Hello. Welcome back to Energy 101. This is the module that's continuing on
U.S. energy independence.
energy independence has gotten a lot of press lately for several reasons.
Some of it due to the fact that we've got some new oil finds with the Bakken and
other than oil shale and gas shale and people you see a lot of, a lot of stories
that maybe we can gain energy independence now that we're producing
more oil and gas. I want, want to make sure that we look at
the facts on all that and today I want to look at some of the issues regarding what
we mean by energy independence and then what the numbers are.
where did energy independence come from? Well, I happen to be old enough to
remember the origin of the word energy independence.
It came from the OPEC Embargo, which I mentioned before but hadn't noted the
specifics, in October, 1972 and and it lasted until March, 1973.
it the reason that we were embargoed by OPEC is the fact that the, the Yom Kippur
war broke out and Israel was marching in forward and the OPEC, and then, the U.S.
was supporting them in some ways and OPEC decided their only way they could stop
the Israel was to embargo embargo the U.S.
And so they embargoed the U.S. for any oil sales in October in 1972,
that was forty years ago. it, it, it's amazing how it crippled our
society, our gasoline stations were forced to be
open only from 8:00 on, during weekdays, till 5:00 in the afternoon.
They could not be open in the evenings or at night and a could not be open on
weekends. You had, and you could only fill up with
gasoline in your car on even-odd days depending on your license tag.
So it caused lots of disruptions, lots of disruptions, the long gasoline
lines. There were mandatory building temperature
settings in public buildings like universities or any public open, any
building open to the public so that the temperature is had to be set down to 68
degrees in the wintertime and had to be 76 degrees in the summertime.
so, it, it was really crippling to our economy,
it was crippling to our way of life. It's crippling in many ways.
And, as a result of that, President Nixon, president at that time, and every
president since then, every single president since then, has
set energy independence as a goal. So, we wanted to be independent and
never. be in that situation, again. And, my
personal view, when I look at all the information, says I'm not sure we can be
100% certain that it cannot happen again but let's look at some numbers.
The let's look at the progress that we made since we had the first embargo in
1972. OPEC was importing or we were importing
2.2 million barrels per day for, of, of oil,
not just from OPEC, from, from everybody, including Canada, and Mexico, and which
was 19% of the oil that we used. So we were importing 19% of our oil and
which amounted to 2.2 million barrels per day.
In ninety, at the end of 2011, and all my data by the way is to the end of 2011 I
don't like to take monthly data, because it's, it creates a lot of chaos and it's
hard to establish trends. But in 2, the end of 2011, we were
importing 8.9 million barrels per day and we were, which was constituted 61% of our
oil. Now, so, some of this that we've noted
before came from, comes from Canada and some from Mexico, which hopefully is a
little more stable, but that still has a tremendous economic impact.
as I've noted before, those 8.9 billion barrels per day costs us almost $350
billion dollars in a year, $350 billion.
You stop and think about it, that's half the cost of, that it took to bail out
Wall Street. That money actually stayed in this
country whereas this money is going over, out, out, out of the country to others
and creating jobs elsewhere. So there's major, major impact here.
So we, we obviously have been going backwards by almost any measure you want
to use of being independent from never being dependent on any one one source of
oil external to the U.S. well, maybe it's because we're not
drilling. Some people say we're not drilling hard
enough and actively enough. Well, there's, look, look at some data
there. let's take Saudi Arabia is a good
example, because Saudi Arabia produces actually
more oil than we do if you see here. they produce 11 million barrels per day,
is how many barrels of oil they produce. And the active drilling rigs that they
have actively drilling are about 50. It varies between 30 or, to 50 over the
years, but right now it's about 50. it, it doesn't dramatically go up and
down, percentage-wise it does, but relative to the U.S.
it doesn't. We'll look at what the U.S.
situation is. We produce half the oil, 5.5 million
barrels per day in 2011 and we are, have 1500, 1500, 1500 active drilling rigs.
So we're drilling a heck of a lot. we, we are using 30 times more drilling
rigs than Saudi Arabia and getting about 1/2 the oil.
Now, it didn't used to be that way. The reason that this situation is it has
occured, is because we have explored our land and, and even the near offshore
since for about 100 years for oil and it's a finite resource.
Anything you'd say about it, it is a finite resource, there's only so much
down there. You can argue about how much is down
there, but it is a finite endowment. and when you spend the endowment, there's
not anything left. But the problem is that the more you
drill and the more you get out, the more difficult it is to find the remaining
oil. I make the analogy, that is like burying
volleyballs and ping pong balls in the sand on the beach.
And when you are poking your stick around looking for each ball, whether it's a
ping pong ball or a volleyball and assuming each of them control, contains
oil, which is what you're after, you're going to find the volleyball first.
And so, we have found most of the volleyballs, but now we have to look for
the ping pong balls and those are more difficult to find and it obviously have
much, much less oil in it. So that's why we're having to drill a lot
more than Saudi Arabia. Saudi Arabia has been producing oil and
exploring for their oil over a much, much shorter time period like from 1940 or
1930s where we've been doing it for a 100 years,
so we are actively drilling for oil. We can always drill more, no question.
We can always drill more, but that's some comparison,
with, between us and the country that produces more oil than any other country
in the, in the world. energy independence that we noted before,
we've seen this graph before is, is still about oil.
the red, what we got here is crude oil in the first bar, natural gas in the next
bar, natural gas liquids, and coal, and renewable is just to remind us that the
red is the import and the blue, what we produce.
You notice that oil is the problem, the import problem, and natural gas is about
15% imported and that essentially all comes from, from Canada.
So oil is the problem, energy independence is about oil and, and
it's not about anything else. Well, well, but some people say with our
natural gas production, we can become energy independent,
but natural gas is not oil. But, let's look at what has happened to
our natural gas production. We've seen this a little bit different
form previously, but, this is the natural gas production
from 1949 on the bottom scale out to 2011 and it's TCF trillions of cubic feet per
year. And you can see that we just passed the
peak that we had in about 1972 or 3 which happened to be that the same time we
peaked in oil production in this country. and so, we are increasing our natural gas
production how much is all relative is we look at it here in
perspective, you can see the increase out there on the right-hand, right-hand side.
let me point it here, right here.
so it is growing, but how far it will grow and how fast it
will grow is a, is a prediction and one of my favorite quotes about predictions
is the only time predictions gets you into trouble is, is when they're about
the future. so we hope that's, they're going to
continue to increase and but how much we can substitute them for oil is another,
another situation and that we'll address in a few minutes.
but how much oil do we have? Well, we have, we have a lot of hype about the
shale gas that we're getting and how much is there and what the potential is.
And there was a huge boost in the gas reserves that were were predicted and, by
US Energy Information Agency, which is the division of DOE that, that
accumulates data, and the, there's pretty hard data that that they collect pretty
form data. But when you get that, reserves, it's not
exactly a science, there's a lot of art to it,
but they overpredicted by their own admission and they admitted it in 2011 of
how much gas they could get for these new gas shale formations.
they actually cut the reserves that they predicted they estimate is in the shale
gas from 827 to 482 TCF. now 827 would be 40 years worth of gas
and 482 is 20 years worth of gas. And of course, you don't just keep
increasing it, and then, all of the sudden, one day you can't get any more.
It peaks and starts dropping off because it becomes harder and harder to get the
second half out than it was the first half, just like the ping-pong balls and
volleyball balls. So, shale gas is certainly a, a good new
supply and it's increasing our natural gas production and future of production,
but exactly how much is yet to be known. We can predict it, we can guess at it,
but it', it's it's hard to get a hard firm number on it that's, that's
believable and you can count on. another thing that I've learned over my
life is that things are never as good as they first appear, but they're also not
as bad as they first appear, so, hopefully, we can hit a happy medium
there. but one thing we have to realize, there
are no silver bullets for energy independence and I've just pointed out a
few negative things here that point, that say, it's going to be difficult to, to
reduce our oil consumption or imports down to a point where it, it wont hurt us
if somebody, particularly, the larger nations like
Russia and Saudi Arabia are two prime examples were to quit selling us oil or
pull it off the world market. That's, that's what would hurt us and it
would hurt everybody, would, the whole world would go into a deep depress,
recession if, if Russia or Saudi Arabia quit exporting the, any oil.
it would be very difficult, so there are no silver bullets.
We have to do a lot of things and we'll talk about some of those things in the
future. that we'll see you next time in the next
module, as a matter of fact, is about electric cars displacing oil.
One of the, one of the shotgun pellets not necessarily a silver bullet.
Thank you.