The Myth that the US will Soon Become an Oil Exporter

Countries trade crude oil and oil products back and forth. When all of these transactions are netted out, is the US close to becoming a “net” oil exporter?

With the recent increase in oil production (perhaps even exceeding that of Russia on a “barrels-per-day” basis), a person might think that US oil production problems are behind us. If we look at the data, though, it is very clear that the US is still a long way from becoming a net oil exporter.

There are several reasons for confusion. One is the fact that excess refinery capacity can lead to the ability to export both gasoline and diesel, even though the United States continues to import large amounts of crude oil. Another is that tight oil (extracted through “fracking”) is growing from a small base, but can’t necessarily ramp up very far, very quickly. Another source of confusion is with respect to how different types of liquids should be combined for comparison purposes.

In this post, I would like to explain why the idea that the US is about to become a net oil exporter is simply a myth.  Continue reading

Two Energy Books of Interest

Today, I’d like to write about two fairly different books related to limited energy supply. Both are excellent, but intended for fairly different audiences, and focusing on different aspects of our dilemma.

1. “Power Plays: Energy Options in the Age of Peak Oil” by Robert Rapier.

This book is written at a fairly introductory level, giving information about the many energy options we have, and the trade-offs we make as the result of our choices of energy options. The book is not about peak oil per se, but includes a chapter on peak oil as well as a chapter on climate change. The book ends with the chapter, “The Road Ahead”. The book is inexpensive–$16.15 from Amazon.

2. “Energy and the Wealth of Nations: Understanding the Biophysical Economy” by Charles Hall and Kent Klitgaard

This book is focused on energy and economics. This book seems to be aimed as a text book, or at an audience who is already familiar with some of the issues, and wants to dig deeper. This book is in two column format with questions at the end of each chapter to facilitate classroom discussion. It covers in depth a wide range of topics, from energy’s role throughout history, to the relationship of energy to wealth production, to energy return on investment, to how to do biophysical economics, to peak oil. It ends with the chapter, “Living a Good Life in a Lower EROI Future.”

Below the fold, I will talk a little more about each. Continue reading

Why oil prices are so high: Production shortfall, Iran concerns, and low interest rates

Rising oil and gasoline prices are of concern to many people today. I see three basic issues involved:

  1. “Stalled out” growth in world oil supply
  2. Concerns about Iran
  3. Artificially low interest rates

Stalled Out Oil Supply Leads to Five Million Barrel a Day Shortfall in 2011

In my view, the biggest contributor to high oil prices is the first one–stalled out oil supply.  At this point, the interaction between oil demand and oil supply does not work in the way most people expect it would. Even if the price of oil rises, world oil production doesn’t increase by very much (Figure 1), if at all.

Figure 1. Brent oil spot price and world oil supply (broadly defined), based on EIA data.

In the words of economists, world oil supply is relatively inelastic. This is true, even though the oil supply shown in Figure 1 is what is sometimes called “All Liquids,” so includes substitutes for crude oil, such as biofuels, natural gas liquids, “refinery gain,”  and any fuels from coal-to-liquid and gas-to-liquid processes. These substitutes are not growing by enough to make up for the shortfall in crude oil growth.

If we compare recent oil production with that in the 1980s and 1990s, we see that about 2005, growth in world oil supply suddenly slowed down (Figure 2).

Figure 2. World oil production (broadly defined) based on EIA data, with exponential trend line fitted by author to 1983 to 2005 values.

Continue reading

Three Major Journals Publish Articles on Limited World Oil Supply

In the past month, three major peer-reviewed journals have published articles relating to limited world oil supply:

  1. In Science, Technology is Turning U. S. Oil Around But Not the World’s, by Richard A. Kerr;
  2. In Nature, Climate Policy: Oil’s Tipping Point has Passed, by James Murray and David King; and
  3. In Energy, Oil Supply Limits and the Continuing Financial Crisis, by Gail Tverberg.

The fact that these articles have been published is significant, because articles in the  mainstream press, such as Bloomberg’s recent article, Peak Oil Scare Fades as Shale Deepwater Wells Gush Crude, seem to suggest that our oil problems are past. While the US oil supply situation may be a little better, the world supply situation is still very bad, and oil prices are still very high around the world.

Furthermore, high oil prices tend to have a recessionary effect, and can lead to debt defaults. These issues are described in both the second and third articles above. Thus, there is a substantial chance that high oil prices are contributing to the debt default problem in Europe, and to forecast low world economic growth.

In this post, I briefly describe these articles. Continue reading

Businessweek Gets it Wrong—Everything You Know About Peak Oil is ‘Not’ Wrong

On January 26, Bloomberg Businessweek printed an editorial by Charles Kenny titled, “Everything You Know About Peak Oil Is Wrong”. This editorial reflects several common misunderstandings.

According to Kenny:

Titled Limits to Growth, their report suggested the world was heading toward economic collapse as it exhausted the natural resources, such as oil and copper, required for economic production. The report forecast that the world would run out of new gold in 2001 and petroleum by 2022, at the latest.

Limits to Growth gives a table that might be interpreted to show that oil and gold new extraction will be exhausted by the dates indicated. The book is careful to explain that the situation is more complicated, though. The way the book summarizes the issue is as a price problem:

Given present resource consumption rates and the projected increase in these rates, the great majority of non-renewable resources will be extremely costly 100 years from now.

Continue reading