Oil Crisis in America

Floor Speech

Mr. BARTLETT. Madam Speaker, I want to begin today with a chart that I usually use near the end of this presentation when I'm talking to an audience. I frequently don't have time to develop the chart as fully as one might, so I thought that today I would begin with this chart.

As I've said before, if you had only one chart that you could look at to get some idea as to where we are relative to the liquid fuel situation in the world, this would be the chart.

Let me first make a comment or two about energy in general. There's a lot of discussion of energy. Sometimes we talk about the various kinds of energy as if they were interchangeable. We will talk about electricity. We will talk about natural gas, and we will talk about oil. When we have a sudden increase supply of one--natural gas today--the assumption is made by some that, gee, we then don't have a problem with oil, do we, because we've had a problem with oil.

Now, for some uses these energy sources are fungible, they're exchangeable, and you can use one or the other. For instance, if you want to ride in a bus, we used to have buses that had a trolley on top and wires up there, and they were run with electricity. You see them run with natural gas, and most of them are run with a petroleum product that comes from oil. So with proper engineering, you can use any of these energy sources to run a bus. And streetcars, of course, were a bus on rails, and we've taken those out of most of our cities now.

But you will never run an airplane on anything but some product from oil. You cannot possibly get enough energy stored in a battery to do that. And natural gas, those molecules are very small and they don't like each other at all. They try to get as far apart as possible, so we squeeze on them to put them close together and under some considerable pressure, but we just can't get them to liquify so that we can get any concentrated energy source there. So for our airplanes, for instance, we're stuck with some product from oil.

For automobiles, we could certainly run them on electricity. We can certainly run them on natural gas. We now run most of them--about 97 percent of our transportation comes from oil. But to do that, we have to make a lot of changes in engineering and manufacturing, and it takes a long while to do that. The fleet out there runs about 16 to 18 years before you turn the fleet over, so it would be a long while before we could introduce a meaningful number of cars running on something other than some product of oil. Then we have to develop the infrastructure to support that.

We have been, now, 100 years in this country developing our current infrastructure. In this country, in the world, we are finding the oil. We are developing the fields for pumping the oil. We are transporting the oil. We're refining it. We're hauling it to the service stations. And there are millions of them around the country, wherever it's convenient and customers will come there and the owner can make a profit. One might note that government was hardly involved at all in any of these activities. It was the marketplace that drove this. But today we're going to be talking about oil.

We face a special crisis in oil; and it's not there in natural gas, and it's not there in electricity. For those who would have you believe that, because we can put in more nuclear power plants and wind and solar and micro hydro and true geothermal for electricity, we don't need to worry about oil because we can do it with electricity or natural gas, we can do it with natural gas; but we cannot change that quickly to avoid a crisis with oil if, indeed, we can't find enough oil to meet our demands.

Well, this is the one chart that I told you that if we had only one chart this would be the one that would tell you the most about where we've come from and where we're going with oil. This is billions of barrels per year that have been discovered here. These are the years in which they have been discovered on the bottom, and the bars here indicate the volume of that discovery.

You can see that we started discovering it way back in the thirties a little bit, and then a bunch in the forties; and, wow, the fifties, the sixties, the seventies and even into the eighties we were discovering oil.

If you add up all of these bars here, you get the total amount of oil that the world has found, and the amount that we have used is represented by this heavy dark line here. The amount that we've used is the same as the amount that we've produced because we're not storing anywhere any meaningful quantities of oil. So the production rate and the consumption rate are essentially the same thing.

There are several interesting things about this chart. Notice that from about the 1970s on, we have found less and less and less oil. And that was while we had a greater and greater interest in finding oil because we had a greater and greater use for oil.

The dark line here shows our use rate, and you notice that it was increasing exponentially up through the early seventies. Had this curve continued, and you can extrapolate it, it would have come out through the top of this graph. But a very fortuitous thing happened. We didn't think it was fortuitous at the time. It was anything but that at the time, but it was the Arab oil embargo. And I can remember that you went on even, odd days, the last number on your license plate, and there were long lines at the service stations, and some disagreements occurred in those lines. It was a difficult time for America. But that woke us up.

By the way, this was only a temporary disruption of the supply of oil because they just decided because they did not like our friendship for Israel that they weren't going to ship us the oil. There was plenty of oil to ship us, and we knew it would be there after this temporary crisis.

But it did wake us up. It reminded us that, gee, we had better be somewhat more provident in our use of oil. And so we set about being more efficient in the way we use this energy. A lot of things are more efficient today than they were then, in both the use of oil and electricity. For instance, your air conditioner is probably three times as efficient today as it was then, so you're using less electricity, relatively, now than you were then.

We became more efficient in our use of oil. You notice there was a little recession produced by this Arab oil embargo in the eighties there, and now the growth rate is slower. That's very fortunate because now the reserves that we have will last longer.

Notice that at about 1980, we, for the first time, started using more oil than we found. But no matter, because we have a lot of reserves. You see, everything above this curve represents reserves. All that we have used is what is under the curve, so above the curve represents reserves that we can use. And we cannot find enough to meet today's use, and that's been the situation since these curves crossed back here in about the eighties.

And so now we have been dipping into these reserves back here to find the oil that is above the oil that we've found to meet our demands for it. And by and by, these reserves, of course, will be exhausted. And so this was a prognostication made--when was it made? In about 2004, this prognostication was made that we were going to reach our maximum oil production here in just about this time, isn't it? Just about this time we were going to reach the maximum oil production, and then production of oil would fall off after that.

Now, it's anybody's guess as to how much oil we will find, and we're finding some meaningful fields of oil. If you find a 1 billion field of oil, that's a pretty big field of oil. So where is that on this chart? Well, this is 10 billion here, so 1 billion is way down here, just barely gets off the baseline here.

A really, really big find of oil is 10 billion barrels of oil. That's here.

Well, you can see that the big discoveries that we're finding today are dwarfed by the discoveries that we found a number of years ago. One of these discoveries was the great Ghawar oil field, the granddaddy of all oil fields in Saudi Arabia. It's been pumping oil now for 50 years, and we don't know how many years yet before exhaustion in that field.

By the way, that 10 billion barrels of oil that you find will last our world just exactly 120 days because every 12 days we use a billion barrels of oil. This is about sixth grade arithmetic. We're using about 84

million barrels of oil a day, and if you multiply that by 12, it's about 1,000, and 1,000 million is a billion. So about every 12 days we use a billion barrels of oil. That means that a huge oil discovery today will last the world 120 days.

Now, what happens in the future, you can draw that curve anyway you wish by what you postulate as to what we're going to find. You can actually have that curve going up, and some do, if you think that we're going to find enough oil to make that happen.

But this is the rate at which we've been finding--and remember that these ever-decreasing discoveries have occurred while we've had better and better technologies for finding oil. We had pretty poor technologies back here, but it was near the surface and readily available, so we found an awful lot of it. Now what we find is deep and hard to get at, and we have much better technologies for finding. So in spite of these improved technologies for finding oil, we have been finding less and less and less oil.

The next chart shows us what happened in our country and what is happening today in our country. I need to get a more recent one of these charts because it will show a little bit of a pick-up here at the end due to the Bakken oil. But this is the production of oil in our country.

Whenever I present this chart, I generally talk about the prognostications of the person I think gave the most important speech of the last century. It wasn't recognized then, and I think shortly now it will be recognized that the speech given by M. King Hubbert on the 8th day of March, 1956, was the most important speech in the last century. It was given to a group of oil people in San Antonio, Texas; and he made what was then an absolutely audacious prediction.

The speech was given in 1956, and here we are in 1956, and this is the amount of oil that we're producing. Oh, the orange on top here is natural gas liquids--that won't be in your gas tank; it is propane and butane and things like that--and oil from Texas and oil from the rest of the United States. But the total here is the line that we're interested in, and this is where we were in 1956.

You have to put this in context as to where we were as a country. The United States was king of oil. We were producing more oil, we were using more oil, we were exporting more oil than any other country in the world.

M. King Hubbert said that, in just about 14 years, right around 1970, the United States will reach its maximum oil production. From then on, no matter what you do, the production of oil will fall off. We don't have time today, but we may, at another time, go into how he made those predictions and why he was relatively certain that he was correct in making those predictions.

No one else had done that. And because we had always found huge amounts of oil, more than we were using, he was relegated to the lunatic fringe. And when in 1970 it happened, and when you were at 1980 and looked back, you really knew that it happened, didn't you, because you could look back and say, wow, 1970 was the peak, wasn't it? We're falling off the peak now, so M. King Hubbert was right.

Now, he did not include in his predictions oil from Alaska or the Gulf of Mexico because he looked at only the lower 48. You notice that that huge find in Alaska, we have a 4-foot pipeline up there, I've been up there where the pipeline begins, and we are producing about a fourth of all the oil in our country that flowed through that pipeline.

So it made a little blip here in the downhill slide. Then you remember not all that many years ago those fabled discoveries and production of oil in the Gulf of Mexico. You see it here. It's the little yellow here that made barely a ripple in the top line.

Well, this is the experience of the United States. Today we have drilled more oil wells than all the rest of the world put together. We're the most creative, innovative society in the world. We could not reverse this decline that M. King Hubbert said was going to happen.

He also predicted that at just about this time, the world would be reaching its maximum oil production.

Now, if the United States, if we, with all of our creativity and innovation, could not reverse this decline, when the world reaches this top point, which is called by most people peak oil, from which point you go down the other side, if we could not reverse that, what chances do you think there are that the world will do what we could not do? I think most people believe that we probably can do more, better than the rest of the world.

This is a chart of a couple or so years ago. These are the data from two entities that do the world's best job of tracking the production and consumption, which are essentially the same thing, of oil. This is the International Energy Association, a creature of the OECD in Europe, and the Energy Information Administration, a part of our own Department of Energy. These are their two curves here. You can see that they are very similar.

The caption up here says ``Peak Oil: Are We There Yet?'' Because they appeared to be leveling out. Now, this chart was drawn when oil was a bit under $100 a barrel. You remember if we extended this out a little, it went to $147 a barrel. These curves did not go up. We're roughly here at 84, 85 or so million barrels of oil a day or so. That's where we've been for 5 years now.

With increasing demand and no more supply, the price finally went up to $147 a barrel, and the economy with some help by the housing crisis in our country, came crashing down and oil dropped down to I think a bit below $40 a barrel. This has been a steady climb as the economy picked up from that time on, and oil, as you know now, is about $100 a barrel.

The next chart here, and I want you to remember this one because you're not going to find it on the Internet when you go there. These both appeared on the Internet. It's where we got them. These are charts produced by the IEA, the International Energy Association. This was called the World Energy Outlook. This top one here they did in 2008. I want you to note some interesting things about this chart.

The dark blue here is the production of oil, what we call conventional oil. If we went back to the other side of the Chamber here and started 100 years ago, you'd start at zero and then it would come up and up and up, slowly up, always producing just the amount of oil that the world wanted to use because it was the era and we could produce it.

So, we always met the demands for the use of oil in the world. It was 10 cents a barrel when it started, and within fairly recent memory it was $10 a barrel, really pretty cheap compared to $100 a barrel, isn't it?

So, they're saying that now this conventional oil that we've been pumping is going to reach a peak here. We reached that peak in our country in 1970, remember. After we reach that peak, it's now going to fall off. It's now going to go down the other side.

We're now producing total liquid--we say it's oil but some of it is natural gas liquids--about 84 million barrels a day. The top orange here is natural gas liquids. The green here is unconventional oil. That's oil like the tar sands of Alberta, Canada. That is really sticky stuff. They have a shovel that lifts 100 tons, dumps it in a truck that holds 400 tons, and then they cook it with some what we call stranded natural gas. That's natural gas where there's not a lot of people so there's not a big demand for it. We say it's stranded so it's quite cheap. They use that for heating and softening this oil. Then they put some solvents in it so that it will remain a liquid so that they can pump it.

The dark little red one up here, now it really should be a part of the blue one down here because it's simply enhanced oil recovery. It's squeezing a little bit more out of conventional oil by pumping live steam down there or seawater, as they do in Saudi Arabia, or CO

2 to get some more oil out of it.

They're prognosticating that by 2030 that we're going to be producing 106 million barrels of oil a day, and that's going to be possible in spite of this falloff in the production from our conventional sources because there's going to be huge productions that come from the fields that we have now discovered, the light blue here, but too tough to develop, and the red ones, fields yet to be discovered.

These represent pretty big wedges, and I want you to look at the relative magnitude of these wedges to the amount of oil that they said we would be producing from our conventional wells by 2030.

Now, 2 years later in 2010, they produced the chart on the bottom. There are several interesting things about this. They reversed the two things on top. They're exactly the same things. They have different colors and they've reversed them. This is unconventional oil, and this is natural gas liquids. They've now incorporated the enhanced oil recovery up here where it should have been, and the conventional oil. Notice now they're showing even a more precipitous dropoff, and now they go out to 2035.

Reality is setting in because now 5 years later, 5 years beyond this, they are not producing 106 million barrels a day. They say now the production will only be 96 million barrels a day.

But to get to that 96 million barrels a day, you have to postulate huge wedges in here from developing fields that we've discovered now but are hard to develop, like one in the Gulf of Mexico under 7,000 feet of water and 30,000 feet of rock, and the darker blue here, fields yet to be discovered.

Now, we were at this tipping point in 1970, and there is nothing we did in our country that kept this top curve going up. I have a lot of trouble understanding why people believe that the world will be able to do what we could not do. Notice these huge wedges that are supposed to be produced by just 2035. That's not very long from now, is it? I think that there is little probability that these wedges will be produced.

I think what's going to happen is that the world will do what the United States did. That this will tip over and the total production of oil worldwide will decrease.

The next chart is a very recent chart from the Deutsche Bank, and this shows the growth in oil production capacity versus demand. This is not how much we're producing. This is the growth in how much we're producing.

They think this chart tells a grim story. I think it tells an even grimmer story because I don't think we're going to have any increase in production. I hope we do. But we have not for 5 years now. I think we're stuck at where we are. Even if we have this increase in production, this is the increase in demand, and they say that an increase in demand is going to fall 20 percent short of the production.

Notice where most of that demand is. Red. Red China. That's where most of the increase in demand is.

China last year used 6 percent more oil than it did the year before. Worldwide, there was no more oil than there was the year before. So where did China get that oil? Well, we use less. We used to use, what, 21 million barrels a day? Now we're at 18 1/2 million barrels a day. We are driving less. We're driving more efficient cars. There are more people in the HOV lane.

Our military really has had a very aggressive and very successful program to be more energy efficient because energy is a huge part of their cost. If it goes up just a dollar a barrel, they have millions of dollars more cost in the military.

So for a lot of reasons, we've been more efficient in our country. Good news, because that meant that China could have more oil to use and the price didn't go above $100 a barrel.

Let me show you the next chart here, and this one I think, is a very interesting chart that kind of puts this in a worldwide perspective. The world is going to seem to be turned upside down with this.

This is what the world would look like if the size of the country were relative to how much oil it had. We see some very interesting things here.

Wow, Saudi Arabia dominates the planet in oil, doesn't it?--and it does. About 22 percent of all of the known reserves of oil in the world are in Saudi Arabia.

Look at little Kuwait, a tiny, little thing that looked to Saddam Hussein like a province that ought to belong to Iraq, and he went down there to take it. You remember that war. Look at Iraq and how much oil is there. Then Iran. Iran is pretty big.

In our hemisphere, Venezuela dwarfs everything else. They have more oil than everybody else put together in our hemisphere.

Here we are, the United States. We have only 2 percent of the reserves of oil in the world, and we use 25 percent of the oil in the world. Guess who our No. 1 importer is. It's Canada.

Look at Canada. Canada has even less oil than we do, but they don't have very many people, so they can export the oil.

Until fairly recently, Mexico was our No. 2 importer. They also have less oil than we do. They have a lot of people, but they're too poor to use the oil, so they can export it to us. The second largest oil field in the world, the Cantarell oil field, was in Mexico. It is now in rapid decline by something like 20 percent a year, so now Mexico is our No. 3 importer, and Saudi Arabia is our No. 2 importer of oil.

I want you to look at Europe. Boy, you need a magnifying glass to find it over here, don't you? This is Europe. It's bigger than we are in terms of an economy but with very little oil. It's really dependent on these huge supplies of oil from the Middle East.

Russia, spanning 11 time zones up there, is not all that big. They're the world's, I think, No. 1 producer of oil now because they're pumping really hard in their oil fields. They have a lot of oil, and it will last for a while but nowhere near as long as that of Saudi Arabia and Iraq and Iran.

By the way, as to Iran, if the current increase in use rate and if the current production rates remain the same, those curves will cross within less than a decade, and Iran will be an oil importer. That is also true of Mexico, by the way. They're going to be an oil importer within a decade. If you look at the rate of increase in the use of oil and in the production of oil, those curves will cross in less than a decade.

The real alarming picture occurs when you look at China and India over there. They're tiny, little countries in this world according to oil--China with 1.3 billion people, India with over 1 billion people and with very little oil. What is China doing about this? China is buying up oil all over the world. We use 25 percent of the world's oil. It's a bit less now since we slowed down a little, but it has been 25 percent of the world's oil, two-thirds or more of which we import, and we're not buying oil anywhere.

Why wouldn't the nation that uses the most oil and has, relative to its use, the least be buying oil somewhere else? Well, there is no need to buy the oil. It doesn't matter who owns it, because the person who gets it is the person who comes with the dollars and buys the oil--and let's hope it stays dollars at the global petroleum auction.

So why isn't China content to just take their money--and they've got a lot of it. Why don't they just take their money and buy the oil? I think that they understand that there will be a shortage of oil in the future--and I hope I'm wrong in this prediction--and that China may one day say that they can't share that oil. This is going to create some huge geopolitical tensions in the world.

What does all of this mean?

This means that we have a huge challenge in our country. This is good news to me because I think that we can, once again, become an exporting country and that we can create millions of jobs with the green technology that produces the alternatives that inevitably will occur. One day, we will produce as much energy as we use in this country. Geology will assure that that happens.

I hope that we get there through a really winning economy when we recognize that we have to rise to this challenge. I think America with its creativity and innovation can create the technologies and the products it will sell worldwide to help us in this huge challenge that we face with a limited supply of oil and the ever-increasing growth in the need for oil.

Madam Speaker, I yield back the balance of my time.

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