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Oil, Black Gold, Texas Tea... [1]

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Date: 2023-03-22  

Texas

We are branching out to the oil business today starting with an overview of the inputs for America. The chart below shows how much of our crude oil production comes from the US, broken out for lower 48 production and Alaska production, and our net imports (imports minus exports). This is for only the liquid crude oil as there are other inputs into the refineries which we will explore later.

The first item are the units and they are big. We use a huge, huge amount of oil every year in this country. For 2022 we produced 4,337 million barrels of crude and we imported (net) another 976 million barrels for a total of about 5,300 million barrels (or 5.3 billion barrels). If you want to calculate that in gallons, one barrel of oil equals forty two gallons. I honestly have trouble wrapping by mind around that number.

So we produce and import (or consume) about 14.56 million barrels of crude oil per day. Even with a profit of a few dollars per barrel that is a lot of money.

The importance of these numbers is context. One of my biggest complaints with modern journalism is that numbers are thrown at the reader without any context. Let’s look at this context thing in terms of Alaska.

Alaska

The northern 1/3 of Alaska was declared an oil reserve in the 1930s but little or no activity happened until the 1960s due to transportation problems. There had long been a proposal for a pipeline to bring that hot oil from the north slope down to warmer waters where it could be loaded onto tanker ships and sent south. The pipeline ideas went nowhere since not everyone involved could agree on a route. The 1973 oil crisis put the pipeline front and center of American energy policy and all the problems were solved by money. Everyone in Alaska gets a share in the oil shipped out of Valdez in the form of a check, and then the pipeline could be built.

At first the Alaskan oil made a huge difference and our imports went down. The next chart shows the same production and import information with a total usage line added. We peaked in 1977 thru 1979 and then went down based on several oil conservation measures finally having an effect (it took several years). Then we had “Morning in America” and consumption went back up. Domestic production continued down until fracking became widespread and then all those older fields started producing again. We can see the effect of the pandemic in 2020 as a substantial drop of almost one billion barrels.



So where do we go with Alaskan oil production and exploration. Currently Alaska produces 3.7% of our domestic oil and 3.0% of our usage. The decrease in total usage from 2004 to 2008 was several times that number. The decrease during the pandemic has been several times that amount and yet oil companies still report record profits. There is an oil development proposal that was just approved (Pres. Biden had no choice and took several million acres out of potential development) called the Willow Project is estimated to produce 600 million barrels of crude over 30 years. Taken alone that sounds like a lot of oil. But when compared to the 5,300 million barrels consumed last year that is 42 days — and remember that is all 30 years of production.

Alaska has a problem in that current north slope production has been decreasing since 1988. But it looks like we don’t have a supply problem and with electric vehicle production on the rise does it make sense to keep looking for oil near the arctic circle?

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[1] Url: https://www.dailykos.com/stories/2023/3/22/2159591/-Oil-Black-Gold-Texas-Tea

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