When President Obama makes his first Oval Office address to the nation tomorrow night, the topic will be the BP oil spill disaster in the Gulf. He cannot mobilize our people in support of a sensible energy strategy if they don’t have the crucial facts about the U.S. petroleum situation. Here are three:
1. Domestic crude oil production is in long term decline. (Data from EIA.)
Yes, that’s an uptick in 2009, the first since 1991. Overall, the trend is one of decline since production peaked in 1970. Our richest oil fields were developed long ago and are now mostly depleted. Risky and expensive deepwater fields are now being developed in a desperate effort to offset depletion. 2009 production remains below the 1950 level.
2. The US has only a tiny share of the world’s remaining reserves — two percent — while we consume roughly a quarter of global production. (Data from BP.)
It has been documented that most Americans believe we have plenty of oil, as much as fifty percent of world reserves. This delusion, which supports the “Drill, Baby, Drill” fantasy, must be cleared up quickly.
3. As we import nearly two-thirds of the oil we consume, any price increase balloons the trade deficit which acts as a brake on the economy. (Data from EIA.)
The estimate for 2009 is $189 billion, as the price dropped from historic highs in 2008. However, data for April 2010 show that we are on pace to reach $250 billion this year because crude oil prices have stayed above $70 per barrel. (Data from the Bureau of Economic Analysis.)
If the U.S. were to return to the strong growth that is needed to bring down our high unemployment rate, then the price of oil would rise further, swelling the oil import bill and the trade deficit while putting downward pressure on aggregate demand.
The U.S. is no longer the main driver on the demand side of the oil market. Strong and growing demand for petroleum in Asia is having an upward ratchet effect on price.
President Obama, please inform our people that we must add to petroleum’s significant environmental and security risks a new reason to cut petroleum dependence — our oil import bill represents a major financial risk to our economic health.
Instead of being a source of prosperity, oil is now a barrier to it.