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Thursday, June 16, 2011

Oil Independence is Impossible

Something we’ve been hearing for decades now is that America needs to achieve “energy independence.”  However, while both Conservatives and Liberals deploy this phrase routinely, they usually intend it to function as shorthand for two very different policy prescriptions.  For Conservatives, “energy independence” generally means independence from foreign sources of oil.  For Liberals, “energy independence” usually means the creation of sustainable and renewable energy sources.

The two concepts are not the same, and it is a shame that a single phrase has been used to signal both.  Although it is probably too late now, our national dialogue would be much improved by using different phrases to distinguish these two positions.  What Conservatives are really seeking is “Oil Independence” – the ability to have as much oil as is wanted without being subject to the whims of other nations.  What Liberals are really seeking is true “Energy Independence” – the ability to have as much energy as is needed without relying on finite energy sources.

A few recent news stories clearly demonstrate that not only is Energy Independence a more idealistic concept than is simply seeking Oil Independence, it is also much more practical.

There are only two ways for America to sever its dependence on oil producing nations:  it can either invade those countries that still have sizeable caches of oil and seize those nations’ oil fields for itself, or it can boost its domestic production until that production is sufficient to meet all of America’s oil needs. 

Now there are many who would claim that America already has engaged in the first course of action -- and there probably is something to that assertion -- but this approach to Oil Independence is clearly unworkable. 

First, even setting aside the basic question of morality, a war of aggression to seize oil is incredibly difficult to pull off.  It cannot be done openly, because it would result in the aggressor becoming a pariah nation; say whatever you want to about America’s might, we still need trading partners.  Which means that in order to succeed at something like that, the invading country has to find a pretext to invade a country, topple the government, and then arrange for a compliant successor government to “request” that it stay on and take over oil production (obviously, at extremely advantageous terms).  This at least provides a patina of legality, but as the misadventure in Iraq proved it is incredibly difficult to occupy a country that does not really want you there.

Second, even assuming one pulls off a successful smash-n-grab on the international stage, wars of aggression are incredibly expensive ways to obtain any natural resource.  What would have been cheaper?  Lifting sanctions on Iraq and buying oil on the open market, or invading and occupying the country for decades while at the same time thumbing our nose at the rest of the world and declaring that Iraq’s oil belongs to us now -- as Donald Trump actually argues we should do?

No matter how much Conservatives want to believe in “American Exceptionalism,” no matter how much they may cling to the Green Lantern Theory of Geopolitics, the fact stubbornly remains (thank God) that neither America nor any other nation has the actual ability to attain Oil Independence by sheer force.

But what about doing so by boosting America’s domestic production?  Conservatives are constantly chanting “Drill, Baby, Drill!” and complaining that the Obama administration’s unwillingness to let oil companies gorge themselves off of our coasts is the real reason the United States is so dependent on foreign sources of oil.  In fact, this is precisely what Republican Congressman Darrell Issa argued the other day when Exxon announced a massive oil find in the Gulf of Mexico:

Exxon Mobile Corp. (XOM) announced it found the equivalent of 700 million barrels of oil beneath the Gulf of Mexico, the biggest discovery in the region in 12 years.

The estimated size of the Hadrian field may increase as drilling continues, Exxon said in a statement today.  The discovery is about 250 miles (400 kilometers) southwest of New Orleans in 7,000 feet of water, Irving, Texas-based Exxon said.

 Wow!  That certainly sounds big!  But let’s unpack those three sentences just a little.

First, let’s note that the newly discovered Hadrian field is about 2,000 feet even farther below sea level than was the field being drilled during the Deepwater Horizon catastrophe last year.  So, right there, drilling this oil field presents another possibility of ecologic catastrophe.  After all, the reason it took so long to stop all of that oil gushing into the Gulf last year is because it is difficult to do pretty much anything that far down.

Second, let’s note the length of time that has passed since we last discovered an oil field this significant in the Gulf:   12 years.  And one reason this field was not discovered earlier is almost certainly because no one had gone looking for it before; all things being equal, oil companies don’t enthuse about drilling for oil a mile and a half below sea level.  The only reason they are looking to drill there today is because they’ve essentially depleted the more easily obtainable oil located on land or in shallow water.  The fact that Exxon Mobile is even looking for fields 1 ½ miles below sea level proves how finite a resource oil is.  Once you’ve sucked your milkshake dry, the cup never magically refills; you’ve got to go find another one, and we’ve run out of cheap and easy “milkshakes” to exploit:

It doesn’t necessarily mean that Exxon Mobile actually has access to 700 million barrels of oil, as it is not yet clear how much of this new find is actually recoverable.  (You can never recover all of the oil out of a given field, because the pressure in an oil field decreases as the oil is pumped out of it; eventually, more than a barrel of oil’s worth of energy is required to pump up a single barrel of the remaining oil.)  But even if all 700 million barrels from this new find were instantly recoverable – and they are not, of course -- what does that mean?

Well, according to the CIA the United States consumed 18.69 million barrels of oil per day back in 2009.  Even using this two year old figure, that means that Exxon Mobile’s massive new find, the biggest in 12 years, could supply all of America’s oil needs for . . . .  37 days.  It means that to replace all of the oil America consumes every year the United States needs to find about ten new domestic fields a year – each one the size of Exxon Mobile’s new “massive” discovery – and bring them online immediately.  Only then could the United States claim to have truly achieved Oil Independence.

This clearly is not going to happen.

Right now, global demand for oil runs to about 89 million barrels a day.  Which means this is the amount of new oil that needs to be found around the world – every day – just to keep from depleting current oil reserves.  Obviously, that is a tall order.  For example, even if the global demand for oil were to suddenly stop rising – which it won’t – Exxon Mobile’s new 700 million barrel oil field would only cover about one week’s worth of global consumption.  For that matter, Brazil’s discovery last October of a new offshore field estimated at 8 billion barrels of recoverable oil can only meet the world’s needs for about 3 months.

Indeed, last year the International Energy Agency explicitly acknowledged the fact of “peak oil” – that is, the point at which the global supply of oil maxes out and then begins an inexorable decline – and provided a best estimate as to when it expects that point to be reached:  2035.  But even that date, which is only about 24 years away – may be a bit optimistic.

The good people over at Energy Bulletin reviewed the IEA’s 2010 World Energy Outlook and summarized the IEA’s projections for future global oil production by constructing the following graph:

Do you notice something interesting about where that vertical black line is drawn?  Extending from around 2006 until 2035, the IEA estimates that the world’s supply of crude oil – that is, oil the way we normally think of it, something liquid that can be pumped out of oil fields – will remain constant.  Of course, this isn’t great news since global demand will continue to rise.  But it actually gets worse.

Look at how the IEA anticipates the world will maintain this constant rate of crude oil production.  To begin with, the IEA acknowledges that we have begun to see a precipitous drop in production from all currently developed oil fields (the dark blue section).  The IEA expects that some already identified but as yet undeveloped fields (the gray section) will make up part of this shortfall, but it also acknowledges that production from these newly developed fields will also begin to drop precipitously around 2017. 

In fact, the only way the IEA is able to claim that crude oil production will just remain constant until 2035 is by asserting that both of these expected shortfalls will be made up for by oil fields that have not yet been discovered (the light blue section) -- like, for example, Exxon Mobile’s “massive” Hadrian oil field, which can supply the world’s needs for a whole week. 

The more one looks at this graph, the more the IEA’s projections seem an exercise in wishful thinking:  “sure, all known oil fields are quickly running out of that sweet, sweet crude, but we’ll find some more somewhere.”  In fact, according to its own figures the only way the International Energy Agency avoids the conclusion that “peak oil” already has occurred is by suggesting both that if we clap loudly enough new fields will be discovered and that “natural gas liquids” and “unconventional oil” – the really expensive kind, produced from tar sands and shales -- will make up the loss. 

At least, y’know, for the next 20 years or so.   Then I suppose we can all bugger off.

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