Reducing US Oil Imports By a Third

Reportedly, President Obama is about to make a major speech on energy policy, and it seems that somebody gave a great deal of advance detail to the New York Times:

With gasoline prices rising, oil supplies from the Middle East pinched by political upheaval and growing calls in Congress for expanded domestic oil and gas production, President Obama on Wednesday will set a goal of a one-third reduction in oil imports over the next decade, aides said Tuesday.

The president, in a speech to be delivered at Georgetown University, will say that the United States needs, for geopolitical and economic reasons, to reduce its reliance on imported oil, according to White House officials who provided a preview of the speech on the condition that they not be identified.

The graph above shows the history of oil imports, together with the President's goal (assumed to mean a reduction by 1/3 from 2010 levels by 2020).  You can see that, since 2006, we have in fact been on about the right trajectory required to accomplish the President's goal.  So, all it should take, then, is another decade of big oil shocks and major recessions to get there.  Be careful what you wish for, Mr President...

The required reduction in imports is about 4mbd (from the graph above).  If we look also at the domestic production picture, we get this (with imports in red stacked on domestic crude production in blue):

Note that this is roughly equivalent to consumption (but the equivalence is really quite rough because of things like refinery gains).

You can see that production has generally been declining since the US peak in 1970, with two periods of growth - the period in the late 1970s and early 1980s when prices were high and Alaska was coming on stream, and the last two years, when prices have again been sustainedly high.

If I had to guess about the future of domestic crude production, my guess would be roughly flat - depletion of old fields together with restrictions on offshore drilling post Macondo, will tend to counter the effects of high prices.

If we didn't have a decade of major oil shocks and recessions, we would expect US usage to grow at something like the historical rate - 1.5%/year between 1983 and 2005 (and note that 2010 grew 1.2% over 2009, so even an anemic recovery with modestly high oil prices caused immediate resumption in usage growth).  That would add about 2.5mbd of additional usage between 2010 and 2020.

So really, a reduction of 4mbd in imports is going to mean about 6-7mbd of conservation relative to "business as usual" - here meaning conditions that feel similar to the mid eighties and nineties.

Of course, then there's this:

Just projecting out the historical rate of Chinese oil consumption growth over the next decade gives another 8-9mbd of Chinese demand by 2020.  Unless global production can be raised significantly, that, and corresponding amounts in other developing countries, are going to have to come out of the consumption of the US and Europe.

So I think the mostly likely outcome is recessions and oil shocks, and that President Obama may get his desired import reduction.  The major things that could change that include 1) if the Cheney/Al-Shahristani plan comes to fruition on schedule, and 2) if China experiences a major bubble bursting event that depresses its internal demand, while leaving its ability to export intact.

In other notes on the speech plans:

He will call for a consistent long-term fuel-savings strategy of producing more electric cars, converting trucks to run on natural gas, building new refineries to brew billions of gallons of biofuels and setting new fuel-efficiency standards for vehicles. Congress has been debating these measures for years.

Emphasis mine. Could we please leave the bolded part out? Trying to save fuel by increasing food prices is not going to improve things in the Middle East and make us more secure.

Also:

Mr. Obama is also expected to renew his call from the State of the Union address to increase the percentage of electricity produced from so-called clean sources to 80 percent from the current 40 percent by 2035. The president’s definition of clean energy includes renewable sources like wind, solar, hydro and geothermal, as well as nuclear, natural gas and coal with carbon capture and storage, an as-yet-unproved technology.

Could the President please explain why, despite these calls, wind power investment in the US has collapsed on his watch?