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Stationary Energy

Oil

The U.S. is the largest consumer of oil and the third largest oil producer after Saudi Arabia and Russia. Oil production takes place in 29 states and oil extraction employs about 125,000 Americans. Total employment for the domestic oil and natural gas sectors is about 1.5 million.

Consumption: Americans use more oil in absolute terms than any other nation. Petroleum supplies almost 40% of the energy consumed in the U.S. This percentage has remained steady since 1950. In 2004 residential and commercial consumption represented 6.3% of total petroleum use in the U.S. Industrial use, which includes refineries and petrochemical industries, represented 25% of consumption, electric use consumed 2.5% and the transportation sector consumed 66% of U.S. petroleum. Among industrialized nations, the U.S. consumes the highest ratio of oil to GDP at 7.5 gallons of oil per $1,000 GDP. Anticipated growth in domestic demand for oil is expected to reach 29 million barrels per day by 2025. This is an increase of more than 40% over current consumption levels.

Supply: U.S. oil production has been in gradual decline since 1970 when petroleum production peaked at 11.7 millions of barrels of oil per day (MBD). In 2000, the U.S. produced 8.7 MBD and 7.8 MBD in 2004. The Energy Information Administration projects this trend to continue. It also predicts that the highest rates of demand growth will occur in China, India, and Mexico. Domestic oil production is supported by several tax incentives including: (1) excess of percentage over cost depletion; (2) expensing of exploration and development costs; (3) oil and gas exception from passive loss limitation; and (4) credit for enhanced oil recovery costs. In 2004, the combined value of these subsidies was estimated to be between $134 billion and $149 billion.

Unconventional Oil: Unconventional oil includes heavy oil (oil sands), bitumen, syncrude, shale oil, and conventional heavy oil from tar sands. Colorado, Utah and Wyoming have an estimated equivalent of 1.8 trillion barrels of oil in oil shale. Canada has an estimated 10 billion barrels of unconventional oil and Venezuela about 230 billion barrels. High crude oil prices have increased interest in oil shale, however it not currently economically recoverable. The Energy Policy Act of 2005 identified oil shale as significant in decreasing economic dependency on foreign energy resources.

Strategic Petroleum Reserve (SPR): The U.S. government owns a complex of facilities in deep underground salt caverns along the Texas and Louisiana Gulf Coast filled with emergency supplies of crude oil. As of September 2004, the SPR had approximately 669 million barrels of oil, enough to sustain a loss of imported oil for 53 days.

This issue brief does not represent the viewpoint of the Energy Initiative or the positions of its individual members. This summary provides merely a starting point for the working group's education and discussion of the issue. To learn more about the working groups click here.