1 00:00:00,012 --> 00:00:07,843 Hello, we're in Energy 101, I'm Dr. Sam Shelton at Georgia Tech and this is 2 00:00:07,843 --> 00:00:13,709 the, looking at, section that looks at energy sources. 3 00:00:13,709 --> 00:00:21,412 We saw that the energy that we use in society comes from various sources. 4 00:00:21,412 --> 00:00:27,582 we talk about coal where 20% of energy comes from, we talk about natural gas 5 00:00:27,582 --> 00:00:33,614 that supplies 26% of our energy, and today we're going to talk about oil which 6 00:00:33,614 --> 00:00:38,490 supplies 36% of energy. It's the biggest single source for the 7 00:00:38,490 --> 00:00:44,076 energy that we use in our society, and We'll see that that's linked to 8 00:00:44,076 --> 00:00:48,907 transportation. Nuclear provides 9% as the nuclear power 9 00:00:48,907 --> 00:00:55,472 plants that produce electricity. Biomass is, there's ethanol as well as, 10 00:00:55,472 --> 00:01:01,680 Bio-mass waste from things like pulp in paper mills, that burn it to help supply 11 00:01:01,680 --> 00:01:07,800 the steam and electricity to them. hydro-power, the dams that we generate 12 00:01:07,800 --> 00:01:11,862 electricity from is about 3%. Wind is about 1.2 %. 13 00:01:11,862 --> 00:01:17,567 Geothermal's a quater percant and solar is about a tenth of percent, so that's 14 00:01:17,567 --> 00:01:22,805 where all the energy comes from. Just a quick review and today we're going 15 00:01:22,805 --> 00:01:28,799 to talk about the biggest one, oil, 36%. So where does the oil go? What sectors 16 00:01:28,799 --> 00:01:32,841 consume That oil. Well, as I already mentioned, 17 00:01:32,841 --> 00:01:39,472 transportation is the dominant one. manufacturing uses 23% of it and that we 18 00:01:39,472 --> 00:01:45,073 don't generally burn the oil in manufacturing to make things that we want 19 00:01:45,073 --> 00:01:49,154 to buy. We are generally using the molecule, for 20 00:01:49,154 --> 00:01:52,923 instance to making plastics and making chemicals. 21 00:01:52,923 --> 00:01:57,323 So manufacturing is the number 2 [UNKNOWN]utilizer of oil. 22 00:01:57,323 --> 00:02:02,960 Residential is about 3% and that's, that's essentially space heating in the 23 00:02:02,960 --> 00:02:07,252 northeast. Where, they, have no natural gas 24 00:02:07,252 --> 00:02:14,267 pipelines down the street, and they have to use oil or maybe propane and, they, 25 00:02:14,267 --> 00:02:19,532 it's cost them significantly more money than natural gas. 26 00:02:19,532 --> 00:02:23,652 Would, if they had natural gas pipeline down the street, but they have no 27 00:02:23,652 --> 00:02:26,171 alternative to get natural gas in that area. 28 00:02:26,171 --> 00:02:30,365 And electric heat pumps are a problem because they don't have a duct system 29 00:02:30,365 --> 00:02:34,549 with air conditioning. That's the whole technical detail here, 30 00:02:34,549 --> 00:02:39,320 as we'll get into later. Commercial sector buildings, 1.6 percent. 31 00:02:39,320 --> 00:02:44,272 And then electricity is a half a percent. Don't miss that electricity. 32 00:02:44,272 --> 00:02:49,586 The electricity is an important point. And that only half a percent of oil is 33 00:02:49,586 --> 00:02:53,577 used by electricity. So that will have an important 34 00:02:53,577 --> 00:02:57,558 implication here as we go through that we'll see. 35 00:02:57,558 --> 00:03:03,898 Oil was first, not first, but basically the massive discovery of oil was in the 36 00:03:03,898 --> 00:03:10,006 spindle top area in Texas in 1901. We actually started using oil with advent 37 00:03:10,006 --> 00:03:15,766 of the invention of the internal combustion engine in the automobile in 38 00:03:15,766 --> 00:03:21,293 the mid to late. 1800s, but, we didn't really start, 39 00:03:21,293 --> 00:03:28,558 drilling and getting oil from beneath the ground in deep wells until 1901, and 40 00:03:28,558 --> 00:03:36,142 there's a, a, a shot taken in 1901, of that well down in Spinnelcock, Texas. 41 00:03:36,142 --> 00:03:42,177 Just like the other hydrocarbons; coal, natural gas, you burn it, we don't need 42 00:03:42,177 --> 00:03:46,192 to dwell on this. You notice the chemical formula's a 43 00:03:46,192 --> 00:03:51,107 little bit more complex. You don't need to learn this or memorize 44 00:03:51,107 --> 00:03:55,625 it or anything. But it's a little different in that it's 45 00:03:55,625 --> 00:04:01,055 got an unknown called n. C, oil is generally designated by C and 46 00:04:01,055 --> 00:04:03,846 H2n plus 2. n can be 1, 2, 3, 4. 47 00:04:03,846 --> 00:04:08,332 n is an integer. Depending on the length of the molecule 48 00:04:08,332 --> 00:04:15,076 and the heaviness of the oil. So just you can reacted with oxygen but 49 00:04:15,076 --> 00:04:22,249 you need two n oxygen molecules to react with the carbon and hydrogen that comes 50 00:04:22,249 --> 00:04:28,132 with oil and it goes to nco2. Molecules and n + 1 water molecules. 51 00:04:28,132 --> 00:04:35,021 So again, oxygen is reacted with carbon and, and hydrogen, to produce CO2 and 52 00:04:35,021 --> 00:04:39,588 water, in the same way that natural gas and coal is. 53 00:04:39,588 --> 00:04:46,703 So of course coal has no hydrogen. But, in the process, it, it reduces heat, 54 00:04:46,703 --> 00:04:53,447 and the reason for that, is that chemical energy In the molecules on the right hand 55 00:04:53,447 --> 00:04:59,017 side of that equation, the CO2, and H20 is less than the chemical energy in the 56 00:04:59,017 --> 00:05:04,757 hydro-carbon molecule and the oxygen. So we're decreasing the checmical energy 57 00:05:04,757 --> 00:05:10,332 content and converting it into what we call thermal energy or heat, and that's 58 00:05:10,332 --> 00:05:15,137 what combustion is all about. That conversion process, from, from 59 00:05:15,137 --> 00:05:18,077 chemical to Heat. Oil consumption. 60 00:05:18,077 --> 00:05:21,527 So how much do we use? And what's the trend. 61 00:05:21,527 --> 00:05:27,237 Well here it shows it from the 1900s. Then when the spindle top was first 62 00:05:27,237 --> 00:05:29,597 drilled and came in. And oil. 63 00:05:29,597 --> 00:05:35,447 And Texas, by the way, has been the largest producer of oil in any state in 64 00:05:35,447 --> 00:05:40,622 the union ever since. And still today by a significant margin. 65 00:05:40,622 --> 00:05:45,152 But it increased, and it dramatically increased in the 60s and 70s. 66 00:05:45,152 --> 00:05:50,082 You notice it topped out in the late 70s. You might think back on why that might 67 00:05:50,082 --> 00:05:52,852 have been the case. There were two reasons. 68 00:05:52,852 --> 00:05:57,547 Number one, number one we had the embargo, oil embargo, and so that scared 69 00:05:57,547 --> 00:06:02,262 the heck out of everybody, and everybody that could quickly get off oil and 70 00:06:02,262 --> 00:06:07,117 convert to something else, and use something else did so, just for stability 71 00:06:07,117 --> 00:06:11,252 and reliability. But the other reason is, is electric 72 00:06:11,252 --> 00:06:16,632 power, you noticed that only half of a percent of oil is used for electric 73 00:06:16,632 --> 00:06:22,153 power, that was a much higher percentage in 1970, much higher percentage. 74 00:06:22,153 --> 00:06:27,998 so we burned a lot of oil in power plants to produce electricity in the early 75 00:06:27,998 --> 00:06:32,365 1970's building up. But then oil became so expensive, when 76 00:06:32,365 --> 00:06:37,451 oil increased from about Two dollars a barrel to approximately ten dollars a 77 00:06:37,451 --> 00:06:40,378 barrel in the 70s. That's a five fold increase. 78 00:06:40,378 --> 00:06:45,359 That's higher than probably you, if you stop and think about it that, that you've 79 00:06:45,359 --> 00:06:48,422 ever seen. Five fold increase so it was a dramatic 80 00:06:48,422 --> 00:06:52,622 impact on our country and anybody that could get off oil got off oil. 81 00:06:52,622 --> 00:06:59,183 It was the first implementation of, of, car mileage standards, by E, E.P.A., the 82 00:06:59,183 --> 00:07:05,644 government, and to force, higher fuel efficiency, which, has been continually 83 00:07:05,644 --> 00:07:09,250 going up. It, it was stable for About 20 or 30 84 00:07:09,250 --> 00:07:13,413 years, from 80, 1980 to 2010, essentially. 85 00:07:13,413 --> 00:07:21,814 but, now it's, it's scheduled to go up to around 50 miles per gallon, from the 28 86 00:07:21,814 --> 00:07:27,252 or 30 or so, in year 2025. So There are lots of reasons why the oil 87 00:07:27,252 --> 00:07:33,717 consumption declined, and then it started increasing again once we got off the easy 88 00:07:33,717 --> 00:07:39,797 oil to get off of: electric power plants and other uses that made the cost of oil 89 00:07:39,797 --> 00:07:45,006 too expensive with the dramatic increase for reliability reasons. 90 00:07:45,006 --> 00:07:51,210 You see it's been flat since 2007-2008. That obviously has everything to do with 91 00:07:51,210 --> 00:07:55,197 the recession. Again, we saw earlier that when the 92 00:07:55,197 --> 00:08:01,437 economy drops, the gross domestic, gross domestic product and a recession comes, 93 00:08:01,437 --> 00:08:06,988 then you have a decrease in energy consumption and oil is one of those The 94 00:08:06,988 --> 00:08:11,981 other thing is that you can get hit. So, and now we're starting to move up 95 00:08:11,981 --> 00:08:17,565 again as the recession, we're coming out of the recession as you can see from 2009 96 00:08:17,565 --> 00:08:20,662 or so. That data is through 2011, by the way. 97 00:08:20,662 --> 00:08:25,972 So, that, that's our consumption side. So, where is that oil coming from. 98 00:08:25,972 --> 00:08:31,044 We've got to get it from somewhere. Where's the oil coming from? Well, here's 99 00:08:31,044 --> 00:08:36,116 showing what we're, our production, US oil production, and this has got some 100 00:08:36,116 --> 00:08:40,458 interesting aspects to it. We could spend a long time on this, 101 00:08:40,458 --> 00:08:43,728 slide. But, let's just look at the, the major 102 00:08:43,728 --> 00:08:47,192 features. Again, this comes from, it starts at year 103 00:08:47,192 --> 00:08:50,367 1900. And we're talking about millions of 104 00:08:50,367 --> 00:08:56,112 barrels per day, by the way, on the vertical scale, as we did on the previous 105 00:08:56,112 --> 00:09:00,067 slide. we see that's millions of barrels per day 106 00:09:00,067 --> 00:09:04,417 on the vertical scale. 2, 4, 6, 8, 10, 12, 14, 16 million 107 00:09:04,417 --> 00:09:07,522 barrels per day. And here, same way. 108 00:09:07,522 --> 00:09:12,342 So, from 1900 to 2011, also. So, this is our US oil production. 109 00:09:12,342 --> 00:09:18,589 The yellow area is our lower 48, 48 state oil production. 110 00:09:18,589 --> 00:09:27,255 And the purple is our Alaska production. You notice that the Alaska production 111 00:09:27,255 --> 00:09:35,240 came in a a little bit in the mid 70s and really boomed with the North Slope 112 00:09:35,240 --> 00:09:41,678 Discovery in the 80s. And development off that, that built the 113 00:09:41,678 --> 00:09:49,372 Alaska pipeline, get that oil down to the US and, and it's maxed out in mid 80's to 114 00:09:49,372 --> 00:09:54,929 late 80's and has been declining, as every oil field does. 115 00:09:54,929 --> 00:10:01,602 When you drill a well the production declines at about 4% per year so. 116 00:10:01,602 --> 00:10:06,657 Your maximum production is going to be the first year that it's in production, 117 00:10:06,657 --> 00:10:11,543 and then it's capability to produce oil or extract oil declines every year. 118 00:10:11,543 --> 00:10:16,360 So you have to keep running in order to stand still, because we have to find 119 00:10:16,360 --> 00:10:21,346 enough new oil coming out of new wells that we drill in order to make up for the 120 00:10:21,346 --> 00:10:24,257 declining production in the existing wells. 121 00:10:24,257 --> 00:10:28,042 The major feature that you might find surprising here. 122 00:10:28,042 --> 00:10:33,579 Is that oil production in this country peaked in 1970, peaked in 1970. 123 00:10:33,579 --> 00:10:39,444 what was the price of oil in 1970? It was $2 a barrel, $2 a barrel in 1970 oil 124 00:10:39,444 --> 00:10:44,258 production peaked and we have never reached that peak again. 125 00:10:44,258 --> 00:10:51,241 In the mid 80's we came closest to it but Because of the north slope Alaskan oil 126 00:10:51,241 --> 00:10:54,950 production coming down the Alaska pipeline. 127 00:10:54,950 --> 00:11:01,724 But it, it declined then up until about 2008 when it started climbing again and 128 00:11:01,724 --> 00:11:06,701 that's been pri, primarily North Dakota. And this is all U.S. 129 00:11:06,701 --> 00:11:10,898 produced oil. So we have had an increase, as we've had 130 00:11:10,898 --> 00:11:14,542 some in the past. It's not a nice smooth curve. 131 00:11:14,542 --> 00:11:20,687 It's continued to decline since 1970. But we're seeing a bump up at this point. 132 00:11:20,687 --> 00:11:26,501 So where's the rest coming from? Because that does not meet our consumption. 133 00:11:26,501 --> 00:11:31,842 The red area shows the difference between our production and our consumption. 134 00:11:31,842 --> 00:11:34,803 The red area is obviously then our imports. 135 00:11:34,803 --> 00:11:40,017 That is the oil that we're importing. We're currently importing about 60% of 136 00:11:40,017 --> 00:11:41,383 our crude oil. 60%. 137 00:11:41,383 --> 00:11:46,647 You hear lots of different numbers, but in crude oil, we're, we're importing 138 00:11:46,647 --> 00:11:50,303 about 60% of our oil. Give or take a few percent. 139 00:11:50,303 --> 00:11:54,839 this is data right out of the EIA, as I've noted there. 140 00:11:54,839 --> 00:12:01,637 that's the Energy Information Agency, part of DOE, and it was formed in the 141 00:12:01,637 --> 00:12:06,762 late 70s to keep up with oil and energy facts in general. 142 00:12:06,762 --> 00:12:10,997 And there's a good, reliable sources for energy data. 143 00:12:10,997 --> 00:12:16,740 So that red area has generally been increasing but it's hard to tell on the 144 00:12:16,740 --> 00:12:22,357 scale about what the trend has been. But let's, so let's look at the next 145 00:12:22,357 --> 00:12:28,565 slide that shows just the oil imports. You notice again, the oil imports peaked 146 00:12:28,565 --> 00:12:32,992 in the late 70's. just about the time we had the oil 147 00:12:32,992 --> 00:12:39,451 embargo, and the sharp price increase. to about, oil worth, we were importing 148 00:12:39,451 --> 00:12:45,018 about 6 million barrels per day. And then, with the price quadrupling. 149 00:12:45,018 --> 00:12:49,408 And then, and, The availability With, with the 150 00:12:49,408 --> 00:12:55,034 interruption of the supply from the Middle East, it dropped the imports down 151 00:12:55,034 --> 00:12:59,012 to close to 3 million barrels a day, so it cut it in half. 152 00:12:59,012 --> 00:13:04,962 But that is as I already mentioned, that was because we started using less oil, 153 00:13:04,962 --> 00:13:11,022 but we didn't and, and we primarily took care of the drop in the use by decreasing 154 00:13:11,022 --> 00:13:14,562 the imports which would be naturally the case. 155 00:13:14,562 --> 00:13:19,492 And it's, it's been climbing since. it declined again in 2007. 156 00:13:19,492 --> 00:13:26,139 primarily again with the drop in recession, because our demand went down 157 00:13:26,139 --> 00:13:31,756 and our increased production. So that's, that's our trend on oil 158 00:13:31,756 --> 00:13:38,177 imports from 1900 to 2011. So where is the oil going? Again the oil 159 00:13:38,177 --> 00:13:45,251 is going to 72% of it is going to transportation, 23% to manufacturing 2, 160 00:13:45,251 --> 00:13:51,512 3% for residential, but then the key number is a half a percent for 161 00:13:51,512 --> 00:13:56,449 electricity. So the conclusions from all of this is 162 00:13:56,449 --> 00:14:00,852 the US is dependent of, on, on imported oil. 163 00:14:00,852 --> 00:14:04,989 You just can't get away from it. When you're importing 60% of your oil 164 00:14:04,989 --> 00:14:09,588 that you used, you are dependent on imported oil and all the implications for 165 00:14:09,588 --> 00:14:12,553 that. but the other thing that way if you look 166 00:14:12,553 --> 00:14:17,501 back against the information that we. Talked about in coal and gas. 167 00:14:17,501 --> 00:14:24,650 We essentially if supply and produce all of the coal that we use and all of the 168 00:14:24,650 --> 00:14:31,173 gas that we use, the only exception is the gas, natural gas in which we get 15% 169 00:14:31,173 --> 00:14:36,897 of the gas or 14% of our gas from Canada. So we are essentially energy independent 170 00:14:36,897 --> 00:14:40,442 on coal and gas but we are not energy independent on oil. 171 00:14:40,442 --> 00:14:44,407 So there's a big distinction. All energy is not created equal. 172 00:14:44,407 --> 00:14:49,102 You can't just go around throwing a piece, chunk of coal in your gas tank in 173 00:14:49,102 --> 00:14:52,042 you car and drive your car on a chunk of coal. 174 00:14:52,042 --> 00:14:58,056 And running on natural gas has lots of problems and issues and costs and 175 00:14:58,056 --> 00:15:03,135 economics also. So what, what that means is coal and gas 176 00:15:03,135 --> 00:15:09,270 is the electric power fuel resource. and, again, reinforces the fact that we 177 00:15:09,270 --> 00:15:14,985 do not get any of our electricity from oil or any significant, amount, that 178 00:15:14,985 --> 00:15:20,594 being about 0.5% or for some unique reasons that, probably is not going to 179 00:15:20,594 --> 00:15:25,618 change any time soon. So that's the, where our oil is coming 180 00:15:25,618 --> 00:15:32,457 from and how we're using it and we'll talk about pricing, energy pricing next 181 00:15:32,457 --> 00:15:36,545 time. Talking about why it is that Europe pays 182 00:15:36,545 --> 00:15:41,297 8 or $9 a gallon for. For gasoline, and we only pay, only, pay 183 00:15:41,297 --> 00:15:45,142 $3.50 to $4. What's the pricing issue here, and how is 184 00:15:45,142 --> 00:15:50,940 the price of oil determined for us and other countries in the world? Thank you.