1 00:00:00,012 --> 00:00:06,277 Hello. Welcome back to Energy 101. This is the module that's continuing on 2 00:00:06,277 --> 00:00:08,372 U.S. energy independence. 3 00:00:08,372 --> 00:00:14,922 energy independence has gotten a lot of press lately for several reasons. 4 00:00:14,922 --> 00:00:22,172 Some of it due to the fact that we've got some new oil finds with the Bakken and 5 00:00:22,172 --> 00:00:27,939 other than oil shale and gas shale and people you see a lot of, a lot of stories 6 00:00:27,939 --> 00:00:33,002 that maybe we can gain energy independence now that we're producing 7 00:00:33,002 --> 00:00:36,796 more oil and gas. I want, want to make sure that we look at 8 00:00:36,796 --> 00:00:42,790 the facts on all that and today I want to look at some of the issues regarding what 9 00:00:42,790 --> 00:00:47,492 we mean by energy independence and then what the numbers are. 10 00:00:47,492 --> 00:00:52,973 where did energy independence come from? Well, I happen to be old enough to 11 00:00:52,973 --> 00:00:56,753 remember the origin of the word energy independence. 12 00:00:56,753 --> 00:01:02,001 It came from the OPEC Embargo, which I mentioned before but hadn't noted the 13 00:01:02,001 --> 00:01:09,567 specifics, in October, 1972 and and it lasted until March, 1973. 14 00:01:09,567 --> 00:01:21,462 it the reason that we were embargoed by OPEC is the fact that the, the Yom Kippur 15 00:01:21,462 --> 00:01:30,471 war broke out and Israel was marching in forward and the OPEC, and then, the U.S. 16 00:01:30,471 --> 00:01:38,172 was supporting them in some ways and OPEC decided their only way they could stop 17 00:01:38,172 --> 00:01:41,477 the Israel was to embargo embargo the U.S. 18 00:01:41,477 --> 00:01:47,205 And so they embargoed the U.S. for any oil sales in October in 1972, 19 00:01:47,205 --> 00:01:52,353 that was forty years ago. it, it, it's amazing how it crippled our 20 00:01:52,353 --> 00:01:56,719 society, our gasoline stations were forced to be 21 00:01:56,719 --> 00:02:03,937 open only from 8:00 on, during weekdays, till 5:00 in the afternoon. 22 00:02:03,937 --> 00:02:10,104 They could not be open in the evenings or at night and a could not be open on 23 00:02:10,104 --> 00:02:13,520 weekends. You had, and you could only fill up with 24 00:02:13,520 --> 00:02:18,278 gasoline in your car on even-odd days depending on your license tag. 25 00:02:18,278 --> 00:02:23,390 So it caused lots of disruptions, lots of disruptions, the long gasoline 26 00:02:23,390 --> 00:02:27,458 lines. There were mandatory building temperature 27 00:02:27,458 --> 00:02:33,034 settings in public buildings like universities or any public open, any 28 00:02:33,034 --> 00:02:39,411 building open to the public so that the temperature is had to be set down to 68 29 00:02:39,411 --> 00:02:45,022 degrees in the wintertime and had to be 76 degrees in the summertime. 30 00:02:45,022 --> 00:02:48,080 so, it, it was really crippling to our economy, 31 00:02:48,080 --> 00:02:52,692 it was crippling to our way of life. It's crippling in many ways. 32 00:02:52,692 --> 00:02:58,056 And, as a result of that, President Nixon, president at that time, and every 33 00:02:58,056 --> 00:03:02,284 president since then, every single president since then, has 34 00:03:02,284 --> 00:03:07,286 set energy independence as a goal. So, we wanted to be independent and 35 00:03:07,286 --> 00:03:10,828 never. be in that situation, again. And, my 36 00:03:10,828 --> 00:03:17,074 personal view, when I look at all the information, says I'm not sure we can be 37 00:03:17,074 --> 00:03:23,972 100% certain that it cannot happen again but let's look at some numbers. 38 00:03:23,972 --> 00:03:30,946 The let's look at the progress that we made since we had the first embargo in 39 00:03:30,946 --> 00:03:34,857 1972. OPEC was importing or we were importing 40 00:03:34,857 --> 00:03:38,752 2.2 million barrels per day for, of, of oil, 41 00:03:38,752 --> 00:03:45,637 not just from OPEC, from, from everybody, including Canada, and Mexico, and which 42 00:03:45,637 --> 00:03:51,407 was 19% of the oil that we used. So we were importing 19% of our oil and 43 00:03:51,407 --> 00:03:55,337 which amounted to 2.2 million barrels per day. 44 00:03:55,337 --> 00:04:01,630 In ninety, at the end of 2011, and all my data by the way is to the end of 2011 I 45 00:04:01,630 --> 00:04:07,645 don't like to take monthly data, because it's, it creates a lot of chaos and it's 46 00:04:07,645 --> 00:04:12,643 hard to establish trends. But in 2, the end of 2011, we were 47 00:04:12,643 --> 00:04:19,141 importing 8.9 million barrels per day and we were, which was constituted 61% of our 48 00:04:19,141 --> 00:04:22,272 oil. Now, so, some of this that we've noted 49 00:04:22,272 --> 00:04:28,228 before came from, comes from Canada and some from Mexico, which hopefully is a 50 00:04:28,228 --> 00:04:33,593 little more stable, but that still has a tremendous economic impact. 51 00:04:33,593 --> 00:04:39,864 as I've noted before, those 8.9 billion barrels per day costs us almost $350 52 00:04:39,864 --> 00:04:42,825 billion dollars in a year, $350 billion. 53 00:04:42,825 --> 00:04:47,268 You stop and think about it, that's half the cost of, that it took to bail out 54 00:04:47,268 --> 00:04:50,053 Wall Street. That money actually stayed in this 55 00:04:50,053 --> 00:04:55,282 country whereas this money is going over, out, out, out of the country to others 56 00:04:55,282 --> 00:05:00,967 and creating jobs elsewhere. So there's major, major impact here. 57 00:05:00,967 --> 00:05:07,012 So we, we obviously have been going backwards by almost any measure you want 58 00:05:07,012 --> 00:05:14,196 to use of being independent from never being dependent on any one one source of 59 00:05:14,196 --> 00:05:18,039 oil external to the U.S. well, maybe it's because we're not 60 00:05:18,039 --> 00:05:21,120 drilling. Some people say we're not drilling hard 61 00:05:21,120 --> 00:05:25,532 enough and actively enough. Well, there's, look, look at some data 62 00:05:25,532 --> 00:05:28,484 there. let's take Saudi Arabia is a good 63 00:05:28,484 --> 00:05:31,515 example, because Saudi Arabia produces actually 64 00:05:31,515 --> 00:05:37,446 more oil than we do if you see here. they produce 11 million barrels per day, 65 00:05:37,446 --> 00:05:44,207 is how many barrels of oil they produce. And the active drilling rigs that they 66 00:05:44,207 --> 00:05:50,246 have actively drilling are about 50. It varies between 30 or, to 50 over the 67 00:05:50,246 --> 00:05:56,534 years, but right now it's about 50. it, it doesn't dramatically go up and 68 00:05:56,534 --> 00:06:00,900 down, percentage-wise it does, but relative to the U.S. 69 00:06:00,900 --> 00:06:04,090 it doesn't. We'll look at what the U.S. 70 00:06:04,090 --> 00:06:08,481 situation is. We produce half the oil, 5.5 million 71 00:06:08,481 --> 00:06:15,076 barrels per day in 2011 and we are, have 1500, 1500, 1500 active drilling rigs. 72 00:06:15,076 --> 00:06:21,280 So we're drilling a heck of a lot. we, we are using 30 times more drilling 73 00:06:21,280 --> 00:06:25,837 rigs than Saudi Arabia and getting about 1/2 the oil. 74 00:06:25,837 --> 00:06:32,225 Now, it didn't used to be that way. The reason that this situation is it has 75 00:06:32,225 --> 00:06:38,302 occured, is because we have explored our land and, and even the near offshore 76 00:06:38,302 --> 00:06:41,827 since for about 100 years for oil and it's a finite resource. 77 00:06:41,827 --> 00:06:46,003 Anything you'd say about it, it is a finite resource, there's only so much 78 00:06:46,003 --> 00:06:48,774 down there. You can argue about how much is down 79 00:06:48,774 --> 00:06:53,142 there, but it is a finite endowment. and when you spend the endowment, there's 80 00:06:53,142 --> 00:06:56,322 not anything left. But the problem is that the more you 81 00:06:56,322 --> 00:07:00,779 drill and the more you get out, the more difficult it is to find the remaining 82 00:07:00,779 --> 00:07:04,942 oil. I make the analogy, that is like burying 83 00:07:04,942 --> 00:07:10,942 volleyballs and ping pong balls in the sand on the beach. 84 00:07:10,942 --> 00:07:18,687 And when you are poking your stick around looking for each ball, whether it's a 85 00:07:18,687 --> 00:07:24,683 ping pong ball or a volleyball and assuming each of them control, contains 86 00:07:24,683 --> 00:07:29,464 oil, which is what you're after, you're going to find the volleyball first. 87 00:07:29,464 --> 00:07:34,032 And so, we have found most of the volleyballs, but now we have to look for 88 00:07:34,032 --> 00:07:38,880 the ping pong balls and those are more difficult to find and it obviously have 89 00:07:38,880 --> 00:07:43,309 much, much less oil in it. So that's why we're having to drill a lot 90 00:07:43,309 --> 00:07:47,531 more than Saudi Arabia. Saudi Arabia has been producing oil and 91 00:07:47,531 --> 00:07:52,914 exploring for their oil over a much, much shorter time period like from 1940 or 92 00:07:52,914 --> 00:07:56,371 1930s where we've been doing it for a 100 years, 93 00:07:56,371 --> 00:08:01,137 so we are actively drilling for oil. We can always drill more, no question. 94 00:08:01,137 --> 00:08:04,872 We can always drill more, but that's some comparison, 95 00:08:04,872 --> 00:08:10,150 with, between us and the country that produces more oil than any other country 96 00:08:10,150 --> 00:08:14,862 in the, in the world. energy independence that we noted before, 97 00:08:14,862 --> 00:08:18,294 we've seen this graph before is, is still about oil. 98 00:08:18,294 --> 00:08:24,028 the red, what we got here is crude oil in the first bar, natural gas in the next 99 00:08:24,028 --> 00:08:30,045 bar, natural gas liquids, and coal, and renewable is just to remind us that the 100 00:08:30,045 --> 00:08:33,426 red is the import and the blue, what we produce. 101 00:08:33,426 --> 00:08:39,065 You notice that oil is the problem, the import problem, and natural gas is about 102 00:08:39,065 --> 00:08:43,943 15% imported and that essentially all comes from, from Canada. 103 00:08:43,943 --> 00:08:48,500 So oil is the problem, energy independence is about oil and, and 104 00:08:48,500 --> 00:08:52,786 it's not about anything else. Well, well, but some people say with our 105 00:08:52,786 --> 00:08:56,412 natural gas production, we can become energy independent, 106 00:08:56,412 --> 00:09:01,398 but natural gas is not oil. But, let's look at what has happened to 107 00:09:01,398 --> 00:09:06,570 our natural gas production. We've seen this a little bit different 108 00:09:06,570 --> 00:09:11,021 form previously, but, this is the natural gas production 109 00:09:11,021 --> 00:09:17,862 from 1949 on the bottom scale out to 2011 and it's TCF trillions of cubic feet per 110 00:09:17,862 --> 00:09:21,837 year. And you can see that we just passed the 111 00:09:21,837 --> 00:09:27,962 peak that we had in about 1972 or 3 which happened to be that the same time we 112 00:09:27,962 --> 00:09:35,387 peaked in oil production in this country. and so, we are increasing our natural gas 113 00:09:35,387 --> 00:09:41,702 production how much is all relative is we look at it here in 114 00:09:41,702 --> 00:09:48,508 perspective, you can see the increase out there on the right-hand, right-hand side. 115 00:09:48,508 --> 00:09:51,081 let me point it here, right here. 116 00:09:51,081 --> 00:09:56,956 so it is growing, but how far it will grow and how fast it 117 00:09:56,956 --> 00:10:02,343 will grow is a, is a prediction and one of my favorite quotes about predictions 118 00:10:02,343 --> 00:10:06,902 is the only time predictions gets you into trouble is, is when they're about 119 00:10:06,902 --> 00:10:10,125 the future. so we hope that's, they're going to 120 00:10:10,125 --> 00:10:15,336 continue to increase and but how much we can substitute them for oil is another, 121 00:10:15,336 --> 00:10:19,760 another situation and that we'll address in a few minutes. 122 00:10:19,760 --> 00:10:25,581 but how much oil do we have? Well, we have, we have a lot of hype about the 123 00:10:25,581 --> 00:10:31,510 shale gas that we're getting and how much is there and what the potential is. 124 00:10:31,510 --> 00:10:38,495 And there was a huge boost in the gas reserves that were were predicted and, by 125 00:10:38,495 --> 00:10:45,384 US Energy Information Agency, which is the division of DOE that, that 126 00:10:45,384 --> 00:10:53,110 accumulates data, and the, there's pretty hard data that that they collect pretty 127 00:10:53,110 --> 00:10:58,099 form data. But when you get that, reserves, it's not 128 00:10:58,099 --> 00:11:02,321 exactly a science, there's a lot of art to it, 129 00:11:02,321 --> 00:11:09,586 but they overpredicted by their own admission and they admitted it in 2011 of 130 00:11:09,586 --> 00:11:15,423 how much gas they could get for these new gas shale formations. 131 00:11:15,423 --> 00:11:22,580 they actually cut the reserves that they predicted they estimate is in the shale 132 00:11:22,580 --> 00:11:27,606 gas from 827 to 482 TCF. now 827 would be 40 years worth of gas 133 00:11:27,606 --> 00:11:32,783 and 482 is 20 years worth of gas. And of course, you don't just keep 134 00:11:32,783 --> 00:11:38,224 increasing it, and then, all of the sudden, one day you can't get any more. 135 00:11:38,224 --> 00:11:44,990 It peaks and starts dropping off because it becomes harder and harder to get the 136 00:11:44,990 --> 00:11:51,355 second half out than it was the first half, just like the ping-pong balls and 137 00:11:51,355 --> 00:11:55,684 volleyball balls. So, shale gas is certainly a, a good new 138 00:11:55,684 --> 00:12:01,912 supply and it's increasing our natural gas production and future of production, 139 00:12:01,912 --> 00:12:07,397 but exactly how much is yet to be known. We can predict it, we can guess at it, 140 00:12:07,397 --> 00:12:10,977 but it', it's it's hard to get a hard firm number on it that's, that's 141 00:12:10,977 --> 00:12:16,207 believable and you can count on. another thing that I've learned over my 142 00:12:16,207 --> 00:12:21,832 life is that things are never as good as they first appear, but they're also not 143 00:12:21,832 --> 00:12:27,122 as bad as they first appear, so, hopefully, we can hit a happy medium 144 00:12:27,122 --> 00:12:31,137 there. but one thing we have to realize, there 145 00:12:31,137 --> 00:12:37,067 are no silver bullets for energy independence and I've just pointed out a 146 00:12:37,067 --> 00:12:43,611 few negative things here that point, that say, it's going to be difficult to, to 147 00:12:43,611 --> 00:12:49,284 reduce our oil consumption or imports down to a point where it, it wont hurt us 148 00:12:49,284 --> 00:12:53,010 if somebody, particularly, the larger nations like 149 00:12:53,010 --> 00:12:58,790 Russia and Saudi Arabia are two prime examples were to quit selling us oil or 150 00:12:58,790 --> 00:13:03,580 pull it off the world market. That's, that's what would hurt us and it 151 00:13:03,580 --> 00:13:08,134 would hurt everybody, would, the whole world would go into a deep depress, 152 00:13:08,134 --> 00:13:12,579 recession if, if Russia or Saudi Arabia quit exporting the, any oil. 153 00:13:12,579 --> 00:13:16,438 it would be very difficult, so there are no silver bullets. 154 00:13:16,438 --> 00:13:21,226 We have to do a lot of things and we'll talk about some of those things in the 155 00:13:21,226 --> 00:13:25,312 future. that we'll see you next time in the next 156 00:13:25,312 --> 00:13:30,062 module, as a matter of fact, is about electric cars displacing oil. 157 00:13:30,062 --> 00:13:35,157 One of the, one of the shotgun pellets not necessarily a silver bullet. 158 00:13:35,157 --> 00:13:35,835 Thank you.