US Oil Dependency and Its Future Thesis

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U.S. Oil dependency and it's future.

United States' Oil Dependency

The foreign oil dependency that currently characterizes the United States is expected to continue following this ascending path over the following decades also. Even more, the U.S.'s will be particularly dependent from oil imported from the Middle East, regardless of the nation's efforts of acquiring oil from non-OPEC sources, like Russia.

According to the CIA's World Factbook, the United States' oil production reached 7.46 million bbl/day in 2007, while the oil consumption reached 20.8 million bbl/day (CIA, 2008). The oil imports exports reach 1.048 million bbl/day, compared to the imports that reach 13.15 million bbl/day. The oil proved reserves are estimated to reach 21.76 billion bbl. Crude oil imports account for approximately 8.2% of the total of exports. The composition of oil consumption for the United States is the following:

Motor vehicles gasoline: 45%

Distillate fuel oil: 19%

Liquefied petroleum gases: 10%

Aviation fuel: 8%

Other: 18%

Source: Ian W.H. Parry and Joel Darmstadter, 2003.

Between 2005 and 2007 oil prices have been characterized by significant increases. This situation threatened the United States' inflation and unemployment. Even so, rising oil prices did not have an immediate effect on the country's economy, the economic growth process continuing through year-end 2007. However, the oil prices situation combined with the actual financial crisis might prove to have significant influences on the United States' economy.

Situation could get even worse, and history might repeat itself. In other words, the United States could have to face an energy crisis similar to the energy crisis that took place 30 years ago. At that time, the crisis was generated by the fact that oil producing countries implemented the embargo on oil, with the intention of determining a halt of U.S. support for Israel (Bowman, 2003). A potential crisis that would emerge nowadays would prove even more disastrous for the U.S., given the fact that the country's current dependency on foreign oil is significantly larger than in the 1970s.

Although the crisis may have affected the U.S. On short-term, some of the long-term effects were quite beneficial. The United States understood the need for a stable energy situation and took measures for achieving such a status. For example, more fuel efficient cars were built and alternative sources for oil were sought at.

But the oil situation did not remain stable at all. Experts have concluded that the U.S. dependence on foreign oil has doubled over the past three decades. Even more, expectations are that over the following decades the U.S. will import approximately 70% of its oil needs. The greater part of this dependency is oriented towards Middle East.

However, a series of efforts have been made by the U.S. In order to acquire oil from non-OPEC sources, mostly after the terrorist attacks in 2001. One of these sources is represented by Russia. This could only serve the United States as a short-term solution only. The problem with non-OPEC oil sources is that they can guarantee an average of approximately 15 years at current production levels, in comparison with over 70 years guaranteed by OPEC countries.

All things considered, experts state that it is only a matter of time until the U.S. will have to use OPEC oil. Experts also admit that they do not think that embargo might be imposed again, at least not immediately. They also expect the dependency for Middle East sources of oil to become a reality at some point.

The importance of the United States' increasing dependency on foreign oil has determined other scientists to affirm that "we may be heading towards Oil War III" (Dye, 2004). This affirmation was made by physicists at the California Institute of Technology that also shared their opinion on the non-technical reasons behind the fact that the United States cannot resolve the energy situation.

For example, "instead of moving forward, we are kicking ourselves in the rear end with tax laws that were established a century ago, corporations that have billions invested in oil reserves and thus no incentive to look for alternatives, and a political system that seems paralyzed" (Dye, 2004).

Scientists point to self-inflicted dependence as one of the causes of this situation. In other words, the development of alternative fuels does not have enough room for expansion because of national policies and corporate commitments that favor foreign oil sources.

The United States' foreign oil dependency is more and more linked to national security. This foreign oil dependency causes economic vulnerability and raises a series of major constraints on the country's foreign defense policy.

This fact is acknowledged by Middle East political leaders and it grants them a certain degree of advantage over the United States' policies (Feldstein, 2001). For example, "the possibility of increasing that leverage emboldened Saddam Hussein to invade Kuwait in order to extend the share of mid-East oil controlled by Iraq. And while the governments of Saudi Arabia and Kuwait are basically friendly to the United States, recent events have made it clear how potentially vulnerable those governments are to radical elements within their own countries" (Feldstein, 2001).

Another problem regarding the United States' oil dependency issue is represented by its costs. Economic costs include:

Transfer of wealth

Reduction of the maximum output the economy is capable of producing due to the increased economic scarcity of oil

Costs of adjusting to sudden, large price changes

The issue concerning the U.S. oil dependency is present in the presidential election campaign also, the matter being approach by the two candidates, in different ways, however. For example, "democratic presidential candidate Barack Obama called on the United States to end its dependence on oil from the Middle East and Venezuela within 10 years as part of a broad speech laying out his energy plans" (eNews, 2008).

Even more, in case he wins the elections, Obama declared himself determined to orient full governmental resources towards promoting alternative energy sources. This action is estimated to require a 150 billion dollars investment over the next decade.

It is very important to take into consideration the country's primary energy consumption by source:

Petroleum: 40

Coal: 23

Natural gas: 23

Nuclear electric power: 8

Biomass: 3

Hydroelectric power: 3

Geothermal, solar, wind: 1

Note: the values are expressed in quadrillion Btu.

Although it is clear that the United States must direct their efforts towards reducing this tremendous oil dependency, it is also obvious that the country cannot become energy independent. The reason behind this affirmation consists in the fact that the nation's transportation system needs liquid fuels for functioning.

Also, reducing oil imports might not lead to lower fuel prices. This could only happen in case the demand for fuel reduces also. An import reduction policy would only determine consumers to approach higher priced substitutes.

However, even in terms of such high prices for oil, it is expected that global demand will continue its ascending path. China, India, Brazil, Indonesia, Mexico, and other developing economies will significantly increase their oil consumption as a result of the development that characterizes these countries.

Although certain experts claim that there are significant reserves of low cost oil that could be purchased by the United States, this situation does not seem quite viable anymore. Low cost oil can be found in Saudi Arabia and East Texas. However, low cost oil has been used for the past 150 years, significantly diminishing these reserves. Therefore, the United States cannot count on this as a solution to its foreign oil dependency problem.

However, in order to reduce this dependency, it is necessary to include in the domestic policy the following objectives:

Increasing efficiency of oil and gas usage

Increasing the alternative energy consumption

Encouraging oil supply from sources outside the Persian Golf

Making the oil and gas infrastructure more efficient and secure

Increasing investments in research and… [END OF PREVIEW] . . . READ MORE

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US Oil Dependency and Its Future.  (2008, November 1).  Retrieved January 26, 2020, from https://www.essaytown.com/subjects/paper/oil-dependency-future/3399

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