CAN THE UNITED STATES BE INDEPENDENT OF MIDDLE EAST OIL?

1
CAN THE UNITED STATES BE INDEPENDENT OF MIDDLE
EAST OIL?

• By
• Ibrahim M. Oweiss
• Professor of Economics
• Georgetown University, SFS
• Address before Academic Bridge Program,
• Education City
• Doha, Qatar
• May 2, 2006

2
STATEMENTS OF PRESIDNENT BUSH

• State of the Union Address on January 31, 2006
  claiming we replace more than 75 percent of our
  oil imports from the Middle East by 2025
• Saying on February 20, 2006 the nation is on the
  verge of technological breakthroughs that would
  "startle" most Americans

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THE PROBLEM?

• Continued rise on the price of oil
• Continued increase in US Consumption of oil
  Addiction to Oil
• Continued decline in US oil reserves
• Continued decline in US production of oil
• Continued increase in US oil imports

4
US Production of Oil

• Dwindling over the years
• It was 8.3 m/b/d in 1994
• In 2004, it was 7.2 m/b/d and decreasing

• Two main reasons
• Proved reserves are decreasing from 3.6 bb in
  1994 to 2.9 in 2004
• Environmental concerns over oil exploration in
  Alaska
• With no new discoveries of oil, the US will run
  out of oil in 10 years

5
US Consumption of Oil

• In contrast with a declining internal US
  production of oil, US consumption has been on the
  rise
• Steady annual increase from 17.7 m/b/d in 1994 to
  20.5 m/b/d in 2004
• US consumption 20.5 m/b/d 25 of world
• Gap between US production of oil and its
  consumption keeps widening over the years
• US imports of oil will then have to rise unless
  there is a technological breakthrough and/or new
  discoveries of oil

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US Imports of Oil 12.9 m/b/d

• From
• S Central America 20.5
• Middle East 19.4
• Canada 16.4
• Mexico 12.7
• West Africa 12.7
• Europe 7.6
• North Africa 3.7

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To address what President Bush called a serious
problem
Advanced Energy Initiative -- a 22 percent
increase in clean-energy research -- at the
Department of Energy
His three points to achieve the goal

• To double federal funding for scientific research
  in the next 10 years
• Tax credit to encourage bolder private-sector
  initiatives in technology
• To encourage children to take more math and
  science

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President Bushs Goal
To replace more than 75 percent of our oil
imports from the Middle East by 2025

• It contradicts his statement on the Dubai port
  issue, it would send a terrible signal to
  friends and allies
• It did not take into account market realities
• It did not learn from the failure of President
  Nixons project energy independence announced in
  1974
• His 3-point proposal may be NECESSARY for
  technological breakthroughs in developing and
  using alternate sources of energy, but cannot be
  considered SUFFICIENT.

9
Oil Reserves
Proved Reserves Share of Total R/P ratio
   
USA 2.50 11.1 years
Iraq 9.70 Over 100 years
Kuwait 8.30 Over 100 years
Oman 0.50 19.4 years
Qatar 1.30 42.0 years
Saudi Arabia 22.10 67.8 years
United Arab Emirates 8.20 Over 100 years
Total Middle East 61.70 81.6 years
OPEC 74.90 73.9 years
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United States Dependency on Middle East Oil

• In the absence of new discoveries or
  technological breakthroughs, such dependency will
  rise not fall.
• Almost two thirds of proved oil reserves are in
  the Middle East
• Middle East oil continues to gain market share.
• Russias production rose substantially
• Largest decline in oil production were in U.K.
  and the USA

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Technologies to reduce dependency on oil

• Use of existing technologies and new emerging
  ones cannot be known with certainty Department
  of Energy (DOE)
• Zero energy homes using solid state lighting
  (SSL). Semi Conductor Light Emitting Diode (LED)
  and Organic Light Emitting Diode (OLED) are both
  commercially available but at high cost
• Research on development of efficient and long
  lasting batteries for electric-gas hybrid cars
  including plug-ins. a nickel-metal-hybrid
  battery, the kind that powers most
  hybrid-electric vehicles, and a small one with
  lithium-ion battery yet to be developed in the
  future by Johnson Controls Inc. laboratory, in
  Milwaukee Wisconsin
• To speed the development of biofuels such as
  "cellulosic" ethanol made from wood chips or
  sawgrass
• "Roof makers will one day be able to make a solar
  roof that protects you from the elements and at
  the same time, powers your house President Bush

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In contrasting the existing technologies to
replace oil against market realities, I predict
that the US will double its oil imports form the
Middle East by the year 2023
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Can the United States be Independent of Middle
East Oil?

• Not in the foreseeable future
• Yes in the long run

But the late Lord John Maynard Keynes once
said In the long run we are all dead.