Americans are being impoverished at the gas pump because Congress has dithered and failed in one of its most important responsibilities.
Having written about the energy industry and issues now for a long time, I hope I can be forgiven for being enraged by the comments by Senator Charles Schumer (D-NY) in response to President Bush’s press conference Tuesday morning. There is simply no way to describe them other than false.
The Democrat Party has long made “Big Oil” their favorite punching bag, confident that the public has no idea what influences the price and supply of oil. Saying anything favorable about Big Oil is immediately deemed evidence that one is in their pay and whatever facts are offered are therefore invalid.
There are, however, some simple truths about Big Oil that cannot and should not be ignored. To do so leaves everyone at the mercy of energy policies that have created the situation in which the United States finds itself today.
Fact #1. The combined ownership of oil reserves by the independent, investor-owned oil companies such as ExxonMobil, Conoco-Phillips, BP, Chevron and others is barely 4% of the total known oil reserves in the world. By itself, ExxonMobil’s share is 1.08%.
Fact #2. Oil is a global commodity sold on mercantile exchanges for whatever price it can command. Speculation in oil prices is the primary reason they have been driven to utterly insane costs per barrel. It has nothing to do with actual supply and demand.
Fact #3. No nation on Earth is or can be “energy independent.” The geopolitics of oil is complex, but as nations such as China and India have seen their economies grow, their need for oil grows with it and thus they compete with long established industrialized nations for existing oil supplies. This competition has an impact on prices.
Fact #4. The OPEC nations, those in the Middle East and including Venezuela, control 77% of the world’s known oil reserves. Like Russia and Mexico, where the oil industry is controlled by the state, it is generally poorly managed. Several Big Oil companies that were induced to undertake exploration and development in Russia and Venezuela actually had their assets nationalized or stolen at prices well below their investment and value.
Fact #5. Energy is the master resource. All nations with any hope of growing their economies require it, mostly in the form of electricity, but also for oil’s role in transportation. The failure to have a national long-range energy policy that is based in reality can severely impact energy prices.
Fact #6. The United States has, for years, pursued an energy policy based on environmental myths such as “biofuels” in which corn is turned into ethanol to reduce the import of oil, but it costs as much to produce ethanol as to refine oil and it provides less mileage per gallon, thus negating any reason for this additive. Likewise, suggesting that wind or solar energy can generate anything more than its current 1% of the nation’s electricity needs ignores their unreliability and the fact that they are heavily subsidized, a form of hidden consumer tax.
Fact #7. It costs billions to explore, discover, extract and transport oil. It takes lots of lead-time as well. The United States Congress has, for decades, refused to permit the extraction of vast oil reserves in ANWR despite the fact it would have little or no impact on the Alaskan wildlife reserve. In addition, Congress has declared 85% percent of the nation’s coastal, offshore areas off-limits to any exploration for oil or natural gas.
Fact #8. The U.S. Environmental Protection Agency, under the mandate of Congress, requires Big Oil to refine oil into some seventeen different formulations in the name of clean air. With three grades of gasoline, that means that refiners must produce some 45 different blends. The quality of air in America is excellent, but the cost of gasoline at the pump continues to rise as the result of these mandates.
Fact #9. America imports two-thirds of the oil it uses. All of its transportation runs on oil. The population continues to grow. Failure to encourage the construction of a single new refinery since the 1970s puts a further strain on the ability of Big Oil to provide the nation’s oil and diesel fuel needs.
Fact #10. Democrats continue to demand that Big Oil’s profits be confiscated in some fashion and some of the inducements offered to explore for more oil be ended. Because the costs of exploration, extraction, refining, and transporting of oil represents billions of dollars, the actual profit margin of a company like ExxonMobil is about 10%, well below what industries such as pharmaceuticals and banking enjoy.
For these and many other reasons, Americans are being impoverished at the gas pump because Congress has dithered and failed in one of its most important responsibilities.
ACaruba@aol.com
http://www.anxietycenter.com/
Read more articles by Alan Caruba
Fact #11: This article made no mention of nuclear power.
Fact #12: Full extraction of all known domestic oil reserves, regardless of cost, would supply the U.S.'s current energy needs for less than two decades. As this article notes, "The population continues to grow."
Fact #13: Even a little bit of conservation and improved efficiency would make a huge difference in demand. Improving our overall fuel efficiency by just 2.7 miles per gallon would completely eliminate our need for oil from the Persian Gulf.
Comment by Raymond Ingles | April 30, 2008
Raymond, it appears you have not had the opportunity to study energy and alternate energy thoroughly. Your comment on nuclear use is right on target, however Alan is more accurate than your fact #12 which is a non-fact. Let's start with oil sources then move into alternate energy.
Why is fact 12 wrong? It ignores massive sources of oil by not addressing shale (very competitive at today's prices), coal gassification/oil production (also competitive at todays prices), and new exploration. All of which have been blocked by Democrats for years in their drive to make the US a 4th world country. When we look beyond our borders we see massive quantities of oil in the sands found in Canada as well as the recently discovered sources offshore from Brazil.
Let's move to alternate energy and then address efficiency…
Alternate energy may come to fruition as market develops for it. Ethanol is a poor choice loved by politicians however it's possession of only one carbon atom makes it a less than desirable energy source particularly when one considers that it cannot be transported in the pipelines. Using and incenting the use of basic foodstuffs in the manufacture of Ethanol is almost criminal but Democrats love it. What alternates make sense? Butanol which is a substitute for gasoline can be made using processes similar to the Ethanol loved by the politicians, just using different specialized bacteria. BP and others have undertaken test projects to prove Butanol. Of course corn is the wrong starting point and many alternatives are being tested with hemp as one of the possible feed stocks. Hydrogen? Probably not in my life time.
Conservation sounds good and everyone should attempt to make a difference. Little things help when you deal with true consumables therefore buying a higher efficiency vehicle will help reduce usage of oil. Government has shown itself to be useless in this discussion therefore only the ultimate customer will make any difference and that difference requires a big change in life style…have you done it? How about saving on electricity? If enought people save at peak periods of use some energy can be saved, other wise all they did is reduce their electric bill in the short term before the rates rise because the utility has to keep a base load running and conservation will not affect that base load until it is a true way of life within the general population.
Comment by Mickey G | April 30, 2008
Mickey G - what are the numbers? As a rough estimate, the U.S. uses 20 million barrels of oil per day. Times 365 days, times 20 years, that's 146 trillion barrels of oil. Can you point to estimates backed by geology that are within a factor of ten of that? I haven't seen such. Even if we can reach the 20-year mark purely on domestic sources, I rather hope the U.S.A. is a going concern for longer than that.
At no point did I defend ethanol or any other current energy policy. What I am advocating is reducing our dependence on oil, both by developing alternatives and reducing demand. This has good effects strategically, economically, and even environmentally.
Democrats and Republicans have been responsible for the current mess. Search for the term "ethanol" here and see who's making the speech. The Republicans had both wings of Congress and the Presidency for a while, but I don't recall swift progress then.
And, yeah, I've got mostly fluorescent bulbs in the house, Energy Star appliances, and so forth. We dropped some dough on new windows, we're getting a new back door, we've got a thermostat that adjusts temperature to time of day, etc. The birth of our fourth kid has made vans a necessity. But I'm going to join a vanpool in the next couple months at work. It doesn't require a granola lifestyle to make a difference.
It's a criminal shame that, after 9/11, energy independence wasn't made a major theme. If demand for oil is down, the price is down, and the thugocracies in the Middle East have less money to fund terrorists.
Comment by Raymond Ingles | April 30, 2008
Raymond, my math skills may have weakened in my dotage but when I use your numbers I come up with 146 billion barrels of need for 20 years. When I contrast that with recoverable oil shale using the Rand report:
"The largest known oil shale deposits in the world are in the Green River Formation,
which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil
resource in place within the Green River Formation range from 1.5 to 1.8 trillion
barrels. Not all resources in place are recoverable. For potentially recoverable oil shale
resources, we roughly derive an upper bound of 1.1 trillion barrels of oil and a lower
bound of about 500 billion barrels. For policy planning purposes, it is enough to
know that any amount in this range is very high. For example, the midpoint in our
estimate range, 800 billion barrels, is more than triple the proven oil reserves of Saudi
Arabia. Present U.S. demand for petroleum products is about 20 million barrels per
day. If oil shale could be used to meet a quarter of that demand, 800 billion barrels
of recoverable resources would last for more than 400 years." URL for the report is: http://rand.org/pubs/monographs/2005/RAND_MG414.pdf then search for shale.
Now on to coal gassification the following from a company that I have been following although other estimates for US coal to oil are higher 811 years seems reasonable:
Today, new technology has made it possible for us to turn back to domestic energy sources — and to do it cleanly. Coal gasification/coal liquefaction will now allow us to tap the abundant energy stores within our own borders — without compromising our standards of environmental quality. In fact, these technologies may be our best hope for environmental progress in future years.
Using more of our domestic energy reserves would free us from reliance on potentially unstable sources and the economic drain that results from buying oil from overseas. It would result in greater stability in fuel pricing, jobs and job security, and enhance our national security by lessening our dependency on foreign sources.
The "US Geological Survey estimates the total identified coal resources as being 1,600 billion tons. Another 1,600 billion tons of unidentified resources are postulated." Currently the US produces approximately 1.06 billion tons of coal annually.
If the US were to produce, from coal alone, the amount of oil equivalent to what the US imports, the US would consume an additional .912 billion tons annually.
Oil Imports = 10,000,000 bbl/day
=
2,500,000 tons/day
x 365 days/yr
=
912,500,000 tons/yr
——————————————————————————–
Conversion Rate = 4 bbl/ton
Total coal production/consumption would then = 1.972 billion tons annually. (Not even considering the benefits of energy efficiency, biomass, renewables, high mileage vehicles etc., all of which would significantly extend our energy reserves.)
1,600 billion tons of coal / 1.972 = 811 years of fuel reserves.
Given these new conversion technologies the US is, in effect, sitting on a minimum of 811 years of worth of fuel reserves.
To the extent this message becomes clear to off shore oil suppliers, the perception of a sellers market should diminish (and the negative connotation/implications associated with that scenario) and the US would be positioned to purchase oil on its own terms.
Link to this page is:
http://www.ultracleanfuels.com/html/about.htm
Here is an excerpt from a news article legislation that Barak Obama has sponsored to develop coal to oil:
Business
Chavez raises Venezuelan minimum wage 30 percent
Marathon Oil profit edges higher on strong revenue
CVS Caremark profit rises on higher same-store sales
New restaurant growth boosts Burger King results
Exxon Mobil first-quarter profit grows 17 percent
EmailPrintSouth Africa has a way to make oil from coal
Thursday, August 17, 2006
By Patrick Barta, The Wall Street Journal
SECUNDA, South Africa — Every day, conveyor belts haul about 120,000 metric tons of coal into an industrial complex here two hours east of Johannesburg.
The facility — resembling a nuclear power plant, with concrete silos looming over nearby potato farms — superheats the coal to more than 2,000 degrees Fahrenheit. It adds steam and oxygen, cranks up the pressure, and pushes the coal through a series of chemical reactions.
Then it spits out something extraordinary: 160,000 barrels of oil a day.
For decades, scientists have known how to convert coal into a liquid that can be refined into gasoline or diesel fuel. But everyone thought the process was too expensive to be practical.
The lone exception was South Africa, a one-time pariah state that had huge reserves of coal and, thanks to anti-apartheid sanctions, limited access to foreign oil. Sasol Ltd., a partly state-owned company, built several coal-to-liquids plants, including the ones at Secunda, and became the world's leading purveyor of coal-to-liquids technology.
Now, oil prices are above $70 a barrel, and Sasol has emerged as the key player at the center of the world's latest alternative-energy boom.
China is building a coal-to-oil plant costing several billion dollars in Inner Mongolia and may add as many as 27 facilities — including some with Sasol's help — over the next several years, according to a recent tally by Credit Suisse.
In the U.S., the Defense Department is studying coal-to-oil technology as a way to reduce the American military's dependence on Middle Eastern crude oil. And the National Coal Council, an industry association, is pushing for government incentives to help generate some 2.6 million barrels of liquid fuel a day from coal by 2025. That would satisfy some 10 percent of America's expected oil demand that year. The plan would require 475 million tons of coal a year, which represents more than 40 percent of current annual U.S. production. Industry officials believe America's coal reserves are big enough to allow for the extra production.
Coal-to-liquids "is not going to replace oil," says Lean Strauss, a Sasol executive who directs the company's overseas energy business. "But it's an important substitute. It is one of the solutions to energy security."
In June, two senators from coal-producing states, Barack Obama of Illinois and Jim Bunning of Kentucky, introduced a bill to offer loan guarantees and tax incentives for U.S. coal-to-liquid plants.
Sasol has found a particularly receptive audience in Montana's Democratic governor, Brian Schweitzer, who says he carries a lump of coal and a vial of liquefied coal with him at all times. He is lobbying coal companies and others to build coal-to-liquid plants across his state, which has some of the biggest coal reserves in the U.S.
Current estimates indicate the world has just 41 years of known oil reserves and 65 years of natural-gas supplies. It has enough coal reserves to last an estimated 155 years, with some of the largest reserves in the two biggest oil-consuming countries, the U.S. and China.
Let's move to oil sands:
Alberta Canada:
Oil Sands Facts
Canada ranks second largest in terms of global proven crude oil reserves (15% of world reserves), after Saudi Arabia. The majority of these reserves are found in Alberta’s oil sands – over 173 billion barrels.
Oil sands production of more than 1.2 millon barrels a day (bbls/d) in 2006 now account for approximately 42 per cent of Canada’s total crude output.
Alberta's oil sands underlie 140, 200 square kilometers (54,132 square miles) of primarily northern Alberta; an area larger than the state of Florida.
It takes about two tonnes of oil sand to produce a barrel of oil.
Oil sands producers move enough overburden and oil sands every two days to fill Toronto’s Skydome or New York’s Yankee Stadium.
link is:
http://www.energy.gov.ab.ca/OilSands/790.asp
US Oil Sands largely in Utah:
Tar Sands Resources
Primary Tar Sands Resources in Utah
Much of the world's oil (more than 2 trillion barrels) is in the form of tar sands, although it is not all recoverable. While tar sands are found in many places worldwide, the largest deposits in the world are found in Canada (Alberta) and Venezuela, and much of the rest is found in various countries in the Middle East. In the United States, tar sands resources are primarily concentrated in Eastern Utah, mostly on public lands. The in-place tar sands oil resources in Utah are estimated at 12 to 19 billion barrels.
See the Maps page for additional maps of tar sands resources in Utah.
Utah Tar Sands Estimated In-Place Resources
Deposit Known (MMB) Additional Projected (MMB)
Sunnyside 4,400 1,700
Tar Sand Triangle 2,500 420
PR Spring 2,140 2,230
Asphalt Ridge 830 310
Circle Cliffs 590 1,140
Other 1,410 1,530
Total: 11,870 7,330
link:
http://ostseis.anl.gov/guide/tarsands/index.cfm
And a brief note about hemp and butanol:
Alternative fuels such as ethanol could help reduce carbon-dioxide emissions and decrease oil imports, but so far these biofuels only make up a small fraction of fuel use. One of the biggest challenges to ramping up ethanol use is distributing it. That's because ethanol can't be transported in the same pipelines used to distribute gasoline. What's more, ethanol delivers far less energy than gasoline does on a gallon-for-gallon basis.
Philip New, president of BP Biofuels, a recently created company within the giant British oil producer, thinks it has a solution: butanol. While butanol, like ethanol, can be made from corn starch or sugar beets, its properties are a lot more like gasoline than like ethanol. That means it can be shipped in existing gasoline pipelines. And it contains more energy than ethanol does, which will improve mileage per gallon.
Last month BP announced that it will be working with the University of California, Berkeley, on a $500 million, 10-year program, part of which will be devoted to research on improving biofuels such as butanol. And last year BP announced a partnership with DuPont to develop new technology for making butanol. DuPont will provide expertise in biotechnology. Technology Review spoke with New about the company's plans at a recent energy conference at MIT.
Comment by Mickey G | May 1, 2008
Mickey G - you are, of course, correct that my result was mistaken; I either flubbed my calculation or mistyped my result. Either way, thanks for pointing out the mistake. It's worth pointing out that 'technically recoverable' oil is not the same as economically worthwhile. For a lot of that shale and sand, the price of oil would have to be dauntingly high to make them economically attractive.
The coal alternative is interesting and would very likely form a part of a sensible strategy, but even the articles you cite point out that there's still cost issues. (And all known liquefaction processes put out substantial amounts of CO2; whatever your beliefs on global warming, that's going to be a political issue.) Biofuels need at least an order of magnitude of efficiency improvement to help, but as it turns out that may be possible. In any case, we're mostly in violent agreement that our energy policy needs some major revisions.
Comment by Raymond Ingles | May 1, 2008
Allan:
Your fact #2 is wrong. The law of supply and demand has not disappeared. Commodities speculators do not act on a whim. They are not fools. Certainly, speculation can excacerbate trends in the market, but the underlying principle that runs the show is supply and demand.
Similar with refining capacity. Yes, that may excacerbate things, but this is a global market, and we can buy refined products from elsewhere with only a small effect on price.
I am 100% with Raymond, and I consider my patriotic duty to conserve energy. If we wish to wait for the tooth fairy to come up with a solution, that is optimistic, but in the meantime we are transferring the wealth of this country to Russia, Venezuela, Iran, and Saudi Arabia.
If you want to help Ahmadeenijad with his A bomb, buy a gas guzzler.
I am ordering my smart car. Why do my conservative brethren find it so difficult to approve of conservation and frugality.
Comment by yonkel | May 4, 2008