One of the underlying premises propping up the entire move toward alternative transportation is dwindling oil supplies and geopolitical risks and compromises involved in securing them.
While most readers of HybridCars.com know America is struggling to manage its “addiction to oil,” not to mention myriad other issues, according to a post today by the Energy Policy Information Center (EPIC), the world’s two most oil-rich nations are also seriously mismanaging their national oil reserves.
The two OPEC nations, Venezuela and Saudi Arabia, have proven reserves of 18 percent and 16 percent of the world’s total respectively; 296.5 billion barrels in Venezuela and 265.4 billion barrels in the Saudi Kingdom.
In the case of Venezuela, it’s already financially upside-down in importing refined petroleum products, and at its present rate of consumption, Saudi Arabia is projected to begin importing crude oil within three decades.
Both these countries curry political favor and endow their citizens with rich social programs including enviably cheap gasoline – around 60 cents per gallon in Saudi Arabia, and 9 cents a gallon in Venezuela.
Meanwhile they are doing too little to set themselves up for long term sustainability – which in turn stands to affect the rest of the world sooner or later.
In Venezuela, President Hugo Chavez cut oil production from 3.38 million barrels per day (mbd) between 1998 when first elected to 2.7 mbd last year. He’s up for re-election again in October, and estimates are Venezuelan social programs received $53 billion from 2006-2010 while oil exploration investments received but $1 billion.
The country imports refined petroleum products including gasoline from the U.S. at a rate of 40,000 gallons per day paying as much as $200 per barrel at international prices.
At the same time it makes 95 percent of its money from exporting crude oil. If Brent crude drops from $100 per barrel to $85, that means a loss of 2.5 percent of the top heavy country’s GDP. Ouch.
And meanwhile, the picture is also unbalanced in Saudi Arabia where it is estimated 10 times more energy is consumed than the world average per unit of economic growth.
It actually consumes a third of all it produces, about 2.9 million barrels a day, and may have to begin importing crude petroleum by 2038 at the rate it is going.
Long before that, offers EPIC, the Kingdom’s economy would collapse as it, like Venezuela, has for all intents and purposes no other source of sizable revenue than the oil it is burning at a mind-numbing pace.
“Both Saudi Arabia and Venezuela are caught in a bit of a budgeting Catch-22,” says the Energy Policy Information Center. “With the possibility of a flush global oil market driving down prices and wreaking havoc on these nations’ budgets and GDPs, ramping up production to fill the gap will no longer serve as a silver bullet to fix all that ails their economies.”
So why does this matter to Americans?
A number of reasons, but a major one is the U.S. is not insulated from potential failures in Venezuela or Saudi Arabia, said Justin Kitsch, vice president of communications for the Washington-based non-profit advocacy group Securing America’s Future Energy (SAFE), which also oversees EPIC.
The United States is still highly vulnerable to a volatile geopolitical state of affairs, said Kitsch, as it is effectively dependent solely on oil for its transportation sector.
“We are subject to the whims of the global oil market and regardless of how much oil a country produces, the real risk is on the consumption side,” he said. “When you look at the factors outside of the control of the U.S. such as geopolitical tensions, instability in the Middle East or Venezuela, or rising demands from developing nations such as India or China, as long as our transportation sector is utterly dependent on oil, then we do not have energy security.
“An oil disruption anywhere can affect prices everywhere,” Kitsch continued, “and that is a clear demonstration of our country’s energy insecurity.”
SAFE advocates an all-of-the-above approach toward American energy security which for now includes oil drilling and expanded use of natural gas, while also aggressively pushing toward “green” technologies including hybrid and electric.