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Where Will That Oil Come From? August 9, 2010

Posted by Afflatus in Energy.
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In the wake of the Deepwater Horizon oil spill, rage against the oil industry proliferated. Gas stations owned by British Petroleum were vandalized, and angry protesters organized in opposition to the company. Environmentalists clamored for BP, and the rest of the industry, to be brought to its knees. President Obama responded by reversing his policy 180 degrees from his March decision to open areas of the Atlantic to off-shore oil drilling; instead his administration imposed a 6-month off-shore drilling moratorium on all projects deeper than 500 feet. Due to the political climate, this moratorium is likely to be in place for more than just 6 months.

But before you cheer this moratorium on off-shore oil drilling, understand the larger context of the importance of off-shore operations to the US economy. In the US, petroleum provides most of energy for transportation and various chemical building blocks for industry.  In 2009, the United States consumed about 18 million barrels of oil per day (about 22% of total world consumption). Despite the recession reducing oil demand 9%, net crude oil imports were still roughly 12 million barrels per day in 2009. US oil imports would be significantly higher if it wasn’t for the expansion of off-shore oil drilling that took place in the past two decades. A nice graph from Geoffrey Styles’ Energy Outlook blog displays this trend:

As you can see, oil drilling in the Federal Outer Continental Shelf has saved the United States from having to import roughly an additional 2 million barrels of oil per day.

Where would the United States import that additional 2 million barrels of oil per day?

Canada supplies the United States with its largest portion of oil imports at 22%. However, Canadian crude is extremely dirty; over half of Canada’s oil comes from tar sands, an extremely dense, thick form of petroleum that must be melted before it can be extracted and refined. According to the EPA producing one barrel of oil from Canadian tar sands generates 82% more greenhouse gas emissions than does the average barrel refined in the United States. The other likely sources for increased oil imports to the United States are Kazakhstan, Angola, and Nigeria. These countries, as Lisa Margonelli points out, do not have “America’s strong environmental safeguards or the resources available to enforce them.” Kazakhstan did not have comprehensive environmental laws until 2007. Nigeria has suffered an oil spill equivalent to that of the Exxon-Valdez every year for the last 41 years!

So it seems the United States has a choice: drill in off-shore domestic waters under tighter environmental regulations or import the oil from abroad. Or does it?

Underlying this choice is the assumption that the United States’ voracious appetite for oil cannot be reduced. I reject this notion, and hope to explain in the coming weeks how the US could reduce its demand for oil cheaply through conservation and efficiency measures.

In the meantime, it’s worth understanding what a continued moratorium on off-shore oil drilling would mean. Oil is a risky business and it always comes from someone’s backyard!