Import, Baby, Import!

by Eric Epstein

In 1970 we imported 24% of the oil we consumed. The  amount doubled by the time of Jimmy Carter’s epic energy  speech on April 18, 1977.

With the exception of preventing war this [energy crisis]  is the greatest challenge our country will face during our  lifetimes. The energy crisis has not yet overwhelmed us  but it will if we do not act quickly. It’s a problem we will  not solve in the next few years, and it’s likely to get  progressively worse through the rest of this century.  Many of the proposals will be unpopular. Some will  cause you to put up with inconveniences and make  sacrifices.

Today we import 70% of the oil we use, and Americans  continue to consume a disproportionate amount of the world’s  reserves. But the percentage of foreign imports is misleading,  and not necessarily bad news when you diagnose where we  get our oil.

For example, OPEC’s share of American oil imports has  been sliced down to 56%, and 42% percent of  the weakened  cartel’s contribution comes from our allies in Iraq and Saudi Arabia. Both nations contain a significant American military  presence and vast reserves.

The new real politick is that we have a diversified and  proximate addiction inventory. Three of our five main  suppliers – or 50% of the oil we import – are located in our  front and back yard. Canada, Columbia, Ecuador, Mexico,  Venezuela, and the Virgin Islands have displaced Middle  Eastern sources.

The geopolitical reality is that large stocks of regional  resources are currently being tapped. Contrary to public  opinion and political hysteria, drilling off the coast of  New Jersey, Delaware, Florida and Alaska is not a  panacea.  There are important, but limited oil reserves in American  waters, and there are risks to our multibillion dollar fishing and tourism industries.

However, before we drill, we need to know what we  have and where it’s located. The nation’s off shore drilling  data is from the Cold War. Job one is to conduct a thorough  due diligence of our assets. To Ken Salazar’s credit, part of Obama’s drilling plan is to conduct an inventory of our  resources.

Bobby Ryan, Chevron’s VP of global exploration, stated  on March 31, 2010: “We don’t have a good understanding  of the what the true potential is. Until you really get in there  with modern technology and evaluate it, you don’t really  know.”

The Interior Department’s current estimate of  economically recoverable reserves (assuming we don’t give  the leases away) in the areas covered under Obama’s plan  is 63 billion barrels of oil. What does that mean? Not even  a nine year supply for a nation that consumes 7 billion  barrels annually.

I’m not theologically opposed to offshore drilling, but  I am wary of making policy decisions that yield minimal  dividends down the road, especially when there are other  options.

American consumption appears to be stabilizing due  in large part to consumer awareness, improved automobile  standards, and increased ethanol use. American refineries  are operating well below capacity at a time when “margins  have bottomed out and there’s need to be a correction.   Demand is gone and not expected to return,” according to  Nathan Schaffer an industry analyst with PFC Energy.  (Wall Street Journal, April 9, 2010)

Just like off shore wind, there is a role for targeted  drilling after we complete the requisite due diligence.  The best way to protect future generations is to adjust  and decrease our oil consumption patterns.

In the meantime, wake up America and smell the  octane north and south of the border. Part of the answer  to our oil addiction is continue to import oil from the  same nations that provide us with hockey pucks, coffee,  and baseball players.