Hello, we're in Energy 101, I'm Dr. 
Sam Shelton at Georgia Tech and this is 
the, looking at, section that looks at 
energy sources. 
We saw that the energy that we use in 
society comes from various sources. 
we talk about coal where 20% of energy 
comes from, we talk about natural gas 
that supplies 26% of our energy, and 
today we're going to talk about oil which 
supplies 36% of energy. 
It's the biggest single source for the 
energy that we use in our society, and 
We'll see that that's linked to 
transportation. 
Nuclear provides 9% as the nuclear power 
plants that produce electricity. 
Biomass is, there's ethanol as well as, 
Bio-mass waste from things like pulp in 
paper mills, that burn it to help supply 
the steam and electricity to them. 
hydro-power, the dams that we generate 
electricity from is about 3%. 
Wind is about 1.2 %. 
Geothermal's a quater percant and solar 
is about a tenth of percent, so that's 
where all the energy comes from. 
Just a quick review and today we're going 
to talk about the biggest one, oil, 36%. 
So where does the oil go? What sectors 
consume That oil. 
Well, as I already mentioned, 
transportation is the dominant one. 
manufacturing uses 23% of it and that we 
don't generally burn the oil in 
manufacturing to make things that we want 
to buy. 
We are generally using the molecule, for 
instance to making plastics and making 
chemicals. 
So manufacturing is the number 2 
[UNKNOWN]utilizer of oil. 
Residential is about 3% and that's, 
that's essentially space heating in the 
northeast. 
Where, they, have no natural gas 
pipelines down the street, and they have 
to use oil or maybe propane and, they, 
it's cost them significantly more money 
than natural gas. 
Would, if they had natural gas pipeline 
down the street, but they have no 
alternative to get natural gas in that 
area. 
And electric heat pumps are a problem 
because they don't have a duct system 
with air conditioning. 
That's the whole technical detail here, 
as we'll get into later. 
Commercial sector buildings, 1.6 percent. 
And then electricity is a half a percent. 
Don't miss that electricity. 
The electricity is an important point. 
And that only half a percent of oil is 
used by electricity. 
So that will have an important 
implication here as we go through that 
we'll see. 
Oil was first, not first, but basically 
the massive discovery of oil was in the 
spindle top area in Texas in 1901. 
We actually started using oil with advent 
of the invention of the internal 
combustion engine in the automobile in 
the mid to late. 
1800s, but, we didn't really start, 
drilling and getting oil from beneath the 
ground in deep wells until 1901, and 
there's a, a, a shot taken in 1901, of 
that well down in Spinnelcock, Texas. 
Just like the other hydrocarbons; coal, 
natural gas, you burn it, we don't need 
to dwell on this. 
You notice the chemical formula's a 
little bit more complex. 
You don't need to learn this or memorize 
it or anything. 
But it's a little different in that it's 
got an unknown called n. 
C, oil is generally designated by C and 
H2n plus 2. 
n can be 1, 2, 3, 4. 
n is an integer. 
Depending on the length of the molecule 
and the heaviness of the oil. 
So just you can reacted with oxygen but 
you need two n oxygen molecules to react 
with the carbon and hydrogen that comes 
with oil and it goes to nco2. 
Molecules and n + 1 water molecules. 
So again, oxygen is reacted with carbon 
and, and hydrogen, to produce CO2 and 
water, in the same way that natural gas 
and coal is. 
So of course coal has no hydrogen. 
But, in the process, it, it reduces heat, 
and the reason for that, is that chemical 
energy In the molecules on the right hand 
side of that equation, the CO2, and H20 
is less than the chemical energy in the 
hydro-carbon molecule and the oxygen. 
So we're decreasing the checmical energy 
content and converting it into what we 
call thermal energy or heat, and that's 
what combustion is all about. 
That conversion process, from, from 
chemical to Heat. 
Oil consumption. 
So how much do we use? And what's the 
trend. 
Well here it shows it from the 1900s. 
Then when the spindle top was first 
drilled and came in. 
And oil. 
And Texas, by the way, has been the 
largest producer of oil in any state in 
the union ever since. 
And still today by a significant margin. 
But it increased, and it dramatically 
increased in the 60s and 70s. 
You notice it topped out in the late 70s. 
You might think back on why that might 
have been the case. 
There were two reasons. 
Number one, number one we had the 
embargo, oil embargo, and so that scared 
the heck out of everybody, and everybody 
that could quickly get off oil and 
convert to something else, and use 
something else did so, just for stability 
and reliability. 
But the other reason is, is electric 
power, you noticed that only half of a 
percent of oil is used for electric 
power, that was a much higher percentage 
in 1970, much higher percentage. 
so we burned a lot of oil in power plants 
to produce electricity in the early 
1970's building up. 
But then oil became so expensive, when 
oil increased from about Two dollars a 
barrel to approximately ten dollars a 
barrel in the 70s. 
That's a five fold increase. 
That's higher than probably you, if you 
stop and think about it that, that you've 
ever seen. 
Five fold increase so it was a dramatic 
impact on our country and anybody that 
could get off oil got off oil. 
It was the first implementation of, of, 
car mileage standards, by E, E.P.A., the 
government, and to force, higher fuel 
efficiency, which, has been continually 
going up. 
It, it was stable for About 20 or 30 
years, from 80, 1980 to 2010, 
essentially. 
but, now it's, it's scheduled to go up to 
around 50 miles per gallon, from the 28 
or 30 or so, in year 2025. 
So There are lots of reasons why the oil 
consumption declined, and then it started 
increasing again once we got off the easy 
oil to get off of: electric power plants 
and other uses that made the cost of oil 
too expensive with the dramatic increase 
for reliability reasons. 
You see it's been flat since 2007-2008. 
That obviously has everything to do with 
the recession. 
Again, we saw earlier that when the 
economy drops, the gross domestic, gross 
domestic product and a recession comes, 
then you have a decrease in energy 
consumption and oil is one of those The 
other thing is that you can get hit. 
So, and now we're starting to move up 
again as the recession, we're coming out 
of the recession as you can see from 2009 
or so. 
That data is through 2011, by the way. 
So, that, that's our consumption side. 
So, where is that oil coming from. 
We've got to get it from somewhere. 
Where's the oil coming from? Well, here's 
showing what we're, our production, US 
oil production, and this has got some 
interesting aspects to it. 
We could spend a long time on this, 
slide. 
But, let's just look at the, the major 
features. 
Again, this comes from, it starts at year 
1900. 
And we're talking about millions of 
barrels per day, by the way, on the 
vertical scale, as we did on the previous 
slide. 
we see that's millions of barrels per day 
on the vertical scale. 
2, 4, 6, 8, 10, 12, 14, 16 million 
barrels per day. 
And here, same way. 
So, from 1900 to 2011, also. 
So, this is our US oil production. 
The yellow area is our lower 48, 48 state 
oil production. 
And the purple is our Alaska production. 
You notice that the Alaska production 
came in a a little bit in the mid 70s and 
really boomed with the North Slope 
Discovery in the 80s. 
And development off that, that built the 
Alaska pipeline, get that oil down to the 
US and, and it's maxed out in mid 80's to 
late 80's and has been declining, as 
every oil field does. 
When you drill a well the production 
declines at about 4% per year so. 
Your maximum production is going to be 
the first year that it's in production, 
and then it's capability to produce oil 
or extract oil declines every year. 
So you have to keep running in order to 
stand still, because we have to find 
enough new oil coming out of new wells 
that we drill in order to make up for the 
declining production in the existing 
wells. 
The major feature that you might find 
surprising here. 
Is that oil production in this country 
peaked in 1970, peaked in 1970. 
what was the price of oil in 1970? It was 
$2 a barrel, $2 a barrel in 1970 oil 
production peaked and we have never 
reached that peak again. 
In the mid 80's we came closest to it but 
Because of the north slope Alaskan oil 
production coming down the Alaska 
pipeline. 
But it, it declined then up until about 
2008 when it started climbing again and 
that's been pri, primarily North Dakota. 
And this is all U.S. 
produced oil. 
So we have had an increase, as we've had 
some in the past. 
It's not a nice smooth curve. 
It's continued to decline since 1970. 
But we're seeing a bump up at this point. 
So where's the rest coming from? Because 
that does not meet our consumption. 
The red area shows the difference between 
our production and our consumption. 
The red area is obviously then our 
imports. 
That is the oil that we're importing. 
We're currently importing about 60% of 
our crude oil. 
60%. 
You hear lots of different numbers, but 
in crude oil, we're, we're importing 
about 60% of our oil. 
Give or take a few percent. 
this is data right out of the EIA, as 
I've noted there. 
that's the Energy Information Agency, 
part of DOE, and it was formed in the 
late 70s to keep up with oil and energy 
facts in general. 
And there's a good, reliable sources for 
energy data. 
So that red area has generally been 
increasing but it's hard to tell on the 
scale about what the trend has been. 
But let's, so let's look at the next 
slide that shows just the oil imports. 
You notice again, the oil imports peaked 
in the late 70's. 
just about the time we had the oil 
embargo, and the sharp price increase. 
to about, oil worth, we were importing 
about 6 million barrels per day. 
And then, with the price quadrupling. 
And then, and, 
The availability With, with the 
interruption of the supply from the 
Middle East, it dropped the imports down 
to close to 3 million barrels a day, so 
it cut it in half. 
But that is as I already mentioned, that 
was because we started using less oil, 
but we didn't and, and we primarily took 
care of the drop in the use by decreasing 
the imports which would be naturally the 
case. 
And it's, it's been climbing since. 
it declined again in 2007. 
primarily again with the drop in 
recession, because our demand went down 
and our increased production. 
So that's, that's our trend on oil 
imports from 1900 to 2011. 
So where is the oil going? Again the oil 
is going to 72% of it is going to 
transportation, 23% to manufacturing 2, 
3% for residential, but then the key 
number is a half a percent for 
electricity. 
So the conclusions from all of this is 
the US is dependent of, on, on imported 
oil. 
You just can't get away from it. 
When you're importing 60% of your oil 
that you used, you are dependent on 
imported oil and all the implications for 
that. 
but the other thing that way if you look 
back against the information that we. 
Talked about in coal and gas. 
We essentially if supply and produce all 
of the coal that we use and all of the 
gas that we use, the only exception is 
the gas, natural gas in which we get 15% 
of the gas or 14% of our gas from Canada. 
So we are essentially energy independent 
on coal and gas but we are not energy 
independent on oil. 
So there's a big distinction. 
All energy is not created equal. 
You can't just go around throwing a 
piece, chunk of coal in your gas tank in 
you car and drive your car on a chunk of 
coal. 
And running on natural gas has lots of 
problems and issues and costs and 
economics also. 
So what, what that means is coal and gas 
is the electric power fuel resource. 
and, again, reinforces the fact that we 
do not get any of our electricity from 
oil or any significant, amount, that 
being about 0.5% or for some unique 
reasons that, probably is not going to 
change any time soon. 
So that's the, where our oil is coming 
from and how we're using it and we'll 
talk about pricing, energy pricing next 
time. 
Talking about why it is that Europe pays 
8 or $9 a gallon for. 
For gasoline, and we only pay, only, pay 
$3.50 to $4. 
What's the pricing issue here, and how is 
the price of oil determined for us and 
other countries in the world? Thank you.