Back in 2013 the White House put out a report commenting on that American oil production was up, but expanded production would not produce energy independence. It also stated that 46% of a barrel of Oil is “allocated” to produce Gasoline. It stated our dependence on foreign oil was down to a 20 year low and represented only 40% of our oil consumption (down from 60% in 2005). And of course it stated that as we drilled more, prices continued to rise.
So two years later he points out that gasoline prices are half of what they were in 2013, but not half of what the price was in 2007 before the recession began. And again he takes some credit for the reduction in foreign imports. So what is really going on and does he have any right to claim anything other then be a cause for the instability the White House release talks of. Warning, what will follow may give simple minds a headache.
Lets start with the fact that even the White House reports show US imports of oil began dropping in 2006 (455,600K barrels of Oil in August). As a Time Magazine report then illustrated, as Fracking technology began increasing domestic production in 2005, the need for imports began reducing. This is the same Fracking technology that President Obama has blocked on Oil leases on federal land. It’s also the technology his allies in the Environmental (Green) movement have tried to ban everywhere else in the United States. The White House stated that increased domestic drilling “Will Not” change the domestic energy situation. A decade of Fracking data shows otherwise as increased domestic production means lower imports.
Then came the world wide “Great” Recession that reduced consumption of oil both in Europe and America. So-called “Informed” analysts argue that the reduction in consumption in Europe and America was overwhelmed by increases in consumption in India and China. And its true that Oil consumption in these countries has been rising. But to talk of percentage increase, as the 2013 White House paper sites ignores the fact of what Oil consumption (in Barrels) was in these countries. And as the Time article shows, China, with no real domestic production, still imports well less oil then the United States, and not as much as the combined imports of the European Union countries. So if there is a reduction in consumption in America and Europe, China and India can’t instantly take up the slack.
On the subject of imports, where do the majority of America’s imported Oil (272,800 barrels a month) come from. For many Americans it comes from Saudi Arabia; But where Saudi Arabia is one of the world’s biggest exporters, America’s oil suppliers are more varied then people can imagine. Where OPEC is reported to send the US some 91,000 thousand barrels of oil, and 1/3 of that from Saudi Arabia, another 1/3 of that oil is coming from Venezuela. While he was still alive Hugo Chavez was trying to buy American votes by offering low priced oil through his countries oil subsidiaries in the United States. Mexico, who is not part of OPEC, was sending 23,500 thousand barrels a month to the United States.
But the real surprise is Canada, who sends the United States some 120,000 thousand barrels of oil per month. Nearly 44% of all United States Oil imports are coming from Canada, more then all of OPEC. And this value has been steadily rising for two decades as Canada’s oil production increases. By canceling the Keystone pipeline, President Obama stalled this upward trend and thus insured that any Oil production changes in the middle-east over the next decade will be felt in America.
In the end, its America’s reduction in consumption (and increase in domestic production) that is having an effect on oil and gas prices. With a bit of a glut in the United States, Mexico is beginning to send its oil to Europe and Asia where it can get a better price. The economic/government crisis in Venezuela is prompting other changes in oil supplies throughout the Caribbean and Gulf of Mexico. Cuba, who was a major importer of subsidized oil from Venezuela is having to go on the world market to meet its needs. This means the importation of more Mexican oil, and yes, American oil as the United States ends a 40-year prohibition on oil exports.
And this world market is having to deal with continued reduction in usage by Europe and America, the economic slow down in China, and the continuing diplomatic conflict between the Sunni OPEC nations and Iran. Iran who, thanks to Obama, will be now selling its oil without UN sanctions in competition against its nemesis Saudi Arabia, and its ally Russia. Saudi Arabia, already having cut prices to try and undercut the American Fracking industry, will now have to deal with an old/new major competitor.
Even Obama’s comments regarding the increase in renewables underscores how little he understands either market economics or the energy sector. Oh, its true that renewables now represents 13% of the power grid, but that’s still below the 19% that nuclear represents and anti-nuclear activists continue to state that Nuclear is an insignificant portion of the electrical grid. In truth though hydropower is the major portion of the renewable production; Solar and Wind are significantly larger eight years later, but hydroelectric still produces 40% of the electricity attributed to renewables. The next major contributor is wind, not solar: Solar contributes less then bio-mass conversion.
And both Wind and Solar have a continuing problem of peak power loss. This means Solar has to store energy to use when the sun has set. As for Wind, it too has to store excess energy for use when the wind doesn’t blow. Living in North Central Texas, people have become quite aware that there are times in the summer when the wind just doesn’t blow (usually when you want the air conditioning). Other times the wind is blowing at night when most people are sleeping. This is why Elon Musk’s special battery storage units are of such interest to people. Of course these units only exist on paper at present.
In the end, changes in State laws regarding solar systems- changes done to extradite the States from expensive subsidies- are causing many solar companies to either pull out of the States or simply shutdown. Thus as Obama is praising the results of years of subsidizing Solar, its about to collapse (again) under its true costs. Wind will probably survive, but only because it’s economic model is closer to general energy production. The idea of owning solar and being free of the power company may sound good to ex-hippies, but its impractical in an urban world of apartments and condos. Besides, most people never appreciate just the power required to clean and then pump water into their homes, let alone the power used to then carry the waste from your home. They only know the power recorded by their new smart meter on the side of the house.
In the long run, the renewables Obama wants to cite only produce electricity. And until a much larger portion of the transportation system is electrical will the switch to renewables have any impact on gasoline prices. As previously noted, Obama uses the term allocated when describing the amount of gasoline you get from a barrel of oil. What is not understood by people is that the percentage of a barrel that produces Gasoline is fixed, not an allocation. If you need to make a certain amount of gasoline, you will in the process produce a certain amount of jet fuel, diesel, plastics and resins, etc.
Many years ago I became aware that someone had hijacked the history of World War 2 aviation and stated that the ME262 jet fighter actually shortened the war because it burned such large quantities of fuel it actually emptied the tanks of other fighters. The reality is that the process of creating the fuel for those other “piston” engine fighters Germany produced a certain amount of jet fuel. But in those days it wasn’t called jet fuel, because they didn’t have jets. Only when the ME262 came out did they have a use for this material, which before this was simply dumped in a landfill. Thus the ME262 didn’t drain any fuel tanks, it allowed the use of what was otherwise a waste material in the defense of Germany.
This being said, when you process oil for plastics and resins you will create a certain amount of gasoline. In a future world of “electric” cars this residue gasoline will have very little value since it will be a left-over. It will be like it was when Oil was being processed for Kerosene lamps (before the internal combustion engine) and the by-product gasoline was simply dumped as a waste. Thus, even if Al Gore gets his way and we don’t have gasoline cars; until we have other sources for plastics, polymers, resins, jet fuel, etc. we will still be needing to process oil. And with every barrel processed we will be making gasoline as a by-product which we will probably just burn off as a waste.
And now the final note: the low price of gasoline verses what it was just two years ago. As the rest of America enjoys $2.00 gasoline, California does not. There is a lot in the cost difference that comes from Taxes the State has imposed to promote their environmental agenda. But the biggest reason is the lack of refining capacity on the West coast. California’s inability to support the industrial capacity needed by its own population must now import gasoline (and the other oil by-products) to fill its need. This transportation cost is just added to the cost the citizens already pay in a State that actually produces a major portion of the domestic oil in the United States. So even when you have the resources, other factors can raise prices and create "Artificial" shortages.