Monday, March 03, 2008

Misleading Statistics

In its editorial on the pending energy tax bill, today's New York Times repeats a frequently-heard, but dangerously misleading pair of statistics concerning US oil consumption and proved reserves. The Times says, "a country that consumes one-fifth of the world’s oil but has only 3 percent of its reserves cannot possibly drill its way to energy independence." Ignoring the feasibility or desirability of attaining energy independence by any means presently available to us, the implication is that remaining US oil resources are inconsequential, and it is high time we discarded them in favor of renewable energy. Yet if we compare the potential energy contribution of even a modest increase in domestic oil production to what we hope to gain from biofuels in the next decade, the better answer is that we need both and can't afford to ignore the contribution of either.

The basic data the Times cites are, if anything, conservative. In 2006, the US consumed 20.7 million barrels per day (bpd) out of global production of 84.6 million bpd, or 24.5% of the total, while producing 8.3 million bpd, or 9.9%. US proved oil reserves stood at about 2.5% of global reserves of 1.2 trillion barrels. However, it is equally true that the US has produced a cumulative 200 billion barrels of oil from proved reserves that never exceeded 40 billion barrels. If reserves told us everything about future production, the US would have run out of oil decades ago. The US government estimates that in addition to our present reserves of 20 billion barrels, we have another 85 billion barrels of untapped offshore oil resources, including those in regions that are off-limits to drilling. US oil production peaked in 1970 and has been declining ever since, but that doesn't mean that we can't reverse that slide for a decade or so.

Even if only a fraction of those untapped resources were ultimately converted to reserves, which would require both access and an assessment that the oil could be produced at current prices and with existing technology, a net 10% increase in US oil production ought to be entirely achievable. That would add 700,000 bpd, or the equivalent of 15.3 billion gallons per year of ethanol, matching the entire ultimate conventional biofuel mandate under the new Renewable Fuel Standard for 2015 and beyond. And in energy return terms, a 10% increase in oil output would contribute more than three times as many net BTUs to the US economy as all that corn ethanol, after subtracting their respective energy inputs. Higher domestic oil production would also buy us valuable time for our vehicle fleet to turn over to more efficient cars, and for the technology of producing biofuels from cellulose to supplant our resource-intensive and environmentally-questionable conversion of foodstuffs to fuel. This isn't a question of "drilling our way to energy independence," but of bringing all our resources to bear at once on the problem of energy security.

However one regards the US oil industry and its current profitability, a fact-, rather than emotion-based analysis of our energy situation ought to convince us that oil and gas still have at least as much to contribute to our energy security over the next decade as any alternative energy technology now at our disposal. We urgently need a practical and realistic strategy for managing the long-term transition from oil and gas to more sustainable, environmentally-benign energy sources that cannot yet carry the burden of providing our economy with all the energy it needs, even after employing every conservation tactic available to us. Turning our backs on billions of barrels of untapped resources, based on superficial sound-bites about consumption and reserves, will make that transition a lot more arduous and expensive than it needs to be.

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