What if? Disruptions to world oil supplies
What if the uprisings that are currently spreading across northern Africa and the Middle East affected world oil supplies?
Yesterday, David Wogan published a thoughtful post about the potential consequences of disruptions to our oil supply. He has been studying alternative transportation fuels at The University of Texas at Austin as a graduate student researcher for the past 3 years and it acutely aware of the sensitivity of the U.S. to disruptions to our oil supply. And, in the face of recent uprisings and unrest in northern Africa and the Middle East, David took a moment to discuss world oil markets and their sensitivity to changes in oil production levels.
Oil is traded on a world market, with tankers of crude constantly moving across the world’s oceans. It has become a world market in part because of its portability – it can be easily pumped and stored in its liquid form, unlike natural gas that must be compressed and stored in pressurized containers. Refined petroleum products, such as jet fuel, are also traded between countries. The United States, while a net importer of oil, still exports billions of barrels of refined products every year.
In his post, David explores what might happen if unrest in Egypt expanded into the Middle East, which is home to 1/5 of the world’s oil production and 70% of its spare capacity. He discusses the world oil market’s sensitivity to even small production disruptions, while discussing the particular sensitivity of the United States, which depends on petroleum to power (almost) its entire transportation fleet.
Our vehicle fleet is almost entirely depended on liquid petroleum, leaving us vulnerable to political crises around the world – regardless of where the oil comes from. Some would point to the Strategic Petroleum Reserve as an option, but it is a short-term solution, and even then its long-term viability is questionable. Natural gas is also a global commodity, andenvironmental concerns about hydraulic fracturing make domestic production a tough deal to sell.
Therefore, the United States is left in a predicament where even though it might like to see a change of power in the Middle East, it is ill-prepared to deal with the outcomes.