A “Manhattan Project” for Energy Independence

The United States produces 10% of the world’s petroleum and consumes 24% or roughly 20 Million Barrels per Day (MMbd). The Energy Information Agency (EIA) estimates we import 13.5 MMbd. Today oil is around $80 a barrel (bbl). World Production of Oil is approximately 85MMbd.

I believe the the United States not only should, but must, engage in a quest towards energy independence with all the effort and unity of purpose that we dedicated to the Manhattan Project (Project to develop the atomic bomb during world war two). In this essay I will lay out my case for such a project.

1) Supply of Oil
Even the most fervent denier of the theory of Peak Oil estimates the maximum worldwide production of oil is near capacity. The EIA estimates for maximum worldwide production through 2020 has gone from 120MMbd in 1999 to 95MMbd today. Depletion of known reserves exceeds discovery of new oil now, and the new oil is harder and more expensive to obtain. These factors make the case for the possibility of decreasing supply going forward, and an even stronger case against the supply meeting the increased estimates of the EIA. Today questions about the independence and veracity of the EIA have arisen. Here is an excerpt of an article that appeared yesterday in the Guardian (United Kingdom).
"The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.
The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves."

2) Demand for Oil
If we use an estimate of 102MMbd or 20% above current levels, and a constant demand by the United States (Increase in demand offset exactly by increases in efficiency) this 20% increase in world production will be swallowed up by the increase in demand of the emerging markets. Arguments against these estimates by both sides of the issue have been put forth, however the distinct possibility that a supply shortage resulting from increased demand will occur in the next 10yrs exists.

3) Economic Effects
We currently import 9.783MMbd from all sources. If the average price over the next 10 years is the same as it is now $80 bbl that is an outflow of $782,640,000 per day or $285,663,600,000 per year.

4) Political Effects
Of the $285 Billion we spend on oil every year, much of it goes to regimes that are authoritarian, oligarchic, dictatorial, and even chaotic. Today, over 80 percent of world petroleum reserves are state-owned — controlled by countries that have the power to manipulate supply and price with impunity, this fact goes directly to the heart of energy security. Examples include the following:
Venezuela - $29,608,800,000 Led by Hugo Chavez, a Communist and supporter of Fidel Castro
Equitorial Guinea - $2,803,200,000 Led by Teodoro Obiang Nguema Mbasogo a despot who achieved power in a 1979 coup where he killed and reputedly ate his uncle. In July 2003, state-operated radio declared Obiang to be a god who is "in permanent contact with the Almighty" and "can decide to kill without anyone calling him to account and without going to hell."
Saudi Arabia - $29,842,400,000 Led by King and Prime Minister ABDALLAH bin Abd al-Aziz Al Saud who rules under Sharia Law and with absolute power. The home country of most of the 9/11 hijackers
Iraq - $13,402,800,000 Led only in the loosest terms by Prime Minister Nuri al-MALIKI a veritable black hole for the money we send them, and a country again only in the loosest terms.

5) There is more than just crude
Petroleum products imported by the United States during 2007 included gasoline, diesel fuel, heating oil, jet fuel, chemical feedstocks, asphalt, and other products. Net imports of petroleum other than crude oil were 10% of the petroleum consumed in the United States during 2007. This represents considerably more than 10% of the cost because these refined products cost more by volume than crude.

In light of the above it should be a national imperative to achieve energy independence. If there is a decrease in supply, an increased demand from other countries, or both, the price may be a whole lot higher in the not too distant future. Not only am I sick of paying usurious prices for petroleum products I am sick of who I am paying them to. It is beneath us to be not only associated with these folks but to support them and their repugnant regimes.

This country has the ability to bring to bear a force of intellect unequaled in the history of our species. It's time to express the outrage we all feel every time we go to a gas station or pay our utility bills. This country is great because we saved the world from psychotic despots in oppressive and violent regimes, supplied much of the world with food, technology, and monetary aid, and have led the nations of the world as a beacon of democracy and freedom. We have taken on and repulsed the assault of monsters, achieved incredible feats in science, and prospered in a fashion unknown before us. We must not allow ourselves to be exsanguinated by our addiction to imported petroleum. We must rise to this problem with the zeal of the righteous, and the determination to not just survive but to leave our children with a better and more prosperous nation than we have, the way our parents did. We are in danger of being the first generation in our history to leave a less prosperous nation to its children.

“Energy is the single most important problem facing humanity today — not just the U.S., but also worldwide.”
— Nobel Laureate Dr. Richard Smalley

We have arrived at a crossroads as a nation, and are called upon as we have been before, we must come together as Americans and repel the threat as we have before, lest our legacy be that of the generation that let it's children down.

This will not be easy, we need the contributions of our universities, the best in the world. Our industrial base, who made the weapons of war when called upon will make the weapons of energy production. And most of all our citizenry who supported our efforts with victory gardens and war bonds, must lend their support by conservation and holding our politicians of all parties to a standard worthy of their predecessors and the founding documents they swore to support.

Disclaimer
The author owns equity and debt securities of the United States of America

References
The Energy Information Administration
The Federal Reserve Bank of St. Louis


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