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Is there an oil shortage?
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(Graphic by Wayne Hodges)
MISSION, KS - “The first number, 531 billion, is the amount of crude oil, measured in barrels, that’s still under the ground. They’re called reserves,” said instructor Sam Gordon to his senior life skills class. “The second number (16.5 billion) is the world’s annual consumption of crude oil…now, when will the world run out of oil?” Good question. Sam Gordon is the economics teacher in Russell Roberts’ financial romance novel “The Invisible Heart.” And although it’s built on assumption, his question to the class unfortunately has much relevance. Is the world really running out of oil?
Folks, the year 2025 is less than two decades away. So, as many experts predict, will we be ready for what’s expected to be a shortfall in the supply of “Texas Tea” in roughly 17 years? Hey, I’m nervous. And I’ll explain why. Oil production, according to transport and energy consultant Richard Gilbert, will peak in 2010 at more than 30 billion barrels per year; then take a drastic drop as resources dwindle. This could result in a one-third drop in production by 2025. Incredible!
What about oil consumption? Well, it’s expected to grow roughly 33% by 2025 to more than 40 billion barrels a year. Wow! Talk about massive usage? Conventional wisdom suggests we’ll have to start digging for more somewhere, right? But how do we find it? According to Sam Gordon, the task is certainly easier said than done. “Think, think, think!” Sam told the class. “There is a finite amount of crude oil in the world. We use immense amounts of it everyday. Obviously, we’ll run out some day. Won’t we?” To put the shortage in perspective, Sam gives us a classroom example? Suppose we’re all given a room full of pistachio nuts in the shell; up to a height of five feet. There are millions of them. Now understand, inside the room the nuts are free; but outside they’re very expensive. And there’s one little catch. As we eat the nuts, the shells must remain in the room. We can’t take them with us under any circumstances.
At first, that’s not a problem. For the first few days, and perhaps months, the pistachios are plentiful. We’ve eaten until our heart’s content. But, as the years pass by, it takes longer and longer to find a pistachio. Why? The excess shells are starting to get in the way; and now we’re spending hours wading through the ones we’ve eaten in hopes of finding a nut. Then frustration begins to settle in as we continue to bump into each other. Why? Because we begin to realize the nuts aren’t free anymore. Sam shouts in triumph “exactly!” See, after a while, we’re better off paying for nuts in the store rather than spending hours trying to extract one from the depths of the pile. It’s the same with oil. It’s getting way too expensive, and far too difficult to find new reserves.
So, what are our options? We could walk away from oil as an energy source and switch to cheaper, less expensive choices. But this transformation would require a complete culture shock. See, oil is used for more than just vehicle fuel and Little Richard’s hair conditioner. It’s also molded into plastics that bring tremendous savings in energy use. For example, parts for cars and trucks are increasingly made of plastic to reduce their weight; creating better fuel efficiency in the process. As a matter of fact, the weights of most plastic products are usually less than their alternatives; resulting in boatloads of savings for fuel shipping.
Petrochemical feedstocks, which are products used in refining, make up roughly 3% of all crude oil consumption. These are used to make plastics for thousands of items such as tableware, furniture, aircraft and automobile parts, luggage, surfboards, helmets, medical supplies and packaging. They’re also used to make products such as solvents, synthetic fibers for wearing apparel, synthetic rubber, paints and coatings. What about streets and highways? Asphalt and road oil account for another 3% of crude oil consumption. Of course, you wouldn’t know it judging from the condition of Missouri’s highways. Heck, if their roads are an indication; they’ve experienced massive oil shortages for about 20 years now. And then there’s the “Grand Daddy” of them all: petroleum.
Some people say cash makes the world go round. Well, petroleum makes it possible for people to get around the world. Check this out. Of all the crude oil refined for use in the United States, nearly half (47%) becomes gasoline for automobiles, boats and other gasoline-driven motors. Airplanes, not surprisingly, consume another 10% in the form of jet fuel. And 20% becomes distillate; in which two-thirds is diesel fuel for trucks, buses and other diesel engines. And one-third is used for home heating oil. Yikes! Can you imagine no heat for our houses during the winter? Seriously, we’d all be running for the border each fall.
Then there’s boiler oil, or residual fuel oil, which makes up roughly 7% of crude oil consumption. It’s primarily used in ships, industrial boilers, and power plants to produce electricity. That’s right! Without crude oil, our HD Plasma Screen TV’s, DVD’s, X-Box 360’s, Playstation 3’s, Nintendo Wii’s, and surround-sound systems would become moot. Seriously, imagine this pickup line as a bachelor. “Hey baby, how ‘bout we get together on Saturday night and light a few candles?” Don’t laugh! It could happen.
Commercial/Industrial plant operations are also negatively affected by shortages as 10% of crude oil is used as non-energy feedstocks for manufacturing products such as lubricants, wax, coke for steel making, and napthas that are used in the dry-cleaning process. Now, as you can see, Jed Clampett’s “black gold” has proven to be pretty darn important to the lifestyle we’ve grown accustomed to. So let’s be grateful for all the valuable things we’ve previously taken for granted. How will this economic situation play out? Sam says “long before we run out of oil, we’ll switch to cheaper alternatives. Just remember the pistachios!” The kid in the back row leans over to his friend and whispers, “I told you he was crazy. Too much time in the Nut Room.”
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