The Global Oil Addiction

Some Facts

Israel’s security =

Eliminate oil addiction

• The first strategic priority of Israel’s defense policy is to minimize US dependency on oil

• The second priority of Israel’s defense policy is to minimize the world’s dependency on oil

IEA forecast of global all-oil

production, mbd

Source : IEA, The Guardian Newspaper

US: Oil share of goods & services

trade deficit

0%

10%

20%

30%

40%

50%

60%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009 *

Source: US Bureau of Economic Analysis

* Jan-Nov 2009

Oil and the US Defense Budget

More than 50% of the US defense issues

are oil related:

• Protecting the “Oil States”(e.g., the Gulf War, Iraq)

• Protecting the “Oil Routes”(Navy)

• War on Terror (Radical Islam)

Oil Prices and Recession

Every major recession in the last 40

years was preceded by a rise in oil

prices.

Can the US/world come out of the

recession when oil is 80$?

Israel: Oil share of GDP

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Net oil imports of oil in millions, present value $

Expenditure on oil as % of GDP

Oil imports as a % of total imports

Source:

Modelim

estimates

Africa: Oil share of trade deficit

Country Fuel Imports as %

of current account

balance

Kenya -174%

Senegal -90%

Tanzania -85%

Uganda -124%

Mali -83%

Source: Development Indicators, World Bank, 2007

What is the best way to reduce US

oil dependency?

• Nuclear

• Wind

• Solar

• None of the above

Oil is hardly used (1%) to generate

electricity

2008 United States Electric

Power

OIL

1%

GAS

22%

COAL

48%

MISC

2%

HYDRO

6%WIND

1%

NUCLE

AR

20%

If the US replaced

all of its coal

based electricity

with nuclear, wind

or solar… it would

not reduce its oil

dependency by a

single gallon.

Source: US Energy Information

Administration

What is the largest source of CO2

in the US?

Coal

or

Oil?

2008 United States

Total CO2 emissions (Mt)

COAL,

2125,

37%

OIL,

2436,

42%

GAS,

1242,

21%

Source: US Energy Information

Administration

It is oil

Distorted Priorities

• The US Stimulus Bill allocated $64

billion to electricity/coal related

energy (like CCS, wind and solar) and

only $3 billion to oil replacement

issues.

• If our goal is to reduce CO2

emissions, why aren't we attacking

the larger source?

Death Tolls - A Comparison

• Deaths as result of oil related wars (last 35 years)-

6- 6.7 million

• Possible deaths as result of oil related wars (next 20 years)-

100 million

• Possible deaths as result of global warming (next 20-50-80 years)-

Hard to determine, but according to IPCC the severe impact will happen in 50-80 years

A Question of Priorities

Putting Climate Change ahead of eliminating the

strategic value of oil

… it is like a physician telling a 25 year old…

“You have brain tumor and without treatment you will die in three years. However, we will not do anything about it. Instead you should take medicine to reduce your cholesterol.”

We have a brain tumor

It is called global oil dependency:

• It ruins our economy

• It funds radical Islam

• It kills millions today and most likely will be

the cause of a new world war

It is time to get our priorities right

Drill, baby, drill ?

The United States:

• Uses 23% of world oil supply

• Has 3% of the world's oil reserves

• Most likely production costs of new

US oil findings at $50-100 /barrel

OPEC:

• 79% of the world’s oil reserves

• Production costs under $10 /barrel

Save – efficiency – CAFE

• If the US will implement the current

CAFE standards, its oil consumption in

2030 will be a few percent lower than

today

• Yes – we should improve efficiency

(and faster), but we cannot save our

way off oil

• Smoking 18 cigarettes a day instead

of 20 is marginal – we need to quit

smoking altogether

What is the increase of OPEC

production since 1973?

• 100%

• 50%

• 20%

• -2%

OPEC since 1973- Controlling Oil

Supply (and prices)

15

17

19

21

23

25

27

29

31

33

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

20

09

ann

ualiz

ed

Year

mb

d

0%

20%

40%

60%

80%

100%

120%

Ind

ex

ed a

gain

st

19

73

pro

duc

tio

n

leve

ls

Source: Energy Information Administration

OPEC Crude Oil Production

82

83

84

85

86

87

88

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09

27

27.5

28

28.5

29

29.5

30

30.5

31

31.5

32

Global Oil Demand, mbd OPEC Avg Production, mbd

What happened in 2008?

Demand falls… OPEC cuts production

Source: Oil

Market

Report, IEA

and EIA

21

Summary

Food vs. Fuel

One of the best false PR campaigns in

history

Guess who said this?

“Ethanol and other biofuels do not meet

environmental and energy security goals…

their cultivation eats into the human food

supply, reduces the absorption of carbon

dioxide as forests are cut down, has not

improved the security of energy supply and

has not reduced petrol prices… we have to

look beyond biofuels… and concentrate

instead on truly renewable sources of

energy,” he said, flagging solar energy as

“perhaps the best source”

Ali Al-Naimi Saudi Minister of Petroleum and Mineral Resources at

the International Oil Summit `

Biofuels- Good for oil or Bad for oil?

The US no longer produces electricity

from oil. Whereas biofuels:

• Directly displace oil

• Snatch petrodollars from the Saudi

coffers

Merrill Lynch Commodity Strategist Francisco Blanch:

Without biofuels, the price of oil would

be about 15% higher than

it now is.

It’s the OIL - not the Ethanol.

Higher commodity

prices (like corn)

are driven by OIL

prices, not Ethanol

production

volumes!

Sources: NYMEX, USDA, RFA

The campaign against biofuels

The Lie:

“Growing biofuels destroys the

rainforests”

The Truth- Growing biofuels does

not destroy the rainforests

• Brazil has substituted over 50% of what would be its gasoline consumption with ethanol sugarcane

• Should Brazil double its ethanol production, this would take up 3.3% of its total agricultural land

• This land is not the Amazon

• In fact, you cannot grow sugarcane in the Amazon

A Billion Acres Of Abandoned

Agricultural Land

Source: Campbell et al., Env. Sci. Technol. (2008) ASAP Article, 10.1021/es800052w

Not Enough Land For Biomass?

Total Global Acreage 26B acres

Forest Crops Pasture Other

8B acres 3.2B

acres

6.8B

acres

4B acres

10% = .68

0.675 B acres x 20 t/ac x 2.38 B / t

= 88M barrels per day

Source: Ceres, FAO Statistical Database

Varying regional yields are barriers

to meeting food demand

Corn Yield

1990 1995 2000 2005

Year

Bushels

per

Acre

0

20

40

60

80

100

120

140

160

USA

China

World Average

Brazil

India

Sub-Saharan

AfricaArgentina

Source: IMF

Historically, food is not expensive

Food expenditures by families and individuals as

percentage of disposable personal income

0

5

10

15

20

25

30

1929

1932

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

Year

Pe

rce

nta

ge

Home Away from Home Total

Source: USDA