance on its own soil. The process is known and has been tested on an industrial scale. It will produce clean-burning fuel at a cost competitive with oil between 60 and 80 dollars per barrel. The U.S. Air Force has carried out extensive and successful tests of synthetic aviation fuel and has long supported this approach.
All the above approaches, if resolutely pursued, will achieve significant results within the scope of one presidential administration. They will not achieve the mythical “energy independence” talked about for decades, but this is not necessary. The United States can continue in the short term to rely, at least in part, on the global oil market. All it needs is an extra margin, under its own control, to reduce dependence on unstable sources, cushion potential shocks and stay ahead of the game until longer-term policies allow us to reduce both oil consumption and our dependence on foreign sources.
Such policies will be addressed in the following issues of the National Interest Platform. The plank just outlined can be summarized as follows:
Immediately initiate and implement the recommended approaches – domestic production, bilateral agreements and synthetic fuel development – so as to reduce dependence on foreign sources for the U.S. transportation fuel supply.
April 26th, 2010 at 5:17 pm
Good article – the solutions are obvious, especially when clearly described as you have done. Implementation is the challenge and, of course, the real obstacle is political.
I would like to take exception to one of your statements:
They will not achieve the mythical “energy independence” talked about for decades…
In fact, the USA did achieve energy independence in the mid 1980’s after ten years of focused effort. The idea of energy independence was conceived out of Nixon’s “Project Independence” in response to the 1973 Arab oil embargo. We first heard the phrase “energy independence” in 1974. Three Presidents: Nixon, Ford and Carter pushed the energy policy forward (with lots of political resistance), but it worked. The public cry for energy independence enabled Nixon to overcome political opposition from environmentalists, and sign into law the Alaska Pipeline project, adding 2 million barrels of oil per day by 1980. Then, the new fuel efficiency standard, implemented in response to the oil embargo, doubled automobile fuel efficiency by 1984. And in addition to that, the oil embargo and push from Congress motivated USA electric utility companies to move away from fuel oil, replacing oil with coal and natural gas to fuel their generators [and a few nuclear power plants].
In 1973, 17% of all oil consumed in the USA was used for electric generation. By 1986, that amount had dropped to under 5% and today is less than 2%. Then Ronald Reagan was elected at the time when the accumulated efforts of the Nixon, Ford, Carter energy independence program where beginning to really pay off. World oil price completely collapsed in 1986 creating a world oil glut, sending Middle East economies into depression.
Yes, we continued to import oil [less than 30%], but at under $10 per barrel. That is what energy independence looks like. The zero oil imports concept is not energy independence. Nixon, Ford and Carter never intended to have zero imports; there was never a call to end imports from Mexico or Canada. We do not need to have zero oil imports to have energy independence.
Presidents Reagan, Bush 1 and Clinton did not have incentive to continue on the path of energy independence because oil prices were too low (and oil companies did not want anything that would drive oil prices lower). Bush 2 wanted to get back to energy independence after 9/11 but he faced resistance from his VP and the oil companies, plus by then the environmentalists had regained the upper hand in their fight to suppress the development of all hydrocarbons.
“Energy Independence” remains a powerful national slogan today, a verbal icon that invokes a political response in the American people. Unfortunately environmentalists have made headway in re-defining energy independence to mean independence from all hydrocarbons; which is the opposite of its original definition; one that included development of synthetic fuels from USA vast coal and shale reserves.
The USA could, with existing technology, produce 20 million barrels of synthetic crude oil per day from USA shale for the next 100 years. And, that’s not a myth.
April 29th, 2010 at 9:14 pm
[...] issue has two sides: supply and demand. In the previous plank of the platform we have dealt with supply. Here we will deal with the demand side, which means reducing [...]