Black Gold Texas Tea Essay, Research Paper

Trevor MacKenzie

Black Gold the Texas Tea

In this paper I will touch on topics of oil prices, the demise and growth of oil companies large and small and international oil regulators, natural oil deposits and their locations and life expectancy, and the future of the oil industry and all it effects. I have chosen to write on this topic because of personal interest in the world?s biggest resource, oil. In past years I have thought of how the modern world revolves around certain elements and ideas, one of these is oil. I wanted to try to get answers to questions I have had about ?How long can we keep extracting oil from the Earth?? and ?How will people overcome a worldwide complete oil scarcity?? When I try to answer these questions to myself I get frustrated because there are so many variables that contribute to answer such questions that it boggles my mind. So I have an opportunity to learn or partially learn the answers in researching this broad topic of the oil industry. My connection to this topic is just like any other average American. I use oil in some way shape or form every day, whether I am driving my car, heating my house, or typing a research paper I am directly or indirectly using oil. I am affected by oil in countless ways by means of which are mostly out of my control. For instance companies who use oil to make products that burn holes in the Ozone layer, or that fuel air polluting combustion engines can effect the climate, and health of our planet in the long run. What I do know about the oil on our planet is that we are using it all up at alarming rates. Since 1859 when Colonel Drake dug the first oil well we have been steadily using up the oil hidden below the earth?s crust. If substantial solutions to the future oil crisis are not complete there will be tremendous worldwide repercussions of political, economic, and social unrest. I want to learn much more about this topic because it fascinates me as a reality and a problem in which so much time, money, ingenuity, and effort will be put into solving. I am also interested the rise of oil prices and the control of oil trade worldwide. I want to know a good estimate on how much longer this resource will be abundant. Also on when and how oil will be to scarce and expensive to use in today?s conventional uses.

In finding information for my topic I used a few different methods, like using the Internet, ProQuest databases, and utilizing the Colby library. During the Colby trip I was still unsure on what my topic was. I knew I was going to write it on oil but I didn?t know what aspects of oil. In searching for periodicals I found a few topics I liked and stuck with them. I found more and more articles with topics pertaining to my subject of oil companies, natural deposits, and the future of oil. I spent too much time looking through articles and stuff on the computer that I didn?t spend any time looking for a book or primary source. I did however eventually find a primary source through ProQuest. I feel all of my other sources are sufficient in the amount of information needed to write this paper. I have articles from many different magazines, journals, and one newspaper source. The process was time consuming but paid off in retrieving the information I wanted.

The number one resource of all time is dwindling fast to depletion without major solution or alternative to the problem. Oil is used in every country all over the world, we depend on it, and we have learned to tame and convert it into many diverse and useful products. The extent of oil left in the world that is easy to use is a guess and has been estimated by many. The exact amount of oil is unknown, and there is going to be a point when we have used or extracted as much as possible from the earth. Mankind has a major problem on its hands and there are no answers to the problem. New ideas, technologies, resources, and an unpredictable future are our only hopes of overcoming an oil crisis.

Our society to day runs on energy, pure energy. Some comes from the sun, some from water, some from wind, some from nuclear power, but most comes from oil. ?Oil accounts for 38% of all energy used.? People depend on oil and oil companies that sell and deliver that oil to the consumer. Hundreds of oil companies have been competing over land rich in oil for years and they will continue to fight. These companies lease or buy land from a government in countries all over the world and drill for oil. The country and company drilling both get profit from the oil sold to different companies and different countries. Large oil companies like Mobil and Exxon who just merged have a larger market of people buying their oil. Because they hold the rights to thousands of wells all over the world and produce a lot of oil, these ventures bring in a lot of money. However a small company like Gerrity Oil with wells in the Denver-Julesberg Basin in eastern Colorado, will not bring in as much money but may still be as successful as Mobil, just on a smaller market. American independent companies like Gerrity are thought to have been disappearing but small independents are moving in and finding oil where larger companies said there was none. Although independents don?t sell to a world market they do sell their oil to local businesses, other oil companies, and refineries. Mobile and Exxon merging, British Petroleum buying Amoco, and Ultamar Diamond Shamrock buying Total Petroleum inc., are striving to find big oil buyers like the U.S., and gain economic control over other companies by merging or buying out other companies. Merging two big companies can cause problems like cost cutting which means cutting workers, which leads to high unemployment rate that lowers the economy. The mergers and takeovers are being driven by imminent oil shortage with big political and economic problems, like discontinuing trade agreements and bringing other industries to a halt. The Organization of Petroleum Exporting Countries (OPEC) ?produces 35% of the world?s total oil supply? is basically a policeman of the oil producing countries. Companies that operate in OPEC regulated countries (Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, Qatar, and Venezuela) must comply with oil production regulations to keep prices and sales from varying too much. This means that companies that buy from OPEC regulated countries can only buy so much and sell so much, therefore there is no chance of flooding the market with cheaper oil from high production countries. World oil regulators like OPEC are key players in amounts of oil produced, sold, and bought by countries. If there were no regulations on the amount of oil produced and sold there would be tremendous highs and lows in the price and availability of oil.

Oil geologists that specialize in estimating the world oil supply state that (90% of oil fields have been tapped and many are drilled to exhaustion.? As our deposits are being used up there has been a major step forward in finding new oil to feed upcoming big buyers. Technology has allowed new ways of finding oil, 3 dimensional seismic analysis, infared detectors, and radar from space satellites are now used to locate oil deposits on land and in deep offshore fields. Two major new sites that are being tapped for oil is the Gulf of Mexico and offshore of West Africa. In the Gulf of Mexico ?5.9 million acres off of Alabama and the Florida panhandle will be sold for development by December 2000.? Areas around this huge plot have been drilled, but the new developments mean that we need to expand our search and extraction of oil. The seas off the coast of Nigeria (Africa?s biggest oil producer) is another major site for new development. Triton Energy made a major discovery on the southern part of a 125-mile long strip of undeveloped oil fields. Technology of drilling in offshore wells has advanced tremendously since 1965 where drills could operate under 300 feet of water. Now Chevron is drilling at 9,000 feet underwater. The major drawback of deep water drilling is that it is very expensive. Countries that have the ability to produce a lot of oil are held back from selling too much oil by OPEC regulations. In September, Iran?s output of oil amounted 26.13 million barrels per day (b/d) which was a huge increase from 140,000 b/d in August. Countries that disregard OPEC regulations by producing more oil than allowed to set off industry price standards by selling the oil cheaper to foreign companies which make bigger profit margins and disrupt oil prices. With up coming big oil buying countries like India, which by the year 2001-02 will double its oil imports from the 1998-99 year. With new buyers the trade of oil will become stricter and companies will have closer ties to dependant customers. In Asia, oil consumption has increased largely because countries are becoming modernized with new industries and economic prospects. ?Usage of oil has jumped by 50% in Asia and by one third in Latin America. By 2010, world oil demands will have risen by 60% or more.? With our oil in more demand and the supply of oil decreasing, there will be serious repercussions in world economies.

The biggest question in the oil industry is ?How long will the oil last?? Many believe that our supplies are almost gone and others believe that we will never run out of oil. The world has never run out of a major resource because technology has found a substitute or preserved the resource before depletion. This is news tending to give hope to the life of oil, and perhaps top oil geologists like Colin Campbell are wrong, but not very likely. ?Historical evidence suggest that oil will be around for as long as we need it. The world will never run out of oil, not in 10,000 years.? Says M.A. Adelman, a top oil industry researcher. The Energy Information Agency of the Department of Energy said, ?The fact is that estimates of the amount of oil in the Earth have been increasing for the past 8 years.? The Department of Energy also estimates that tar sands in Canada and extra heavy oil deposits in Venezuela contain the equal amount of about 1 trillion barrels, which is slightly more than all the oil ever burned. Colin J. Campbell an Oxford trained geologist with his colleague Jean H Laherre presented a paper titled ?The Coming Oil Crisis? to a conference of the UN International Energy Agency (IEA) in Paris last year. The contents of the paper are very firm on the idea that the oil industry will come to a peak in production and oil will run out in a few short years. Colin Campbell and Jean Laherre are both top geologists for Total, Texaco, and Amoco for over 40 years and work in an oil industry think tank called Petroconsultants. The IEA used the views of Campbell and Laherre that between 2010 and 2020 the oil crisis will be in full swing. Campbell explains ?The production of easily extractable, conventional oil is set to peak around 2005, preceded by a potential spike in crude oil prices.? Campbell also states that ?1.6 trillion barrels of conventional oil have been found so far out of an estimated 1.8 trillion barrels of ultimate recoverable reserves.? The paper continues with facts like that about 90% of oil production comes from drilled oil fields that are over 20 years old, and that these fields cannot be reevaluated to see any more large scale production. The world discovery rate of oil is at 6 billion barrels per year, and annual worldwide consumption of oil is about 24 billion barrels. This means we are using 4 times the amount we are producing and we cannot continue this trend forever. For one barrel of oil offers 10 times the raw power for our uses than it takes to get it. Campbell insists that there are steps that can be taken which will not only buy time, but also allow oil prices to rise in a more gradual and managed way. A solution he suggests is requiring that no country may produce oil above its current annual depletion rate or import production from any country that is exceeding its depletion rate.

The future of life without oil is almost at hand, as soon as we run out countries will fight over the remaining oil fields. The struggle for national prosperity fuelled by energy production will be the rich and powerful countries that have technologies to produce alternate forms of energy. These alternates include harnessing wind energy, hydroelectric power, and solar power. More exploration into these fields will result in new and improved versions of renewable resource power supplies. However alternative energy sources require more energy to get them running than they will ever produce. The threat of nuclear warfare is scary but can be a reality that plagues all nations involved in an energy crisis. Campbell explains mythical prospects of finding new and advanced ways of extracting oil out of heavy oil deposits like oil shale, and the thick leftovers of drilled wells.

It amuses me how our number one industry is the oil industry, and it will be the first major industry or resource to be depleted by over production, and unconventional uses. We have learned to completely rely on oil for transportation, heat, plastics, and many other uses, that when the wells dry up we will not know what to do with what we have created to use oil. Thousands upon thousands of automobiles and airplanes standing idle rotting away in fields for lack of a better use. The only way we will know what will happen is when we cross that unknowing bridge into the future without oil.

Anonymous; ?India?s oil imports jump as refineries start up? Oil and Gas

Journal; Tulsa; 7 Jun. 1999 Vol. 97, Issue 23, 27

Campbell, Colin J.- Laherre, Jean H; ?The Coming Oil Crisis? UN International

Energy Agency summit; Paris; Nov 98

Michael Sivy; ?How Pricier Oil can fuel Profits? Money; New York; Nov. 1999

Vol. 28, Issue 11, 39

Perdue, Jeanne M; ?Alaska Offers 516 Beaufort Sea Tracts? Petroleum Engineer

International; Houston; Sep. 1999 Vol. 72, Issue 9, 9

Rizvi, Sajid; ?Time for Stable, not Higher, Oil prices? United Press International;

28 Sep. 1999, 1

Srodes, James ?Oil Alarm drives Giants? Merger?, Finance Week;

Johannesburg; 20 Aug. 1998. Vol. 76, Issue 33, 22

Taylor, Alex III, ?Oil Forever?, Fortune; New York; 22 Nov. 1999

Vol. 140, Issue 10, 193

Tom Stewart-Gordon, ?Denver Reemerging as a Key U.S. Independent Oil

Center?, The Oil Daily; 23 April 1992, 1