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.