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Why Oil Energy Independence May Not Be a Good Idea

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Title: Why Oil Energy Independence May Not Be a Good Idea


1
Why Oil Energy Independence May Not Be a Good Idea
  • Dennis Silverman
  • Dept. of Physics and Astronomy
  • U C Irvine
  • www.physics.uci.edu/silverma/
  • 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 worlds 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 worlds 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 years 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 worlds 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 Dont 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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