The Truth About Oil—

“New breakthroughs are actually increasing U.S. supplies. But homegrown oil isn’t going to lower prices at the pump.” This is the cover of TIME magazine this month. A fascinating headline story, written by Bryan Walsh, breaks down the future of oil. The article goes in depth about new unconventional sources of oil including, ultra-deep offshore (specifically off the coast of Brazil), oil sands, shale oil, oil shale, and offshore in the Arctic. It stresses that these new sources of oil are beneficial for the US, in that they are reigniting domestic production; furthermore, other countries where these resources are thriving, mainly Canada and Brazil, are allies to the US as opposed to the instability of the Middle East. Domestic production means more money in the US economy, greater energy security and independence, and more jobs, however, at high costs.

The article continues into the economic and environmental costs of unconventional production, depicting it as “expensive, dirty, and dangerous”. Unconventional sources are inherently more complicated, requiring more energy to produce, greater environmental degradation, and increased risk during production. According to Walsh, a barrel of oil sand crude has a 10-15% larger carbon footprint than a barrel of conventional crude when extraction processes are taken into account, and as we’ve already seen with the BP spill in 2010, if an accident happens within a deep-water operation, the consequences can be catastrophic. A quote from Michael Klare states, “I’m less concerned about the absolute disappearance of fossil fuels than about the environmental consequences of pursuing what’s left”.

So the question has been rephrased, from is there enough oil, to at what cost. It’s clear from this article that our dependence on oil has the potential for very adverse consequences, both economically and environmentally. According to Walsh, as the demand for oil increases, especially with the growing economies of China and India, the price will continue to go up; so in this case, more oil does not mean cheap oil. And as our speaker today, Rep. Mark Strama said, high-priced oil could be detrimental to the recovery of the economy. I think it is imperative both for the US economy and for the environment to reduce our dependence on oil; as we can see, despite increased production, the future does not look bright. With the transportation sector of today, the US would not survive without oil. Fortunately, however, there are alternatives—electric vehicles. If prices continue to stay high, as Walsh has anticipated, perhaps it will result in one positive change, a change to a less oil-intensive transportation sector in the US.

– Walsh, Bryan. “The Truth About Oil.” Time. 9 April 2012. 



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2 responses to “The Truth About Oil—

  1. Chad Blevins

    Thanks for pointing out this article!
    I wonder if something like this – on the cover of such a widely read publication – will actually sway the public dialogue. The Presidential stump speeches are already digging in to their arguments on this issue.

    Did the Time article also get into the cost of domestic production argument that Dr. Webber has pointed out on several occasions?
    (Drill Here! Produce Tomorrow! Pay More!)
    Specifically how our domestic sources cost more to produce… So, they will only be produces when the global market prices is high enough to justify the investment… And if producing that resource would cause the global price to drop, the E&P companies won’t invest.

    I have also seen a reference which pointed out that some producing countries that produce more than they consume still pay the global clearing price… which implies “energy independence” is separate from “marketplace independence.”
    (I can’t find the reference right now – but, I’ll share it when I find it.)

  2. sarobinson

    Good points. I think one critical element that often gets left out in the peak oil discussion is price: reserves are a function of price, not geology. Higher price points make other resources economically viable for production.

    This puts the ‘running out of oil, switch before it is too late’ argument in perspective, and at the same time suggests a bright future for resources that are at or approaching the tipping point for viability. Unfortunately for electric cars, this tipping point is pushed out due to the behavioral economics of estimated NPV by consumers. Consumers reliably assign higher diuscount rates to future cash flows (a bird in the hand…) making that higher initial cost of an electric vechicle more important despite lifetime cost reductions. Does the increased visibility of gas prices offset this? I guess we will find out.

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