As oil continues to pour into the Gulf of Mexico, I thought it might be helpful to review how we got where we are today.
The graph below shows total U.S. consumption of petroleum products (in red) and oil production from U.S. fields (in green). Consumption has been growing pretty steadily since 1981 while production has been declining. About 3-1/2 million barrels per day of the gap between these two lines is made up by refinery process gain, natural gas plant liquids, and other liquids. But most of the gap must be met by U.S. imports. Each year that our consumption grows and production declines, imports have to go up. Those rising U.S. oil imports could be the single most important factor determining the price of oil, global trade imbalances, and geopolitics today.
em>Consumption (in red) represents total U.S. product supplied for crude petroleum and petroleum products, annually, in million barrels per day, from EIA. Production (in green) represents U.S. field production of crude oil from EIA.
The next graph shows that although total U.S. production has been falling, U.S. offshore field production (in blue) has been rising, so that offshore oil now represents a third of our total field production. Without offshore oil, the decline in U.S. production would have been even more dramatic. Production from the Gulf of Mexico represents about 3/4 of total U.S. offshore production.
em>U.S. production (in green) same as in previous graph. U.S. offshore production (in blue) calculated as sum of federal offshore Gulf of Mexico field production, federal offshore California field production, and state offshore field production, from EIA.
BP was apparently about to announce they'd hit a gusher in the Gulf of Mexico. Somehow that's not quite as favorable a news release under the present circumstances. Here's one plan to stop oil from pouring out from a well that's under 5000 feet of water:
Industry scientists say the permanent solution is to close the entire well. To do that, they must drill another hole-- through 13,000 feet of rock a mile under the ocean's floor-- that will intercept the leaking well. They can then pump in cement to try to plug the leaks.
Not your run-of-the-mill repair job. So why in the world were we trying to get oil out of the ground under such inherently difficult-to-control circumstances?
The answer, I'm afraid, is because that's where the U.S.'s remaining oil is to be found.
Maybe you have a notion that if we just did X, we could get by without oil produced from offshore sources. To that my response is, looks to me like we'll need both offshore oil and X to get through the next decade.
em>Satellite image of the BP spill. Source: EPA; (hat tip: Environmental Economics).
By. James Hamilton of Econbrowser
Econbrowser analyse current economic conditions and policy.
Reproduced from Econobrowser.com