America’s Energy Disaster

Monday, March 19, 2012

By Robert Zubrin in National Review Online.

President Obama says his energy policy is a great success. In support, Democratic-party stalwart John Podesta trumpets the claim that the United States is now producing more oil than it imports. A recent article in the Bloomberg News goes even further, saying that the U.S. is now a net oil exporter. New York Times columnist Tom Friedman instructs us to rejoice: High oil prices are now good for the United States.

Unfortunately, none of this is true. For the record, according to the Department of Energy/Energy Information Agency February 2012 Monthly Energy Review, the United States currently consumes (November 2011 figures, p.52) 12.93 million barrels of oil per day (mpd) in its transportation sector, 4.55 mpd in its industrial sector, 1.159 mpd in its residential and commercial sectors, and 0.096 mpd in electrical-power generation, for a total consumption of 18.735 mpd. In contrast, (page 37) in 2011, the United States averaged a production rate of 5.671 mpd of crude oil, or 30 percent of its total consumption, for a net deficit of 13.064 mpd, or 4.77 billion barrels per year. At today’s oil price of $105 per barrel, the bill for these imports runs to $500 billion per year, a tax on our economy equal to 20 percent of what Americans pay the IRS, and a reduction in the nation’s GDP sufficient to account for a loss of 5 million jobs at an average salary of $100,000 per year each.

So the administration’s claims about having made meaningful progress towards fixing America’s oil catastrophe are completely false. That said, it is true that the problem did not originate with Obama, but has been developing for some time. If it is to be understood and corrected, some history is in order.

In figure 1, below, I show U.S. oil production, OPEC oil production, and non-U.S./non-OPEC oil production from 1960 to the present. It can be seen the U.S. oil production grew at an average rate of 3.2 percent per year during the 1960s, peaking at 9.6 mpd in 1970. In that year, however, the Environmental Protection Agency was created, and U.S. production has been in decline ever since. As shown, the growth of OPEC production, which had been extremely rapid during the 1960s, came to a screeching halt in 1973, when the OPEC powers replaced the previously dominant Seven Sisters’ policy of expanding production to fuel the world economy with an alternative policy of constricting production to loot the world economy. As a result, OPEC production has not increased at all since 1973. Thus the entirety of the increase of world oil production over the past four decades — during which time the world economy has doubled in size — has come from non-OPEC, non-U.S. sources. As can be seen in the graph, this has increased at rate of 3.4 percent per year since 1970, essentially the same as the 3.2 percent average U.S. growth rate from 1960 to 1970. With the thin green line of the graph, I show how U.S. production would have developed had it matched other non-OPEC sources and continued to grow at its pre-EPA rate. In that case, instead of producing 5.7 mpd today, we would now be producing 35 mpd. Together with other non-OPEC production, this would have totally marginalized OPEC and constrained oil prices below $30 a barrel today, with associated gasoline prices driven to the $1 to $1.50 per gallon range. Just as they did in the 1950s and 1960s, such low oil prices would fuel dramatic U.S. and global economic-growth rates.

Fig. 1: World Oil Production, 1960–2011. Actual U.S. production is marked with the pink squares. Hypothetical U.S. production continued at pre-EPA growth rates is shown by the green-crossed line. Note that such growth was in fact achieved by other non-OPEC countries.

The catastrophic deterioration of the American oil position is shown even more starkly in figure 2, which presents the U.S. share of total world oil production over the period from 1940 to 2010. In 1940, the United States produced 60 percent of the world’s oil. Today we produce 7 percent. Or, put another way, in 1940, the United States, alone, produced half again as much oil as the entire rest of the world put together; today they produce 13 times as much as we do.

Fig. 2: U.S. Oil Production as a Share of Total World Output.

As I explain at some length in my book Energy Victory, during World War II, the American strength in oil production was a decisive advantage for the Allies. Airplanes, ships, and tanks all ran on oil, and we controlled the supply. Because we were so rich in oil, we had no compunction whatsoever deterring us from bombing the Third Reich’s oil refineries or sinking the Japanese tanker fleet, and by doing so, we brought the enemy to their knees. In contrast, today, we are afraid to strike the Islamists for fear that our actions might endanger their petroleum output. The Kharg Island oil terminal handles 80 percent of Iran’s oil exports. An air raid on this extremely flammable facility would bankrupt the regime, thereby putting an end to its nuclear bomb project — and probably its existence. But we are not prepared for the economic consequences, and so must refrain, even as the terrorists continue to pour ever more bomb-usable, highly enriched uranium from their centrifuges.

In the 1940s, the petroleum business was an American game, and it was enormously to our advantage that the world ran on oil. Today, the exact opposite is true in both respects. That is why we need to take two vital steps:

1. We need to improve our horrible position within the petroleum game by eliminating the EPA and other crippling bureaucracies that have turned the U.S. from the game’s biggest winners into its worst losers.

2. We need to drastically reduce the importance of the petroleum game itself by enacting flex-fuel-vehicle legislation that will open the transportation market to fuels derived from non-petroleum sources.

America’s massive shortfall in liquid-fuel production is an ongoing economic disaster and a five-alarm strategic weakness. It cannot be remedied by business as usual, a philosophy of less-is-more consolation, goofy New Age–inspired feel-good projects, make-believe success claims, or rhetorical spin. Rather, it must be dealt with in a serious and forceful way. If Mr. Obama is not prepared to do that, it is essential that he be replaced by someone who is.

— Dr. Robert Zubrin is president of Pioneer Astronautics, and author of the book Energy Victory. His new book, Merchants of Despair: Radical Environmentalists, Criminal Pseudoscientists, and the Fatal Cult of Antihumanism, will be published by Encounter Books later this month.

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