Oil Shortages: Here They Come
Russia is the world’s second-largest oil exporter. But something ominous is happening: Its oil production fell for each of the first three months of this year. Russia is now pumping less than it was last year.
Investment bank usb predicts a 1 percent drop in Russia’s oil production this year. One percent might not sound like much, but when global markets are as tight as they are, and when you produce 9.77 million barrels per day, that’s a big deal.
If there is a supply crunch on the horizon, America is in serious trouble.
Look at America’s oil needs. The U.S. currently consumes 21 million barrels of oil per day. Twenty-one million barrels laid end to end would stretch from Los Angeles to Moscow and back, and halfway back again. America consumes that much every day!
Of those 21 million barrels, America produces only 5 million domestically. The rest has to be imported. So America is tremendously dependent on imported oil. And according to some estimates, 85 percent of global oil supplies are found in countries not especially friendly to the United States.
And the domestic drill bit isn’t going to be able to fix things. As oil prices have soared over $100 per barrel, oil companies in the U.S. have doubled the number of wells drilled per year—and still production is dropping. Hundreds of thousands of old wells are each producing a little less oil each day, and new production isn’t getting close to covering the drop-off.
Despite popular opinion, opening up the Arctic National Wildlife Refuge (anwr) and other off-limit areas to drilling isn’t a magic bullet either. These areas may temporarily provide a source of oil, but will ultimately be just a drop in the bucket of what is needed. The U.S. Geological Survey estimates with 95 percent probability that anwr holds 5.7 billion barrels of recoverable oil. At current consumption levels, that would last 271 days.
The big problem for America and the rest of the world is that additional oil is getting much harder to come by. Oil production isn’t only falling in America, it is falling just about everywhere—Kuwait, Britain’s North Sea, Mexico’s giant Cantarell field (which Energy and Oil says is “simply crashing”). In fact, 54 of the top 65 oil-producing countries have declining production rates. Make that 55 counting Russia.
Still, millions of Americans, Canadians and Britons remain oblivious to the fact that their lives are about to radically change. Many think they have seen it all before during the oil rationing and embargoes in the 1970s, that soon oil prices will fall, that $2-a-gallon gasoline will return.
Today’s looming oil crisis is very different than that of the 1970s. Back then it was because certain opec members purposefully stopped selling oil, and then Iran and Iraq went to war, that prices were driven sky high. This time it is growing demand from 2 billion Asians and stagnating global oil production. There may be short-term pullbacks, but the long-term price trend will most likely be up.
There are those who see it coming.
In March, Edward Lazear, chairman of the White House Council of Economic Advisors, said America should “have been thinking about all of this 10 to 15 years ago when it comes to alternatives or new exploration, and we weren’t.” He implied that today’s efforts are too little, too late.
Also in March, Assistant Energy Secretary Alexander Karsner said, “The places where oil can be found and extracted and brought to bear in the world are decreasing. It will get harder, and demand will outstrip supply for probably the rest of my lifetime.”
Actions speak louder than words. Despite America already possessing the world’s largest strategic petroleum reserve and filling it to over 96 percent capacity (a record 701 million barrels of oil), and despite record-high oil prices and calls from all three presidential candidates to stop filling it, the current administration continues to buy oil and pursue plans to double the reserve capacity to 1.5 billion barrels. Clearly, someone realizes oil shortages are coming.
U.S. military leaders know oil shortages and higher fuel prices are on the way: They are now using $225-per-barrel oil in their planning projections. Congress has directed the Navy to use nuclear power for all future large surface combatant ships. The Air Force is looking for alternate fuel sources to fly its jets. The Army is examining the fuel efficiency of ground combat vehicles.
Globally, the competition for resources will continue to heat up. China, India, Japan and the European Union are massive oil importers, and their needs are growing. Most of Russia’s oil currently goes to Europe. If that supply starts to diminish, Europe will need to seek additional oil elsewhere. Our March 2006 article “The Battleground” (available online at theTrumpet.com) explains where Europe will get the oil it needs.
“The battle for global resources has already begun,” says commodity analyst Kevin Kerr. “[T]he borders are being drawn and the players are suiting up.”
Resource scarcity will have major implications for our way of life and society. At first we will see a general trend of rising prices—for everything from gasoline and fertilizer to plastic bags, as will anything that is trucked to market. Eventually we can expect cities to be gutted and suburbs abandoned as people are no longer able to afford the commute.
More than any country in the world, America relies on oil. Change is on the way. America’s days as a superpower are ending. Its over-reliance on imported oil is just one of the contributing factors. For information on the fundamental reason America is losing its superpower status, request a free copy of The United States and Britain in Prophecy.