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Ban Oil Imports for Energy Security?
By Dian L. Chu
I came across an interesting editorial at Houston Chronicle dated Feb. 26 written by Yale Graduates Energy Study Group discussing energy security and independence.
In the article, the authors propose a federal policy (the "limits" policy) to withdraw U.S. crude and products imports from the world oil market, for example, in a 10-year period. During that period, all imports would be phased out to zero except Canada, whose pipelines run almost exclusively south into the U.S.
Consumer Loss vs. Producer Gain
According to the article, the limits policy would serve the national interest, reduce the costs of disruption in domestic markets due to attacks on foreign oil producers, and help more effective expansion in domestic oil and alternative energy production.
The authors further suggest, based on their cost-benefit analysis,
"...limiting imports from 2011 to 2021 would cost $40 billion in consumer losses, but generate $227 billion in producer gains from selling more domestic products."
In The Case Of $400 Oil
A $400 per barrel oil price scenario is also discussed if occurred before all imports are eliminated:
"...such a disruption would produce a total loss to the economy of $234 billion from a six-month shock under business as usual. Over the decade of the limits policy, these costs decline to zero for a disruption in 2021, even without including the producer gains during years when the shock does not occur."
Eliminations of defense spending on protecting shipping lanes and friendly oil-producing nations, and gains in U.S. employment and tax receipts for federal and state governments are two of the fringe benefits that could result from the "limits" policy.
Full article here at chron.com, and the following are some of my thoughts.
Bridging the Oil Supply Gap?
Based on the EIA data, liquid fuel net imports (including both crude oil and refined products) accounted for 57% of total U.S. consumption in 2008, and fell to 49% in 2010, primarily because of the Great Recession, and rising domestic production. And T. Boone Pickens said the U.S. spent $475 billion on foreign oil in 2008 alone, and projected over the next 10 years the cost will be $10 trillion
With staggering numbers like these, the idea of achieving zero foreign oil imports is intriguing as to the potential positive impact on the trade imbalance, budget deficits, etc. It is also the Holy Grail probably every country in the world is striving for.
However, regardless how the U.S. has come to be so oil and imports dependent, it is nevertheless a fact that needs to be taken into account whenever you are moving one of the energy chess pieces. As such, one thing that's glaringly missing in the article is addressing how to bridge the oil supply gap (Fig. 1), before, during and after the imports phase-out period.
A Drastic Move
Moreover, the proposal seems a bit drastic and might have the process backwards.
That is, instead of using the “limited” policy as a way to push for more effective domestic oil and alternative energy production, alternative replacement sources need to be secured before cutting off imports to avoid the potentially disruptive effect (e.g., the wealth transfer effect of the $40-billion consumer loss; the initial $234 billion loss from the $400 oil shock) and the economy as a whole (consumer spending still accounts for around 60-70% of U.S. GDP.)
Natural Gas, Coal…and Other Imports?
Let’s take a look at the possible replacement sources of the imported oil.
The U.S. dometic oil production is on the decline as pointed out by the EIA. In its Short-Term Energy Outlook released on Feb. 8, EIA noted domestic crude oil production, around 5.51 million barrels per day (bpd) in 2010, is projected to decline by 50,000 bpd in 2011 and by a further 190,000 bpd in 2012 due to production decline in Alaska, Gulf of Mexico, which would only be partially offset by the increase in production from onshore lower-48.
Renewables so far have only been able to provide a small portion of total U.S. energy consumption, and their collective role (along with nuclear power) as a major energy source would remain limited (Fig. 3) as compared with conventional sources, albeit with the fastest growth rate.
Oil shales, such as the Bakken formation in North Dakota, hold great promises; however, the steep production decline after the initial ramp-up has added some uncertainty in its role as a long-term reliable energy source.
These factors, coupled with limited domestic proven oil reserves (around 22.3 billion barrels) suggest in the zero oil import scenario, the U.S. would most likely need to rely more on natural gas and coal (Fig. 2), which there are ample domestic supplies, to replace the imported oil.
Furthermore, just as part of the natural resource depletion process, the shortfall is or will be so significant that it could still be necessary, one way or another, to import non-oil energy sources. Now, conceivably, the U.S. could import from more stable regions, but it is pretty hard nowadays to find places with enough resource that are completely immune to unrests and geopolitical tensions.
Can’t Live Without Yet
For now, EIA is projecting liquid fuel net imports (including both crude oil and refined products) will average 9.6 million bbl/d in 2011 and 10.0 million bbl/d in 2012, comprising 50% and 51% of total consumption in 2011 and 2012, respectively.
Elimination without Replacement = Disaster
World energy supply and demand outlooks from various agencies all pretty much tell the same story (Fig. 3)– we need all kinds of energy sources, fossil, renewables, other alternative technologies, etc. just to continue our social and economic development. Eliminating one source without having a plan for replacement could be disastrous.
The United States currently gets about 45% of its oil from the Middle East and North Africa, these regions hold over two thirds of the oil reserves worldwide. So, until the day renewables or other alternative technologies could successfully replace crude oil and products on a long term sustainable basis, oil most likely will remain one of the world's most important commodities, and foreign oil probably will be one piece of the U.S. energy pie for some time to come.
Meanwhile, I would be interested in learning more detail about the Yale Group’s study, as well as what readers think about their zero-oil-imports proposal.
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answer: yes. the Chinese need the oil more than we do, let them worry about it
The international oil companies are the largest and most profitable corporations that have ever existed on Earth. Their power is enormous, especially with world leaders and politicians. How else would they be able to get away with paying no US federal income taxes, and actually receive tax credits, without having Congress and the Executive branch in their pockets?
We may never see the notes from the secret meetings Cheney had with the energy industry early in his administration. Since disclosure was fought all the way to the Supreme Court, we can assume some of the discussions were 1) disturbing to other nations or 2) not in the best interests of the American people.
Isn't it time we stop our military from doing the dirty work for energy companies? Or at least collect enough tax to cover the expense? Isn't it time to develop and install more alternative energy sources? Why do we sit back and do nothing until the oil supply and price cause economic armageddon? Can we save ourselves or not?
doing the dirty work for powerful economic forces are what militaries do
First point: the US has 2x the hydrocarbon resources than all of Arab OPEC combined. (see: http://www.westgov.org/wieb/meetings/boardsprg2005/briefing/ppt/congress...) The only thing that is lacking is the will to exploit these resources.
The US does not need to ban imports right away. Time will be needed to develop the natural resources we have and the infrastructure to convert those resources in a clean way to the liquid fuels that we need. This could be done by requiring an import license for every barrel of oil imported from countries except Canada and maybe Mexico. The licenses would be priced at open auction and the number of licenses would be limited each year with the limit slowly going to zero. Most important: the limits for future years must be published so that those who are willing to commit capital to invest in the necessary projects can be assured of their projections of market size.
Given that many conversion technologies, such as coal-to-liquid have a break-even cost that is in the neighborhood of the present world price of oil, if we impose gradual import restrictions, the price of fuel may actually decline over time.
It would help a lot if the US government were not hostile to the wellbeing of our own economy. Only a hostile government would restrict drilling in its own waters while providing aid to Brazilian offshore oil drilling. At what point does this obstruction become an impeachable offense as a "high crime" that debilitates interstate commerce?
How many more Deepwater Horizon disasters can the world afford? Was it too much to ask to stop or restrict drilling until a thorough investigation was made? Killing the Earth, or large swaths of the ecosystem, to provide a few million barrels of oil is not the way out of the problem.
Humans beings are not the only life forms on the planet.
I'd do exactly the opposite. Let the rest of the world pump their oil for cheap, I'd leave ALL of ours in the ground for 5/10/20 years from now it will be worth several times as much.
Pump it then.
how about just a ver high tax, of, say 50% of the wholesale price per gallon of gas?
We could use the money to begin to bring the budget back into balance.
(oh, Jimmy Carter suggested that, didn't he?
Americans are idiots ... you all deserve what you are getting ....)
Our banks and politicians are corrupt. Blame me for it if you want, but that doesn't mean you're any smarter than I am. BTW where are you from?
Republicans and most Democrats will not raise taxes. They are paid to provide tax breaks. In this economic climate, we should start by eliminating corporate tax loopholes and all tax credits for oil companies, but would have a snowball's chance in hell of passing. Unfortunately, the US has decided it will instead tax its people by using inflation, the most insidious form of taxation.
Leave it to Yale to get it backwards again, instead of banning imports of oil, ban exports of oil. The USA exports much more oil than most people are even aware of.
ALSO
CNG Car, Trucks, & Buses! They've been doing it in Utah for over 10years.
400$ oil is impossible.
Azia, afrika... they all wouldn't be able to afford oil anymore and demand would puddy back down untill the price would get back to affordable levels for the west but just out of reach for Azia and Afrika.
Something between 200 and 250$ is the uber maximum for oil.(unless the dollar drops bigtime)
depends on what a dollars worth
What will really happen is that the US political class will continue to bankrupt the country in an effort to sustain the unsustainable until finally it just can't be done anymore, and then they just might, and I mean might, be ready to admit there is a problem with the current way of life.
"the american way of life is non-negotiable"
I've heard talk about zero oil imports since we had odd/even gas lines in the 70's and oil prices doubled in one week.
Nothing has happened. Better keep our military razor sharp so we can invade and take what we are unable and unwilling to provide for our gluttenous short-thinking selves.
Nothing ever happened cos US elected a guy called Ronald Reagan who was looking the other way. Peak oil to him, old Hollywood hand with his Colt firmly strapped on by his side, was Indian talk coming from their wig-wams like a smoke signal about 'can I have some fire medicine please'. Totally irrelevant. Just tell Saudi friend "Open the tap, you dirty arab full of our US greenbacks" was so much easier then. Now we're 30 years too late.
I think our military is getting a little too sharp, I hope we go broke and or revolt before I see these walking or flying around: http://www.wired.co.uk/news/archive/2011-02/28/boston-dynamics-atlas-and...
http://www.newscientist.com/article/mg20927995.600-army-wants-rapidfire-...
http://www.activistpost.com/2011/02/how-close-are-we-to-nano-based.html
Another "great idea" from a group of kids who have never even worked on a rig or perhaps never even seen one up close.
Instead of banning oil imports - tax them at 100%
Provided the money is ring-fenced and used to build (via stimulus program) a post-oil infrastructure - then it could work, preventing the $400 bbl hit.
I was told Al Gore proposed a $1 a gallon tax on gas. It went over like a fart in church.
Check out Shell's "blueprint vs scramble" scenarios.
ross perot
So we should protect ourselves against the possibility of a disruption in energy imports by banning them ourselves?
This is like protecting ourselves from a nuclear attack by preemptively nuking our own cities. Or achieving job security by quitting your job (so that you can never be fired). And you can always make yourself cancer-proof by shooting yourself in the head.
A better analagy would be an alcoholic wanting to prevent his habit ruining his finances - by limiting himself to alcohol he can buy with earned money instead of earned and borrowed money.
It's been working for me for years!
Exactly.
Good idea but 30 years too late.
It would have been better 30 years ago but it's hardly reason to not conserve now. As usual we have to take matters into our own hands. Conservation and switching up to alternatives when they make sense...
What's the point of even discussing something this ludicrously unlikely to happen? Complete waste of time.
But then again, that is what "study groups" and "think tanks" get paid to do ... waste time and keystrokes engaging in latter-day how-many-angels-can-dance-on-the-head-of-a-pin "scenarios".
No, don't get me wrong - change will come, but it won't be planned, and it won't be pretty ... but I prefer to deal with that gnarly beast called "reality". That's what adults are supposed to do. Leave the puerile fantasies for the kids.
Would transfer shitloads of wealth to Canada.
I like it :)
You think Canadians own the Oil Sands? Hahahahahahahaha!
Exactly. I'm from Alberta, and we've got a joke of a client state puppet "government". Laugh or Cry? Can't decide.
I would assert U.S. prerogatives under the Monroe Doctrine and expropriate Mexican and Venezuelan oil fields. The drug cartels can be neutralized by legalizing drugs. Chavez can join Gaddafi in Zimbabwe.
But the drug war is designed to divert cash from the lower classes into cash black pools via the DEA. Are you crazy? You can't run an empire without uncounted money sources. That's suicide for the machine.
Nice idea, but it would be like limiting LCD panel imports to domestically manufactured.
! What !
No one would be able to watch their circus or see the commercial for the bread!
Better yet, cut off exports of U.S.A. sports and television or Soda Pop.
The world would revolt.
Wait...this brings us back to ban oil imports!
(evil grin)
deleted
This sounds like making trade offs. The US doesn't do trade offs.
I don't like it. You end up with no strategic reserve for a "rainy day".
US oil consumption is insane.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2174rank.html
We need mandatory conservation, and we need to quickly re-engineer our society to decouple ourselves from the auto. I believe this won't happen as long as we have even the pretense of a democracy. I don't think Americans have the intelligence and education to understand this issue. Since the urgency will become irresistible, I believe that we will eventually experience an abridgement of our personal liberties. It's not my preference; I just don't see an alternative.
"Decouple from the auto" - Yes we all can hold hands, beat drums, sing songs and read quotations from Mao's little red book on our magical "energy free" trains.
"Decouple from the auto" and you will have JDR's and HF's ghosts coming looking for you. Their vampire friends still very powerful on Capitol Hill, you'll have to be something out of the movie "Fearless vampire killers" to even hope making headway. Get your garlic buds ready! Just wait and invest in a bike. Or buy a horse...as US lacks public transport.
We need mandatory conservation,
Can't do it. Bad for the Ponzi.
Proposing suicide out of fear of death...
From the isles of academia, single source our energy needs for ten years, we are truly, too stupid to survive...
Unfortunately, this is a "take your medicine now" approach - rather than the seemingly obigatory "kick the can" approach. Also, this plan does not quite have the requisite score on the "Boondoggle meter" to ensure acceptance amongst our political elite [See Dimitre Orlov regarding the apparent necessity that any political solution lead to the worst possible result].
Seriously though, this is similar to what Matt Simmons suggested by "putting a floor" under the price of oil to force us to take those hard steps [such as those in the Hirsch Rept.] to start making the transition to a lower energy future.
I wish I had a dollar for every economically illiterate, morally bankrupt, power-lusting fool who proposes how--if he had a gun to the head of every citizen--he could use force to make everything all skittles and unicorns somehow.
Why don't we just bomb all of our cities for "national security"? Kill our own troops?
Such proposals are not part of the solution; they are part of the problem!
I am tempted to submit the Hirsch Report as ZH article....
What is the US DOE position on this peak oil report? Has anything been done apart from sitting on the fence? The Ted Barna report is nothing but rehashed pastrami. The current economic meltdown will make a drastic step change in energy policy appear as an 'only option' scenario down the road. Not "silly" in this late emotionally charged stage, as US needs shock therapy badly, apart from WW3. Please take the blinkers off fast!
The wood pile is empty, the wife and kids are freezing in the house, and the DOE is looking for a replacement for wood in the lab. Face it, its been 40 years and the DOE ain't done squat and will never do squat...
Sad, sad, sad, true.
I posted the Hirsch report several times in the distant past here, not much response...
wonder why
The HOUSTON Chronicle, eh?
Hmmm.
gh