Foreign Oil Dependence: Why the Crux of the Energy Issue Centers on this Fossil Fuel
by David Fessler, Energy and Infrastructure Expert
Friday, April 23, 2010: Issue #1245
Picture the scene: It’s 1856 and the Industrial Revolution is just getting underway in the United States.
As America ratchets up its manufacturing and innovation and grows into a vibrant industrial hub, the driving force behind this growth is the greatest energy windfall in the history of the world…
The discovery and commercialization of oil.
Quite simply, it’s a time that heralds the “Age of Oil.” A new energy era.
Flash forward to 2010: We’re still relying mostly on oil to satisfy our energy demands. But the end of the “Age of Oil” is on the horizon and the world faces major energy problems. Supply. Demand. Cost. The environment. The list goes on…
These problems affect the prosperity of countries and people around the world.
That’s because when it comes to economic growth and the future of mankind, there is nothing more precious – and more crucial – than cheap energy.
Right now, however, this is a huge challenge. But for smart investors, this new world energy order holds some tremendous potential gains. It’s why I follow this critical sector – and why I’m about to launch an advisory service devoted exclusively to “peak energy.”
The crux of the energy issue centers on oil…
Oil: Cheap for 154 Years… and Now Dwindling
For the past 154 years, oil has provided one of the cheapest sources of energy that mankind has ever had. For the bulk of that period, we’ve never worried about supply, as it seemed endless and there were no other big users.
But we know fossil fuels aren’t infinite in supply. Some fear the oil peak has already passed and that reserves are dwindling. And with many more oil consumers – including China, India and other emerging nations – it’s now a battle to grab the existing oil.
Trouble is… it’s harder and more expensive to find, extract, and produce. Oil companies are struggling to meet the increasing demand.
We Want More Oil… But Can We Get It? Should We Get It?
Many politicians and industrialists scoff at the idea that we’re running out of oil. They argue that we just need to increase our exploration, drill more wells and extract more oil.
As an engineer, you won’t get an argument from me that new technology will help raise the recovery rates from existing fields and new ones when we find them. So, too, will more drilling, more pipelines and more storage terminals.
But in the end, it’s like increasing the dose of radiation for a terminal cancer patient. He might feel better for a while, but in the end, he’s still going to die.
Denial is the easiest way to dismiss the problem. Kicking the can down the road, as the cliché goes. But the bottom line is that oil is a finite resource. And those who say we aren’t running out are kidding themselves.
Foreign Oil Dependence for 30 Years = $7 Trillion
Of course, so-called “rogue nations” own a big chunk of what’s left – nations who see the United States as an oil addict, willing to pay anything to satisfy its “fix.” (After all, America is the world’s biggest oil consumer, blowing through one-quarter of the world’s 85 million barrel per day usage.)
And that addiction has come at a staggering cost. Over the past 30 years, the United States has spent over $7 trillion on imported oil.
Until 1970, we didn’t have to worry about our dependence on foreign oil. We only imported 25%. But now the figure is roughly 65% – and rising. In fact, we’re on track to spend $10 trillion more on imports in less than a decade, unless something is done.
China’s Oil Consumption and The Energy Equation
It didn’t take China long to figure out the energy equation. Its government-controlled oil companies have been quietly traversing the globe, acquiring as much oil as possible. They have to.
Between 2003 and 2009, China’s oil consumption has nearly doubled. It’s now the world’s second-highest oil consumer.
What’s more, if China’s current growth rate continues, it will consume the world’s available oil capacity by 2030.
So what are the options available for breaking away from oil’s stranglehold?
Piecing Together the Energy Puzzle
Ed Ayres, the Editorial Director of the World Watch Institute, articulates the problem best: “We face something so outside of our collective experience that we don’t really see it, even in the face of overwhelming evidence.”
The answer to the problem is really plural. There are several answers. Simply trading in your gas-guzzling Hummer for a Prius is a small step in the right direction, though not really enough.
And while it certainly involves ramping up alternative energy resources like solar, wind, geothermal and tidal, they can’t be increased quickly enough to make up the difference.
My answer: Taking advantage of our wealth of natural gas by converting as much of our transportation sector to run on it as possible.
Other options include increasing offshore U.S. oil and gas exploration, plus boosting clean coal technology.
It’s like completing a jigsaw puzzle. Find the right pieces, then slot them together one at a time. It must be done.
Is Ending Our Oil Dependence a Realistic Possibility?
In his book, The Long Emergency, James Kunstler writes: “The human race living off the draw-down of non-renewable fossil fuel resources is the equivalent of algae in a pond enjoying a temporary rush of nutrients in one brief session.”
Does Mr. Kunstler have a point, or are we just too entrenched in the politics of “Big Oil?” While there’s little doubt that we’re too addicted to fossil fuels, is ending our dependence on foreign oil a realistic possibility?
It’s interesting to note that after oil prices hit $147, renewable alternatives like geothermal, solar, wind-generated power and others burst onto the energy stage and quickly gained traction. But as their ups and downs prove, the transition won’t happen overnight.
We have to wean ourselves off foreign oil. I’m confident it will happen. But challenges and concerns litter the path to global energy resource-sustainability. And the socio-economic implications are unprecedented.
So, too, are the investment opportunities.
The energy sector promises to be the place to invest for decades to come. And next week, I’ll show you how to take advantage of these opportunities.
Good investing,
David Fessler
Any investment contains risk. Please see our disclaimer.
19 Responses to “Foreign Oil Dependence: Why the Crux of the Energy Issue Centers on this Fossil Fuel”
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David Fessler is the energy and infrastructure expert for Investment U.
I wonder if David Fessler is aware of the successful drilling into the Eagle Ford shale formation streching over 30 counties in Texas, from Houston in a southwesterly direction to beyond the Mexican border. Two thirds of this strata consists of crude oil and condensate as well as the natural gas found over the entire shale formation. Although not new, horizontal drilling and fracturing makes it the greatest oil find in the U.S. in 40 years.
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David, you and I need to talk. I am so proud of your article about switching cars to natural gas. I am a world expert on alternative fuel, and especially natural gas. I have advised T. Boone Pickens, on three occasions. What I taught him, and I want to explore with you is the idea of turning cars to NG, instead, we can accomplish your and my goals easier. 50% of all imported oil is used to make Diesel fuel. The USA has about 7 million heavy-duty Diesel trucks who use half of all imported oil.
I and two major engine manufacturers have EPA and CARB certification to convert existing (not new) diesel engines to run on 100% Compressed or Liquid NG. Coca-Cola Enerprise has already tried our engines and loved them. I have a long letter which explains infrastucture and service stations. Most HD Diesel truckers have motor pools. We install re-fueling stations at the motor pools. We use LNG for large trucks, and we can match range and improve mileage!! Oil doesn’t get dirty w/NG. Oil changes can go 300,000 miles with filters.
Look at the oil that saves. It is far easier to convert 3 million to 6 million heavy duty trucks, than converting over 70 miillion cars on the road today. (You will never want to deal with that many individual owners, I know.) I converted 1,500 small pickups to Propane in 1993. What an experience.
I know all of the movers and players in the heavy duty engine manufacturer and major trucking companies. It is easy to start with either Coca-Cola, Pepsi, or Hunt Trucking. DOE is offering about $30,000 per truck to convert engines to NG. This means the truckers have no out of pocket expenses. I have installed Natural Gas fueling stations. Experience counts.
I have a business plan that T. Boone has seen. Lets talk by phone or face to face. As Snuffy in the comics said “Times awasting”.
Bob Lynch Energy Engineer
SAE (1992) Society of Automotive Engineers
Clean Cities (DOE)
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Makes too much sense to me. I would love to make a play on natural gas. Any suggestions?
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David, did you get my comments re converting
cars and diesel trucks to NG?
Bob Lynch
Energy Engineer
SAE Society of Automotive Engineers
EPA and CARB Diesel engine conversion to NG
A Green Spark, National Sales VP, Wind Turbines.
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For David Fessler:
Is there techonology to convert existing gasoline engines to run on natural gas? If so, is it economically feasible?
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Bob,
The simple answer is yes it does exist. As gasoline and diesel prices continue their inevitable rise, more and more people are interested in converting their cars and trucks to run on compressed natural gas (CNG).
It’s clean, inexpensive (half the cost of gasoline) and it’s made in the U.S.A. No imported oil necessary.
Having said all of that, ANY conversion should be handled by a qualified technician. The EPA has rules and regulations concerning the conversion. You can learn all you need to know at http://www.cleanvehicle.org.
They have a list of EPA-certified retrofit companies and service centers.
All the best,
Investment U
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Sounds to me that David is swapping spit with Boone Pickens. Since David is not a professional engineer, nor a chemical engineer his conclusions are flawed. NG is a good feedstock for propane or for diesel by the Fischer-Tropsch process the Germans developed before WWII. There is absolutely no reason to convert the infrastucture to NG. Propane is already available nationwide, is much safer and proven conversion already exists. Save your money on NG conversion.
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It seems quite implausible that you are so isolated that you haven’t heard about T. Boone Picken’s plan to switch our reliance on oil by converting commercial units to natural gas use. Pickens has been widely promoting this idea for over a year, at least, and there are one or two bills that have been initiated in Washington.
To hear you claim the idea as your own certainly doesn’t spawn any confidence.
Dave
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An excellent article kindling new hopes. Here in India we have commenced converting Gas to LNG for cars n rikshas, a 3 wheeler trepidation, used for public transportation, capacity 4 persons including a driver, a converter kit is fixed so that gas engine is enabled to use LNG.
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Nat Gas would be a good way to solve the problem in the short term, but it is a finite resource just like oil.
I cannot understand why more attention is not being given to geothermal power. It is as reliable 24/7 as a coal fired power plant and also very abundant. Geothermal technology is fairly straight forward, economically viable, and is well proven with numerous plants already producing power around the world.
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Great idea,all gas should be used for transportation .
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The review of the oil-energy resource seems to attract comments, as follws:
1.The major area depending on oil energy is the
automobile sector. Unless, the entire global demand for fossil oil can be replaced by battery run cars or by any other source of energy, the role of oil cannot be underestimated.
2. As long as the oil industry, in this context, is indispensable, the problem of green house gases and the accompanying evil of global warming will be unavoidable. This is already being felt and endured. Add to this, the inevitability of industrial advancement adding to pollution of atmosphere, in all its dimensions.
3. It is a matter of common knowledge, that forests and thick vegetation are the only cheap and natural means of increasing levels of rainfall, and thereby finding a workable way for reducing global warming. We are aware of the present day havoc of deforestation for many commercial benefits.
4. The policies and advancement of biotechnology in the field of agriculture have not solved the basic problem of food resources, world over. Everywhere, the present day cry is shortage of food and deaths due to starvation and
malnutrition.
Under these circumstances, is it not wise to develop a world-wide policy to develop plantations of non-edible oil producing plants to supplement –though not possible to totally replace –fossil oil use? Will this not improve the developing nations, primarily depending on agriculture economy, by improved prospects for job opportunities apart from serving the cause of social service? These projects can be undertaken on vast stretches of arid and semi arid lands, without encroaching on more fertile and productive agricultural crops of commercial value.
Some trials conducted in this field of study have also pointed to the possibility of raising suitable short term agricultural and commercial crops as inter crops.
B N Ramamurti
consultant, Agroeconomsit
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Go to Google and type in, magnetic motor. There are over 2o million entries and many YouTube videos showing the Green energy of the future. These are from all over the world. Do your research and you will find that the US military has working models large enough to power all of NY city. The energy consortium is keeping this off the market. Here is one U-Tube link:
http://www.youtube.com/watch?v=PFGiWiXMHn0
Large enough to power 3 total electric homes.
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exilant,,,,,,one day you must proved…..thanks
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Oil has not been proven to be of finite supply.
However, there are proven reserves in the US which will last many life times. So start onshore drilling,now.
mwb
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David, did you get my comments re converting
cars and diesel trucks to NG?
Bob Lynch
Energy Engineer
SAE Society of Automotive Engineers
EPA and CARB Diesel engine conversion to NG
A Green Spark, National Sales VP, Wind Turbines.
Reply
I wonder if David Fessler is aware of the successful drilling into the Eagle Ford shale formation streching over 30 counties in Texas, from Houston in a southwesterly direction to beyond the Mexican border. Two thirds of this strata consists of crude oil and condensate as well as the natural gas found over the entire shale formation. Although not new, horizontal drilling and fracturing makes it the greatest oil find in the U.S. in 40 years.
Reply
An excellent article kindling new hopes. Here in India we have commenced converting Gas to LNG for cars n rikshas, a 3 wheeler trepidation, used for public transportation, capacity 4 persons including a driver, a converter kit is fixed so that gas engine is enabled to use LNG.
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LNG for cars is O.K. but Diesel Fuel still is the best Transportation Fuel and cleaner than electricity generated from coal fired plants. Diesel has effectively twice the specific energy of Ethanol and 10 times that of Hydrogen. It is very environmental friendly.
Coal to liquid Technology is available eliminating the need of fossile fuel.
Per unit of energy delivered, coal is about 20% of the cost of oil, but contains one-third more carbon. If coal can be liquefied by nuclear energy there will be no or much less pollution, once diesel fuel is derived from coal.
The required heat has to be generated from safe nuclear reactors, making the technology cost effective. Besides electrical power production from nuclear energy does not produce any CO2 or N2O emissions. With this type of energy clean diesel fuel can efficiently be extracted from coal. And is far more attractive for transportation because the existing distribution network can be used, contrary to LNG for wich a new expensive distribution channels have to be created.
see for more details:
http://www.nowpublic.com/world/biofuel-or-biofool
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