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AMERICAN OIL AMERICAN OIL ENERGY ENERGY

INDEPENDENCEINDEPENDENCE

………… ………… IN THE REAL WORLDIN THE REAL WORLD

Dr. John Anthony Scire, PhD, 6 February 2013

THE OPTIMISTS PREDICT US WILL BE INDEPENDENT OF

OUR RELIANCE ON IMPORTED OIL IN TEN YEARS

(IF WE OPEN UP ALL OF OUR FEDERAL LANDS FOR DRILLING, INCREASE FRACKING, AND BEGIN TO EXPLOIT THE OIL SHALES IN THE GREEN RIVER FORMATION.)

SO PEAK OIL IS A THING

OF THE PAST????

REALLY?REALLY?

A REALITY CHECK

ON PEAK OIL

PRODUCTION

THE WORLD PEAKOF OIL

PRODUCTION IS NOW

ESTIMATED TO BE BEYOND

2040 ….. BUT

WHO CARES ??

THE US WILL NOT EXCEED

ITS 1970 PEAK FOR THE FORESEEABLE

FUTURE

THE ENERGY INFORMATION AGENCY OF THE US DOE THE ENERGY INFORMATION AGENCY OF THE US DOE PREDICTS U.S. tight oil production leads a growth in PREDICTS U.S. tight oil production leads a growth in

domestic production of 2.6 million barrels per day between domestic production of 2.6 million barrels per day between 2008 and 20192008 and 2019

U.S. crude oil production million barrels per dayU.S. crude oil production million barrels per day

Source: EIA, Annual Energy Outlook 2013 Early ReleaseSource: EIA, Annual Energy Outlook 2013 Early Release

Adam Sieminski January 5, 2013

Tight oil

Alaska

Other lower 48 onshore

Lower 48 offshore

ProjectionsHistory 2011

BP says US still imports 35% in 2030

DOE says US still imports 37% in 2040

IEA says US still imports 16% by 2035 -(but all of it from the Western Hemisphere, mostly from Canada)

A REALITY CHECK ON IMPORTS

AND WE WILL STILL IMPORT UP TO 37% OF OUR LIQUID FUELS in

2040

Source: EIA, Annual Energy Outlook 2013 Early Release

BUT HOW IMPORTANT

IS OIL TO OUR ECONOMY???

                                                       

PETROLEUM IS ONLY 35.28% OF TOTAL ENERGY CONSUMPTION BUT IN EXCESS OF 90% OF

TRANSPORTATION’S ENERGY USE

HOW IMPORTANT IS OIL TO THE AMERICAN ECONOMY?

BUT THEFRACKING GAS WILL

SAVE US!!!

SHALE GAS DOUBLES GASSHALE GAS DOUBLES GASPRODUCTION BY 2040PRODUCTION BY 2040

U.S. dry natural gas production in trillions of cubic feet

Source: EIA, Annual Energy Outlook 2013 Early ReleaseSource: EIA, Annual Energy Outlook 2013 Early Release

Associated with oil

Coalbed methane

Tight gas

Shale gas

Alaska

Non-associated onshore

Non-associated offshore

ProjectionsHistory 2011

BUT CONSUMPTION

IS GOING UP AND LNG

EXPORTS WILL GO UP SOON

NATURAL GAS CONSUMPTIONBY TRANSPORTATION

QUADRILLION BTUsQUADRILLION BTUs

Note: Gas to liquids includes heat, power, and losses.Note: Gas to liquids includes heat, power, and losses.Source: EIA, Annual Energy Outlook 2013 Early ReleaseSource: EIA, Annual Energy Outlook 2013 Early Release

Pipeline fuel

Light-duty vehicles

2011History Projections

95%

3%

1%

1%

28%

38%

3%

31%

1%Buses

Freight trucks

Gas to liquids

In 2005, 2,085 gigawatt hours per day

In 2012 , 3,358 gigawatt hours per day

This is a growth in Electricity Generation Use

of 47%IN JUST 7 YEARS

NATURAL GAS CONSUMPTION BY ELECTRICITY GENERATION

NATURAL GAS CONSUMPTION BY

EXPORTATIONU.S. natural gas exportsU.S. natural gas exportstrillion cubic feettrillion cubic feet

Source: EIA, Annual Energy Outlook Source: EIA, Annual Energy Outlook 2013 Early Release2013 Early Release

Alaska LNG exports

Exports to Mexico

Exports to Canada

Lower 48 LNG exports

AND THEN PRICES GO UP

TO WORLD MARKET PRICES WHICH ARE 5

TO 9 TIMES HIGHER THAN

THE US

NATURAL GAS WILL NOT MAKE

US ENERGY INDEPENDENT

BUT IT WILL ……

CONCLUSION:

TIME TO REDUCE OIL

ENERGY CONSUMPTION BY

INCREASING EFFICIENCY AND ALTERNATIVES

....BUY US TIME….

BECAUSE EVEN THOUGH OUR DOMESTIC CONSUMPTION HAS

DECLINED AND WILL CONTINUE TO DECLINE

WORLD DEMAND FOR OIL WILL GO FROM 85 MBD TODAY TO OVER 103 MBD BY 2030

96% OF THAT GROWTH WILL BE FROM NON-OECD COUNTRIES.

WORLD DEMAND FOR OIL WILL GO FROM 85 MBD TODAY TO OVER 103 MBD BY 2030

96% OF THAT GROWTH WILL BE FROM NON-OECD COUNTRIES.

WORLD DEMAND WILL WORLD DEMAND WILL INCREASE INCREASE

DRAMATICALLY DRAMATICALLY

1. OPEC’S SHARE OF PRODUCTION GOES UP TO 45% (BP/IEA)

2. US WILL HAVE TO PAY WORLD PRICES …………AND………….

3. NET IMPORT BILLS WILL NOT GO DOWN

(OPEC will still have pricing power)

SOOOOOOOOOOSOOOOOOOOOO

AND WORLD PRICES WILL NOT DECLINE

NO TOTAL INDEPENDENC

E BUT

THE GOOD NEWS IS…….

NO NEED TO IMPORT ANY

OIL FROM THE MIDEAST

BY 2020

SO LET’SDISCUSS

THE NATIONAL SECURITY

POSSIBILITIS

-CENTCOM ROLE DIMINISHES VIS-À-VIS THE OTHER COMS

-ISRAEL’S IMPORTANCE DIMINISHES

-IRAN’S IMPORTANCE DIMINISHES

-THE TRADE DEFICIT’S DRAIN ON AMERICAN CAPITAL DIMINISHES

MORE SECURITY POSSIBILITIES

- OIL DISRPUTIONS WORLDWIDE DUE TO DEMAND OR SUPPLY PROBLEMS WILL NOT CRUSH THE US ECONOMY

- MORE SELECTIVITY IN SOURCING OIL WHEN SECURITY IMPLICATIONS ARISE

- RISING IMPORTANCE OF WESTERN HEMISPHERE

- COMPETION WITH CHINA FOR RESOURCES MAY ESCALATE

MORE SECURITY CONSIDERATIONS

- CHINA’S DEPENDENCY RISES TO 80% MOST OF WHICH WILL COME FROM THE MIDDLE EAST AND AFRICA

- EURO DEPENDENCE ON RUSSIAN GAS DIMINISHES AS US LNG EXPORTS INCREASE

- JAPANESE DEPENDENCE ON IMPORTED LNG INCREASES AS NUCLEAR

DECLINES