1. UNITED STATES DEPENDENCE ON PERSIAN GULF OIL CAN WE REDUCE IT? John Bush May 5, 2006

2. POSSIBLE REASONS TO BE CONCERNED ABOUT OUR ENERGY FUTURE A. Belief that the wasteful and dangerous ways we are using non-renewable energy resources is causing unsustainable environmental damage. B. Concern that carbon dioxide emissions are causing severe, deleterious, perhaps cataclysmic, climate change C. Prospect that we are approaching the peak of oil production as global demand is rapidly growing thus imperiling our economic future D. Concern that our dependence on petroleum from the nations of the Persian Gulf endangers our national security

3. OIL FOR TRANSPORTATION Were it not for our dependence on oil for transportation then D and E would be negligible concerns The US has ample potential resources in coal, uranium, solar and wind energy on which to base an electric or hydrogen economy--given enough time and resource commitment Our national security seems to require that we secure from potential disruptions whatever supply of liquid fuel for transportation that we will require

5. FOR WHAT DOES THE US USE OIL? EIA Annual Energy Review 2004 Residential: 1.57 Quads Commercial: 0.79 Quads Industrial: 9.57 Quads –Asphalt & Road Oil 1.24 –Distillate Fuel Oil 1.19 –LPG 2.19 –Chemical Feedstock3.29 Electric Power: 1.20 Quads Transportation: 27.00 Quads –Distillate (diesel) 5.91 –Jet Fuel (kerosene) 3.36 –Motor Gasoline 16.93 1 Quad = Quadrillion (E 15) Btu/yr

6. US PETROLEUM BALANCE Domestic NetTotal Production ImportsDemand 2001 19.0 Q 22.6 Q 41.6 Q 2002 19.0 22.8 41.8 2003 18.6 23.8 42.4 2004 18.4 26.0 43.9 2005 17.5 26.3 43.7 AAG -1.1% +3.6% +1.3%

7. WHERE DO THE US CRUDE OIL IMPORTS COME FROM? (2006) -Mexico 3.75 Q -Brazil 0.47 Q -Canada 3.62 -Algeria 0.34 -Saudi Arabia 3.00 -Kuwait 0.32 -Nigeria 2.84 -Colombia 0.27 -Venezuela 2.49 -UK 0.17 -Angola 0.98 -Chad 0.16 -Iraq 0.95 -Eq. Guinea 0.15 -Ecuador 0.47 Total 21 Q 78% of US imports

8. SOME DEFINITIONS (EIA) Persian Gulf: Bahrain, Iran*, Kuwait*, Qatar*, Saudi Arabia*, UAE* (*Also members of OPEC) OPEC: Algeria, Indonesia, Iraq, Libya, Nigeria, Venezuela

9. WORLD PETROLEUM TRADE 2002 TOTAL FROM IMPORTS PERSIAN GULF North America 28* Q 6Q 21% W. Europe 37 6 16% Asia/Pacific Rim 34 18 53% Rest of World 18 5 28% Total 117 35 30% *US 23 Q EIA International Energy Outlook 2005

10. WORLD PETROLEUM TRADE 2025 TOTAL FROM IMPORTS PERSIAN GULF North America 45* Q 12 Q 27% W. Europe 40 10 25% Asia/Pacific Rim 74 43 58% Rest of World 24 10 42% Total 183 75 41% * Est. US 38 Q

11. US “NATIONAL SECURITY” GOAL Reduce Persian Gulf crude oil imports by about 5Q (by 2008?) Reduce Persian Gulf crude oil imports by about 8Q (by 2025?)

12. TWO QUESTIONS What would we have to do to attain these goals? If we attained these goals would this enhance our national security? –Suppose only the US were denied Persian Gulf oil in 2008 and we had achieved our goal by then: rationing could probably deal with the shortfall –Suppose the world were denied Persian Gulf oil? In 2008 In 2025

13. WORLD PETROLEUM TRADE 2025 TOTAL FROM IMPORTS PERSIAN GULF North America 45* Q 12 Q 27% W. Europe 40 10 25% Asia/Pacific Rim 74 43 58% Rest of World 24 10 42% Total 183 75 41% * Est. US 38 Q

14. WHAT CAN WE DO ABOUT OIL SUPPLY SECURITY? Increase US domestic production Increase imports from secure sources Displace petroleum from non-transportation uses –Electricity –Industry –Residential/Commercial Reduce transportation oil usage –Increase efficiency of light vehicles –Reduce usage of light vehicles Provide alternative fuels

15. INCREASE DOMESTIC PRODUCTION On-shore production declining 1.1% per year and likely to continue –Alaskan Nat. Pet Res. 1 Q by 2016 –Alaskan Nat. Wildlife Refuge 1.9 Q by 2015 –If we do these, domestic production is expected to peak by about 2016 Deepwater Gulf of Mexico Offshore California / Florida

16. IMPORT FROM SECURE SOURCES What is a secure source? North America: Canada tar sands Long term guaranteed delivery not very likely except at very high prices Military conquest??!!

17. INDUSTRY Chemical feedstocks from coal—potential of 3-4Q but requires retooling More efficient heat recovery: potential perhaps 0.2 Q

18. STOP ELECTRICITY GENERATION FROM OIL In 2004 used 1.12 Q Suppose we could retire these units at 15% per year starting in 2007? Reduction in oil imports: –2008 0.2 Q –2015 0.8 Q

19. RESIDENTIAL/COMMERCIAL 2004 used 2.36 Q Conservation/solar heating/district heating Near term potential maybe 0.1 Q (a guess)

20. TRANSPORTATION Need at least another 5 Q by 2015 Increased light vehicle efficiency –2010 Base Case--Total 30.7 Q: Light vehicles 18 Q, Freight trucks 5.4Q, Aircraft 3.3 Q –Suppose 25% of light vehicles had 40 mpg performance by 2010: 2 Q reduction –By 2015 a 4-5 Q reduction might be possible Decreased light vehicle usage –Economics will operate to achieve a reduction in the long run but people have to be convinced that prices will remain high –May require substantial rebuilding of US residential and commercial infrastructure

21. INCREASE VEHICLE MILEAGE Mandate fuel efficiency Build lighter vehicles Diesels Hybrids Plug-in hybrids Fuel cells Better maintenance through information/enforcement

22. REDUCE MILES DRIVEN Increase fuel taxes Reduce subsidies for petroleum fueled vehicles Encourage mass transit Encourage centralized development

23. PROVIDE ALTERNATIVE FUELS Ethanol Biodiesel Natural gas Electricity Hydrocarbons from tar sands Hydrocarbons from oil shale Liquid fuel from coal Hydrogen

24. MY (TENTATIVE) CONCLUSIONS By 2015, with substantial improvements in vehicle mileage, sufficient supplies of alternate fuels and policies that reduce mileage driven we could achieve “security” from a short-term, US- focused Persian Gulf oil supply interruption There is almost nothing we can do before 2010 There will necessarily be some major disruptions in the American economy and probably life style Achieving this goal will likely accomplish at least some carbon dioxide reduction and prepare us to face a global shrinkage of the oil supply