Over the next seven years, two of our top sources of oil imports may cut us off. Just last year, Mexico and Venezuela sold us 2.9 million barrels per day to fuel our cars and heat our homes, over 20% of our import demand. But Mexico’s oil production is falling more than 5% per year while their domestic consumption rises. Thus, most analysts predict Mexican oil exports to be nonexistent by ~2015. And Venezuela is signing deals with China to send more of its exports there over the next few years even though their production is currently stagnating.
As the Southeast experiences the crippling effects of fuel shortages, planning to replace this oil over the next seven years is critical if we are to prevent such shortages from becoming the national norm. If I was a new observer to the oil market, I would say the US should just replace those imports with output from other oil producers. But the decline story is similar elsewhere. The UK and Indonesia, major exporters until recently, are now importers. Norwegian oil production is in geological decline, and another major source, Nigeria, has declining supplies due to political conflict. Our own production here in the US is also in decline. Even though we are increasing the amount of rigs poking holes throughout the American landscape, our production has been declining over 1.5% per year ever since it peaked more than 35 years ago. So, we may have to replace much more oil than imports from Ven/Mex by 2015. But for this post, I will keep our focus on replacing the lost 2.9 million barrels per day from Mexico.
We have already cut our consumption by 800,000 barrels per day this year, with consumers finally buying more efficient vehicles and driving less as a result of $3.50+ per gallon fuel and a slowing economy. So that leaves us with 2.1 million more barrels per day to cut while our population increases and our economy grows (hopefully). With population growth ~.9% per year and limited economic growth, I will assume a natural 1.1% growth in the number of cars every year. This brings the total number of vehicles to ~275 million vehicles, up from just over 250 million today. Last year’s passage of CAFE standards should achieve a further .4 million barrels per day. That leaves 1.7 million barrels per day of consumption that we need to reduce to keep ourselves from dependence on these fading sources.
I propose that this reduction comes from conservation and the integration of plug-in hybrid electric vehicles (PHEVs). The conservation I propose is for drivers to go ~5% fewer miles in their vehicles, not a huge sacrifice for the energy security it helps to achieve. And private initiative can be a big part of this conservation as we figure out ways of telecommuting productively and taking more trips that involve walking, bicycling, public transit and carpooling. The remaining 700,000 barrels per day would take 10 million PHEVs in operation by 2015, which could run on new wind and solar installations. Back of the envelope calculations project 35 GW necessary for such an endeavor — which can be provided by wind and solar if they grow at 30% and 35% per year, respectively (which is lower than their growth over the last few years).
This rapid growth does not look possible without progressive policies that enable the energy revolution to take place. For instance, Congress will need to renew production tax credits or other equivalent incentives at least through 2010 as the technologies continue to mature.
The Presidential candidates need to be debating which policies are best at fostering this sustainable energy transition to prevent oil shortages from disrupting school and work for our citizens. This discussion is crucial, as an absence of such policy could pressure elected leaders to begin military conflicts to secure elusive oil from nation-states like Venezuela and Iran. Our bankrupt federal government and its citizens cannot afford to get caught in that situation a few short years from now.
Tags: Hurricane Ike, Mexico, oil imports, production decline, Venezuela