Apr-03
Energy, Energy Regimes and Oil
Humans have always used energy, in one form or another.
Biomass sources--dung, wood, charcoal, etc.
Coal
Oil and Natural Gas
[This material on oil owes great debts to Daniel Yergin, The Prize, NY: Touchstone, 1992]
Coal, oil and gas are fossil fuels. Coal was the primary industrial fuel in the early industrial revolution. Oil (petroleum) was of minor importance until the mid-19th century. Until 1900, oil was mostly used as a lubricant, and gas was just an unused by-product, usually burned off as waste.
The first important oil deposits were in western Pennsylvania in the 1800s. The first oil well was drilled in Titusville, PA in 1859. In 1901, a massive oil gusher at Spindletop, TX, led to the start of many of the largest oil companies in the world--Sun, Gulf and Texaco]
The single most important oil company in the world was John D. Rockefeller's Standard Oil (founded 1870), re-established as Standard oil "trust" in 1882.
1911 dissolution of the Standard oil "trust" led to the creation of:
Although the US Supreme Court broke up the trust in the US, they companies were able to cooperate overseas--ARAMCO included those companies and other international firms as well
1913--oil cracking process, simplifies the making of gasoline, enables internal combustion engines to work more efficiently and produces a greater supply of fuel
Cars--Ford and the first American car in 1896 Electrification--coal and then oil as energy sources for residential use WW I and the "mechanized battlefield)-- oil-powered ships, tanks, personnel carriers; expansion of oil power in WW II
As prices started to rise and consumption of oil increased around the industrialized world, hunting for supplies increased.
Supplies in the US were already well established, as well as Russian Empire (1870s in Baku) and Dutch East Indies (1880s in Sumatra)
1908--Oil discovered in Iran (then Persia) British Petroleum (as Anglo-Persian) opened for business shortly thereafter, British government gets 51% of Anglo-Persian in 1914 because of World War I military and civilian needs
1922-oil discovered in Venezuela
1932- oil discovered in Bahrain
1938- oil discovered in Kuwait and Saudi Arabia
1938-Mexican government (Cardenas) nationalizes foreign oil companies
1951-Mossadegh government in Iran nationalizes oil industry; Mossadegh overthrown 1953
1956-oil discovered in Algeria and Nigeria
1958-monarchy overthrown in Iraq
Expansion of the suburbs after WW II--Robert Moses, the NY State Parkway system; the creation of Long Island as a massive suburb for New York City 1951--New Jersey Turnpike opens 1956-Eisenhower and the Interstate Highway system
1960-Organization of Petroleum Exporting Countries founded in Baghdad
1969--oil discovered in North Sea
1973-Yom Kippur War; Arab Oil Embargo; prices rise from September low of $2.90 to December high of $11.65
1977--Alaskan oil from North Slope comes to market
1979-81-oil prices rise from $13 to $34 Oil price shocks
1982--OPEC starts to implement production quotas, followed by price cut to $29
OPEC as a cartel (we've discussed this before)--limits production and sets prices for oil purchasers; cheating in cartels is a big problem; many large oil exporters are not cartel members (e.g., Russia, Canada, Britain, and Norway, among others)
1990-Iraq invades Kuwait after fights over violation of production quotas; Gulf War formally starts in 1991 [Is 2003 Iraq intervention the real end of the 1991 Gulf War?]
Production v. conservation as energy strategies--Energy security as a political issue
Consumption:
Detroit Project--makes the argument that imported oil reduces US energy security, in fact supports terrorism! Hybrid cars--Honda Insight, Civic Hybrid (like mine), Toyota Prius, and (2004 model) Ford Escape SUV use batteries to augment fuel Smaller engines, low-resistance tires, auto-stop features reduce fuel consumption; I average 42-47 mpg in the warmer weather, 36-40 in the winter More auto manufacturers talking about using hybrids in the next few years
Tax breaks for purchasers of hybrid vehicles
Production:
As oil prices rise, then exploration continues; when prices are low, exploration declines. Mexico's proven oil reserves expanded considerably after the 1973 oil embargo, since PEMEX and other companies started looking more seriously. It's more cost effective to test-drill in certain locations at a higher price, and more cost effective to extract and export oil.
Certain types of crude are expensive to remove. E.g. Orinoco heavy crude in Venezuela very think--almost sludge--so one needs to pump water/steam into the oil to loosen it up. As oil prices go up. This sort of activity is a better idea from a production perspective. Same with looking in remote locations, off-shore drilling (like in the North Sea)
What about loosening restrictions on drilling in certain locations, like the Alaskan National Wildlife Refuge? If new techniques have a much smaller footprint and do not damage the refuge, does it matter?
How does one weigh the tradeoffs in energy production? What are we willing to do to change the value of the tradeoffs on consumption and production?
Higher taxes to increase consumption or promote new technologies?
Drilling in questionable locations?
Drive smaller cars or cars using those new technologies, even if the prices are higher?
Do we simply want to outsource the pollution? How many of us are aware of--or care about-- environmental damage with Saddam Hussein burning oil wells in Kuwait and Iraq? What about oil spills in Nigeria, or the destruction of wildlife areas in Chad or Cameroon or Sao Tome?
5 major suppliers to US in 2002 (source: NYT, 1/21/03)
Post-oil energy regime?
Bush administration talking about incentives to produce hydrogen cars
Nuclear power--conventional and breeder type
Wind
Solar
Hydropower