Thursday, October 13, 2005
The Clock Is Ticking
While the oil companies are reaping record profits, Americans are paying 50% more at the pump than they did one year ago. That's called price gouging.
In a free market economy, prices are directly correlated to supply and demand. As demand increases, supply must keep pace or else prices will inflate.
In the past four years, the worldwide demand for oil has increased by 8.6%. Meanwhile, worldwide production has essentially kept pace, increasing 8.3%. Despite this, crude oil prices have spiked an incredible 242% during the same period. Again, that's price gouging.
While some Americans might believe that the U.S. gets almost all of its crude oil from overseas, that is not the case. The U.S. produces 42% of its own oil and our neighbors Canada and Mexico are tied as our number one sources, each providing 11% of U.S. oil imports.
By contrast, Saudi Arabia is the number two exporter to the U.S., accounting for just 9% of U.S. oil.
Our appetite for oil seems to be nearly insatiable. Presently, the U.S. consumes 21 million barrels of oil each day, or 400 million gallons. That's a quarter of all the oil used around the world each day. And experts predict that U.S. consumption will increase 32% by 2025.
But we are not alone in our demand for oil. China and India, each with populations of over 1 billion people, are home to two of the world's most rapidly developing economies. And, as such, the demand for oil in those countries is also developing rapidly.
China's oil consumption is projected to rise 119% by 2025. But even then, they'll still be using only about half as much as the U.S. will be. At that time, it's anticipated that worldwide oil usage could increase to 120-130 million barrels a day, up from 85 million barrels today.
The question most experts ask is, where will all of that additional oil come from? Many have supposed that Saudi Arabia's giant oil fields would account for much of the supply.
But according to Matthew Simmons, the author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," that's highly unlikely.
Simmons believes that Saudi Arabia, now producing around 9 million barrels a day, may soon begin to lose production capacity. According to his research, the Saudi oil fields have matured, leading to their inevitable decline.
As a result, Simmons concludes that worldwide oil production has peaked and instead of increasing to 120 million barrels a day by 2025, it could in fact be half that rate — meaning less than what it is today.
Some have concluded that the U.S. must, in the effort to achieve oil independence, begin drilling in Alaska's Arctic National Wildlife Reserve. But unfortunately, experts have countered that such a tactic would result in 250-800 million barrels a year, the amount the U.S. currently consumes in just 12-38 days.
Obviously, that's not the answer.
Simmons asserts that the world needs to considerably reduce its consumption of transportation fuels to fend off a potential crisis, a contention other experts in the field support.
Since 70% of the world's oil is used as transportation fuel, new forms of fuel are required, as well as a reduction in the number of people and goods moved by cars and trucks. Simmons calls for an increase in the use of trains and ships to make shipping more efficient and to reduce worldwide oil consumption.
Obviously, the U.S. oil industry has a huge stake in seeing to it that American consumers do not decrease the gluttonous consumption of their product. But if Simmons is correct, the clock is ticking on world oil supplies, and the time to act is now.
Biodiesel, which is manufactured from vegetable oils, recycled cooking greases and oils, or animal fats, is one possibility. It can be used in any diesel engine, usually without any engine modifications, and is the safest of all fuels to use, handle, and store. It's also non-toxic, biodegradable, and free of sulphur.
Soybeans, one of the largest and most abundant U.S. crops, are one of the principle sources. And believe it or not, biodiesel is already being used in busses and other municipal vehicles in numerous U.S. cities such as St. Louis, Phoenix, Cincinnati, Portland, Oregon and Lexington, Kentucky.
The Department of Energy calls biodiesel the fastest growing alternative fuel in the nation, as it's use has increased 5000% since 1999.
One way or the other, it's time to start exploring alternatives to crude oil for a variety of reasons: its limited, and perhaps dwindling, supply; various environmental factors; and the economic prospects from a new industry, including jobs.
There are lots of good reasons to wean ourselves from our dependence on foreign oil, not the least of which is our national security, so we shouldn't let U.S. oil companies stand in our way. In fact, if they're wise they'll recognize the opportunities at hand and lead the way themselves.
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