Forty-five years ago, when I was a young petroleum engineer, I was tasked with forecasting future oil production of company interest in southern Oklahoma. The federal government required this semiannual report from all oil producers.
At that time, premium crude sold for $3.05 per barrel. Most of the crude sold at much lower prices, ranging from $1.85 to $2.85 per barrel. The price was determined by the weight of the crude.
Oklahoma, Texas, Louisiana and even Kansas had excess production capacity, which was regulated by the state. Oil imports, primarily from Venezuela, were imported for federal political reasons and not out of national needs. No oil imports came from the Middle East. When additional oil needs were forecast, the state authorized more production from other producers operating the oil fields.
My analysis indicated that the company would deplete its reserve production capacity by the early 1970s. Interestingly, the late Dr. M. King Hubbert, perhaps the most knowledgeable production forecaster of his age, developed a model in 1956 that predicted that all U.S. domestic production would peak in the early 1970s. In other words, the nation would begin to become dependent on imported oil in the 1970s. Only oil people and government bureaucrats knew of this disturbing fact at that time.
A great oil discovery was made in Alaska during the mid-1960s. It would prove to be the largest oil field in North America. But in order to exploit that oil, a pipeline 800 miles long had to be constructed over difficult terrain. A consortium of energy companies planned to build this $8 billion pipeline. But because sections of pipeline rights-of-way would pass through federal lands, the project required congressional approval. Congress, neither the House nor the Senate, would not approve the project. After all, didn’t the nation have excess producing capacity? And what about the environment — how could the pipeline be constructed across frozen ground, hundreds of streams, including the great Yukon River?
The project lingered for years and the nation’s excess production capacity steadily declined, then disappeared. Imported oil became a necessity. This great discovery, with the potential of 2 million barrels per day, had no access to market because of the lack of congressional approval.
The status quo changed when the Arab states conspired to punish the United States for political reasons with an oil embargo in 1973. As long lines formed at gas pumps, angry voters called and wrote to congressmen and senators. Eventually, enough Northeastern congressional representatives and senators changed their vote and approved the pipeline project. The pipeline, with all of its pump stations and terminals was completed a few years later in 1976.
Crude oil quickly filled the 48-inch pipeline as production eventually peaked out in the last 1980s, exceeding 2 million barrels a day. Oil production has declined, as expected, with current production about 950,000 barrels per day. And after 30 years of operation, not one oil spill of significance has occurred.
Our current consumption of oil is something less than 21 millions barrels a day. We are producing a little more than 5 million barrels a day — only 25 percent of our daily needs.
Our great dependency on foreign oil is dangerous. A disruption of the supply lines from any of several countries would have immediate impacts on our economy. We experienced a preview of that sad fact after Hurricane Katrina in 2005, when the Gulf of Mexico production was shut down for a short time, a few weeks to a few months.
Our politicians are rightly concerned over the potential of oil spilling in ocean waters. Let’s review development in the Gulf of Mexico as a model. Fifty years ago, technology allowed developers to move offshore. To drill in 50 feet of water was cutting-edge technology. Now oil is being produced in thousands of feet of water; the U.S. record is 6,000 feet, but Brazil has production in 9,000 feet of water! More than 25 percent of our national production originates from offshore pools in the Gulf. Few care, but it’s important to know that there has never been a significant oil spill off our shores — even in this hurricane-prone environment. A remarkable achievement!
Yet, our political leaders, mostly Northeastern Democrats — have “poisoned the well” of public thinking over the years. Here are a few examples:
— Myth: The 1973 gas shortage was contrived by “Big Oil” to drive up the price. Fact: The shortage was really due to the embargo.
— How many times have we been told that “Big Oil is reaping windfall profits and must be punished”? Government hearings over the years got much press coverage, cost a lot of money and found nothing. The current hearing will yield the same. No collusion, no wrongdoing, only more government grandstanding at taxpayers’ expense.
The politicians know the facts — “Big Oil” makes about 8 percent return on its investment — hardly windfall profits. The issue is that oil industry numbers are huge. We are readily advised of the current profits but aren’t informed of costs. For example, the cost to construct one offshore platform ranges from half a billion dollars to $2 billion, and that doesn’t include the cost to drill a test well.
— Worst of all, Congress has prevented our own exploration and development. For 25 years, the House has denied leasing off the Atlantic shores. Encouragingly, the last vote was rescinded but approval has not gone anywhere in the Senate.
Congress has not allowed the Arctic National Wildlife Reserve to be opened for limited development. ANWR is three times the size of the Adirondack Park but only a few thousand acres would be necessary to develop the great oil potential there. The Department of Energy estimates that ANWR would produce 1.3 million barrels of oil a day. And it wouldn’t take 10 years to develop, as Sen. Charles Schumer recently stated. Had the president’s energy bill been approved in 2003, that oil potential would be flowing today.
Congress will not authorize the development of Western oil shale. Surveys state that there are billions of barrels of shale oil locked in these Western states.
Our nation has drifted into grave danger and most of us don’t realize it, because we have been lied to for political reasons and not told the whole story. We must change course and develop our own resources in a responsible manner.
Such a decision, communicating our intent to the rest of the world, would immediately drop speculation in the oil futures market that would quickly be seen in lower energy prices. If our elected officials fail to respond to this crisis and continue with a “business as usual, do nothing” attitude, we soon will be faced with energy-related issues far worse than the current record prices at the gas pump.
Russell Wege, a retired engineer, lives in Glenville. The Gazette encourages readers to submit material on local issues for the Sunday Opinion section.