Monday, September 17, 2012

Energy Security: Vital to a Nation's Independence

This is the second part of the Energy Security Series.
To read Part I Click Here

Part II

Measuring Energy Resources

When measuring Energy Resources there are some fundamental ideas you should know.  For many energy resources such as, Coal, Oil, and Gas there is a big difference between how much exists, and how much can be recovered economically, or within the confines of current regulations.

The economics of recovery is affected by not just the difficulty in recovering the resource, but also recovering it within the confines of current regulations. The basis of how much in recoverable resources is based on these two issues.

According to President Obama's administration the United States has 20 million barrels of "proven" oil reserves.(1)  When the President refers to "proven" reserves he is talking about resources that can be recovered given economic, technological, and regulatory constraints.(1) What does this mean?

When they say economic constraints this basically means the oil can be sold at a competitive price. Probably the most self-regulating portion of any business is the ability to sell the product at a profit.  For U.S. producers this means waiting for the price to be increased by OPEC before they can sell what they have.

Technological constraints are a bit different.  15 years ago much of the oil located in North Dakota were not technologically accessible.  However, in the 15 years since then drilling methods have made the oil not only technologically accessible, but economically accessible. Technology has opened all new sources of Oil alone and continues to do so.

Regulatory constraints is a government created obstacle.  It takes approximately 10 days to get a permit to drill for oil in North takes a couple of 14 days to get a permit to mine coal in take 27 days to get a permit in takes almost 307 days to get permits from the Federal Government..and in the case of may take even longer.  Some will probably argue that the Federal Government is more concerned with the environmental impact.  Nothing could be further from the truth.  The States are very keenly aware of the impact that drilling or mining may have on their natural resources, and people's lives. Why does it take the Federal Government so long to approve a new well or mine, when the States can do so in at most a few weeks?  Maybe we can answer that question by the end of this series.

What about he President's opposition? The Republican party uses a USGS study that says there are 198 billion barrels of oil that is "Technically Recoverable".(1) Technically Recoverable includes not just oil we know is there, but also oil we think is there based on geological surveys and can be recovered by present technology.  The estimate does not take into account the economic feasibility, or regulatory constraints.

As you can see by the chart there are 763 barrels of undiscovered oil..and the United States has 26 percent of that oil. Is this an accurate picture of the oil resources for the United States.  No, it is not.

The USGS only takes into account traditional oil. You know the kind that squirts out of the top of an oil well.  However, it does not take into account the oil found in the tar sands of Canada, or the shale oil in North Dakota and Montana.

Using these numbers it is easy to see that President Obama is underestimating the amount of oil resources available. Though it may look like the Republicans are over estimating the amount available it may very well be likely they are underestimating that amount as well.

A much more detailed study that included all forms of Oil concludes that there is approximately 1442 Billion Barrels of oil in the United States alone. According to Energy for America if we include the 320 barrels of oil in Canada, and the 31.2 billion barrels of oil in Mexico we have a total of 1.7 trillion barrels of oil.  That is more oil than the world has drilled since the discovery of oil in Titusville Pennsylvania 150 years ago, or enough oil to power the United States for 250 years.(2)

Invariably someone will ask, "What about Alternative/Renewable Energy Sources?" What about it?  We certainly will not stop researching and testing alternative sources of energy, but on the other hand why would we cripple our economy now on untested alternatives?  If we can't find a viable alternative energy source in the next 250 years...maybe we should all find a cave now?

In the next installment of this series we will look at the Economic impact of Energy.

References Used.

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