Exploiting Crude Oil

12.2a

Dependency on Foreign Oil

• The U.S. depends on foreign sources for over 60% of its crude oil.

• Dependency is increasing

• Consequences: trade imbalances, economic disruptions, military actions, coastal oil spills.

How Fossil Fuels Are Formed

• Crude oil, coal, ________ gas• Derived from the remains of living __________• Paleozoic and Mesozoic eras (100-500 mya)

much of Earth covered with _______ and shallow ____________

• Lower layers had ________ conditions- dead stuff broke down ___________

• Organic matter buried by ___________, __________ and heat converted it to fossil fuels

Energy Flow Through Fossil Fuels. Fig 12-11

Crude Oil Reserves

• ___________ Reserves: Geologists’ ___________ guesses as to where oil or natural gas may be _______--- and how much may be found

• ___________ Reserves: when exploratory drilling _______ _______ and further drilling is conducted to determine the ________ and _______ of the oilfield.

Probability

• P50 (50% ___________) of 700 million barrels means that a total of 700 million barrels is just as likely as _____ to come from the field.

• Which is more _________? P05? or P90?

• Oil producers may prefer ______ to give the impression of a large reserve for _____________ or economic reasons

Recovery

• Oil production (______________) is not at a constant rate

• __________ at first when under pressure- __________ Recovery- 25% of the oil in field.

• Further removal possible (50%-60% more) but more _________ and expensive- _________ or Tertiary Recovery use substances like steam to ______oil into wells

Economics of Recovery

• Depends on __________ of a barrel

• No oil company will spend _______ to get oil than they can sell it for.

• When prices are low, not worth it to do _______________ production.

• When prices are _______, some oil fields are ___________ to do secondary or tertiary production.

Declining U.S. Reserves and Increasing Importation

• Until _______, discovery of new oilfields kept ________ with U.S. demand

• 1970, new discoveries fell _______, but consumption continued to __________

• This was predicted by a geologist named M. King ___________- – thought oil exploitation would follow ____ curve-– and that ______ would be 1965-1970

• U.S. relied more and more on _______ oil

Oil production and consumption in the U.S (Fig 12-12 pg 333)

The Oil Crisis of the 1970s

• OPEC: Organization of ______________ Exporting _________________

• Formed a _______ group of countries that decided to ______ ___________ in order to raise the price of oil

• 1973 OPEC began an oil ________- agreed not to ______ oil to the U.S. or anyone who gave military or _______ _____ to Israel during the Arab-Israeli war

Effects of OPEC’s Embargo• Prices went up almost ___________-- the

U.S. had very little in ____________• Spot ____________ occurred that led to

widespread ____________• OPEC agreed to sell oil at the price of

____________ a barrel -up from $2.50 (about $29 a barrel today)

• OPEC continued to raise prices to _____ ($64)

• ____________ our economy- inflation, unemployment, recession

U.S. Effort to Increase Production

• More ______________ drilling

• Construction of __________ ___________ (with prices high, it became worth it to bring it into production)

• Reopened fields for secondary and ____________ recovery (high prices made it _____________ it)

Effort to Decrease Consumption

• Set standards for _________ ____________. Cars to average 27.5 mpg by 1985. (averaged 13 in ’73). Speed limit _____ mph.

• Conservation promoted – _____________, appliances

• _________ breaks and support to research __________ __________ systems

Boycott Protection

• U.S. began to _____________ 599 million barrels or 53 days worth of oil

• We now have _________ million barrels of oil or ______ days worth of oil (at a rate of 21 million barrels of oil a day.

Results

• (Except stockpile) Steps economically _____________ when prices are _______

• If prices of oil low, then many steps not be economically ___________.

• Results _______ __________________.– Takes time to _______ fuel efficient cars– Takes time for fuel efficient cars to ______

gas guzzlers

Recovery

• By 1980s ______________ was declining

• _____________ up in Alaska

• U.S. continued to rely on imported oil, but OPEC had ____________ from ___________, Africa, and the North Sea

• OPEC had difficulty ______________ members

Oil Glut

• Oil production ______________ consumption in mid 1980s

• Prices _____________ in 1986 from high $20s to $14/barrel

• Prices continued to _____________- between $10-$20/ barrel

Victims of Our Success

• ____________ ________ from 3105 drilling rigs in 1982 to 660 in 1992

• _____________ from older oil fields (which cost $10-$15/barrel to pump) _________

• Conservation efforts and _________ ____________. Speed limits went back up to ______ mph

• Tax incentives and subsidies for alternative energy _________ and ___________ many new businesses

• U.S. oil production dropped as proven reserves were drawn down

• Alaska oil field reached its peak in ______

• Consumption ________

• People began to buy _______ ___________ (minivans, SUVs again)

Back to the future• Oil prices in the 1990s were low but started

________________ in 1998• OPEC cut production

– Just as East Asia came out of a ______________– Demand exceeded _______________

• Prices rose to over ________/ barrel in 2008– People reduced driving and bought ________ cars– Oil companies had record _________________– Food prices _________________– Congress raised efficiency standards and called for

increased _________________ fuels

Recession• In September 2008, the stock market __________

– Overpriced _____________, mortgage excesses, uncontrolled stock market speculation

– A ____________ economic meltdown caused job losses

– Major _________________ institutions failed– Credit became ___________________

• Countries fell into the worst recession in ___ years– Oil imports declined and prices ____________– OPEC cut production to ____________ prices

• Countries still _______________ on a few oil-rich nations

Problems of Growing U.S. Dependency on Foreign Oil

12.2b

Trade Deficit

• ______ of balance-of-trade ________ ($815 billion in 2007)

• Same _______ to us whether produced here or _________

• But, when oil produced here, ____ circulates here and helps our __________

• When we buy from abroad= “foreign ____”

Other Costs- Ecological

• Exxon-Valdez oil spill estimated cost of ____ billion

• Other forms of pollution from drilling, ____________ and consumption

• Estimating total damage in dollars is difficult

Persian Gulf Oil

• Maintaining _______ ____ ______ is also a major reason for negotiating _______ agreements in Middle East

• U.S. maintains _____________ presence to ensure _____________ to Persian Gulf oil

1991 Gulf War

• _______Saddam Hussein invaded __________ which produced 6 million barrels per day

• U.S. led forces ______ Hussein’s army ________ of Kuwait in _______

• U.S. kept ongoing presence• U.S. presence angered ___________ who

attacked the World Trade Center and the ___________ on September 11, 2001

Blood for Oil?

• U.S.-_______ coalition invaded Iraq in 2003 to overthrow ________ and eliminate ___________ WMD

• __________ around the world cried “No blood for ______”- implying that oil was the real _________________

Was oil part of the motivation?

• Coalition forces immediately prepared to protect Iraq’s _____ _________, not Iraqi National _____________

• _______ and British companies likely the ones to __________ Iraqi oil industry

• U.S. and other Western countries rely on __________ ________ Oil for ________ of imports

Subsidy

• Military ________ associated with maintaining access to Persian Gulf Oil can be considered a U.S. Govt. ___________.

• Before 2003, military presence= _____ billion/ year= __________________

• In 2002, $30/ barrel + $61 subsidy= _____

• 2008, _______/ barrel + at least $61?

Resource Limitations

• “__________ ______” Hypothesis: as your search turns up _________ eggs, you draw the logical conclusion that most of the eggs have been _________.

• No major oil fields in N. America found since ____________.

• Computer mapping helping find smaller ______________

• World now using _____ BBs/year. • 2020 _____ BBs?

Hubbert’s Peak

• Scientists calculate reserves at ____ BBs- Peak will occur _______ ___________

• Oil Industry 1050 BBs.- Peak within _____ decade.

• Hubbert’s Peak, The _________ World Oil Shortage, by Kenneth Deffeyes: “After peak, oil production of crude oil will fall, ________ ____ __________ again”

Hubbert curves of oil production

Undiscovered Reserves

• USGS believes _______ ______ not yet discovered.

• Even if found, only pushes back peak a _____ __________ or a _________

• At current consumption levels, ________ reserves can supply us for only _____ more years.

• As production declines, ________ nations will ___________ again.

Independence

1. We can increase the _____ _________ of our transportation system.

2. We can use ____ fossil-fuel resources we have to make fuel for vehicles.

3. We can develop ________ to fossil fuels