In the presidential debate last Friday, Sen. Obama called for eliminating the United States dependence on Middle Eastern oil within 10 years. It sounds like a desirable policy goal–the less we are dependent on unstable or unfriendly regimes, the better for our national security. But is this goal realistic? My research suggests it is certainly plausible. But I have my doubts about whether it is very meaningful in and of itself.
How Much of Our Oil Comes from the Middle East?
According to the Energy Information Administration (EIA), the US imports 5.9 million barrels of oil per day from OPEC, whose 13 members include middle eastern nations of Iran, Iraq, Kuwait, Saudi Arabia, United Arab Emirates and Qatar, plus Libya, Algeria, Nigeria, Angola, Venezuela and Ecuador. The Middle Eastern members of OPEC accounted for 29% of global oil production in 2005 according to the EIA. (There should be more current figures around but I can’t find them just now. Please leave a comment if you know where to find them)
The EIA says the US consumes 20.68 million barrels of oil a day, so 28.5% of our daily oil consumption is currently supplied by OPEC nations.
How Is Our Oil Used?
While oil is our single most important source of energy, it is of course not our only one. According to the EIA, oil accounted for about 39% of all Btus consumed in 2007. Here’s our energy consumption broke down by source in 2007:
23.3% natural gas
4.3% non-hydro renewables
Hardly any of the oil is used to generate electricity; coal and gas are much more heavily used for that purpose. Most of our oil—some 70% of it—goes toward transportation. That’s about 14.5 million barrels of oil per day consumed by transportation. That means that transportation is a good place to start looking for ways to reduce our consumption.
How Can We Reduce the Amount of Oil We Use for Transportation?
If transportation is the biggest use of oil in the U.S., how can we reduce the oil we consume for transportation? There are three main ways.
Drive less. A variety of factors can reduce the amount of driving Americans do, but perhaps the most effective is raising the cost of driving. For example, according to the Federal Highway Administration, recent rising fuel prices caused American to cut back on driving by more than 4% in March 2008 compared with March 2007.
Employ oil substitutes. The main candidates here are a) natural gas for fleet vehicles, a centerpiece of the T. Boone Pickens plan; b) plug-in electric vehicles, which draw electricity from the power grid and thus ultimately from electric sources such as coal, natural gas, or alternative sources of electric generation such hydroelectric wind or solar.
Increase vehicle fuel efficiency. The golden age of increasing fuel efficiency in this country was between 1975 and 1987, when the average fuel economy of the new cars produced rose from 13.1 miles per gallon to 22 miles per gallon, at a compounded annual growth rate of 4%. Improvement has not been steady since, however. According to a study by the EPA:
Since 1975, overall new light-duty vehicle fuel economy has moved through four phases:
1. a rapid increase from 1975 through the early 1980s,
2. a slower increase until reaching its peak in 1987,
3. a gradual decline until 2004, and
4. an increase beginning in 2005.
A variety of factors influence average fuel efficiency, including federal and state mandates and the mix of vehicles consumers choose to buy. (An SUV fetish increased SUV’s share of light-duty vehicles purchased from 10% in 1990 to 30% in each year since 2003.) But assuming a 4% annual improvement in fuel efficiency, over 10 years it would lead to a reduction in gasoline consumption of over 30%.
- If the resulting lower cost of car travel motivates consumers to drive more, the net reduction will be somewhat less.
- This is a static analysis that assumes no increase in fuel demand during the period; obviously that’s unrealistic. The EIA’s Annual Energy Outlook 2008 has projections of demand and fuel use through 2030. I have not taken the time to factor those projections into my light-weight analysis, but at a high level they seem to be projecting an increase in US demand for liquid fuel (which is a broader category than petroleum) of about 10% over 30 years—so a very gradual increase that could be offset with efficiency and other measures.
- The impact of new fuel-efficient cars is dilluted by continued presence of older, less efficient cars on the roards. If you know where the figures are on this, please point the way.
Can Improved Fuel Efficiency Liberate Us from OPEC?
The 5.9 million barrels per day we import from OPEC represent about 40% of the total amount of oil used in the US for transportation. So a 30% reduction due to improved efficiency would take us a long way, but not far enough to render OPEC imports unnecessary. The Obama plan does call for other measures besides boosting fuel efficiency, including supporting the adoption of plug-in hybrid cars and streamlining drilling for oil in permitted domestic areas.
Given our recent experience of a sharp drop in driving as a result of higher gas prices, it would seem that higher taxes on gasoline would nudge us closer. If we acheived a 30% reduction in oil used outside the transportation sector (in industrial and building uses) that would put us within spitting distance of the 5.9 million barrels according to this static analysis.
But what would that mean geopolitically?
What Does OPEC Independence Mean Geopolitically?
This is a big question, one I hope to explore in more depth in the future. But here I will just make two observations. First, OPEC’s share of world oil production is about 38% according to EIA data from 2005. Since most non-OPEC countries are net importers of oil, OPEC has substantial pricing power over oil. Even if The US stops importing oil from OPEC, the price the US pays for oil from other countries can still be significantly influenced by OPEC’s actions. Second, US independence from OPEC may be necessary but not sufficient to ensure geopolitical independence from the region, as important parts of the world, allies and trading partners of the U.S., will continue to be dependent on OPEC unless they embrace similar programs.
There is tons written on this subject.Here’s a very recent article slamming the presidential candidates for misrepresenting the true costs of “energy independence.” But from my reading, I think the authors represent the candidate’s positions. Obama, for one, doesn’t talk about energy independence (which I think is a misguided goal) but rather independence from Middle Eastern oil, which is easier to achieve but with perhaps less of a geopolitical impact than we might hope. The author also pins Obama’s plan on alternative energy, but my read is that is depends largely on improved efficiencies.
For an view on why the benefits of energy independence are overstated, see this essay in the Washington Post from January.
The more I dig into this topic, the more I appreciate the complexity of it. I’m sure I missed some important points here. Feel free to point them out in your comments, or link to other sources of information and perspect to help fill in the picture a bit. Thanks.