An oil refinery in Houston (Photo: Roger Wollstadt)
The search for energy independence has been a central issue for the presidential candidates. But six major oil companies recently applied for permits to begin exporting U.S. crude. Economist Joe Stanislaw discusses the implications of this and the United State’s role in the global energy economy with host Steve Curwood.
CURWOOD: Well, the Presidential candidates may debate US energy independence, but there may be less of an energy shortfall than the heated rhetoric would suggest.
The evidence for that? A group of six major oil companies – including BP and Shell – has just applied for permits to begin exporting U.S. crude oil abroad, starting with sending some of North Dakota’s light sweet crude to Canada, where refiners will pay a higher price.
If permits are granted, this would mark the first time in decades that oil companies were selling significant amounts of U.S. crude internationally. For some inside intelligence on the state of the American energy economy, we turn to Joe Stanislaw, economist and independent senior advisor to Deloitte. Joe Stanislaw, welcome to Living on Earth.
STANISLAW: Thank you for having me Steve.
CURWOOD: Oil companies are selling US oil abroad? What do you make of this news?
STANISLAW: It’s quite exciting news in many ways and challenging news. There’s a different mindset in the world of energy today than there was five years ago or 10 years ago. The United States is producing more and more oil and more and more natural gas. We’re going from a mindset of scarcity, to not surplus, but to real supply potential in the United States. That’s a different mindset.
CURWOOD: Is it a momentary bump in the oil supply or do you think this is a real trend now?
STANISLAW: I would call this a tectonic shift. The potential for North America to really be self-sufficient in energy and oil and gas, and the United States, potentially, in 10 or 15 years. This is really a major shift.
CURWOOD: The whole world of energy just changed then, is what you’re telling me.
STANISLAW: It has. Simply put it has. This is like an earthquake in the mindset of the global energy community and the US energy community.
CURWOOD: What’s causing this tectonic shift? Why do we suddenly have so much oil compared to what we’ve had in the past?
STANISLAW: You know, we’ve known about this oil shale, this shale of natural gas for seven decades or longer, we’ve know it’s down there. We had no way of getting it out. Technology has changed and technology advances. We have something called horizontal drilling. That’s where you put a well straight down and you say – I want to go left or I want to go right 90 degrees ¬– and you can make that shaft go left 90 degrees or right 90 degrees for five miles. Then you tie that to something else called fracking that can go into that shaft – now, fracking is controversial to many people – but you combine fracking with horizontal drilling and you’ve just changed the game.
Why has this happened? I’m going to use a terrible term, but I mean it in a very positive light; because of what I call crazy technology entrepreneurs. These are the people who owned that acreage with those mineral rights and said: ‘I have an asset and I have no way of getting it out.’ So these people worked on this to produce this technology, and it was small - they were the smaller companies, and some of the small oil folks who did this and the big guys bought into it and they’re now doing it globally because the potential is huge.
These crazy technology entrepreneurs exist all over the energy space. On the solar side, the heat pump side, the geothermal side, the efficiency side, etc. That’s part of this tectonic shift.
CURWOOD: Now, where is this oil going? Is this oil just going to Canada, or the world?
STANISLAW: We have actually been exporting crude oil to Canada before. Very small quantities. Usually less than 100,000 barrels per day, and there are conditions for that. You have to show economic and technical reasons why you can’t use it yourself, so you can export it, you have to be able to stop that export at a moment’s notice. The real issue is as we go down the road… two years, five years, ten years, will that expand from Canada to other countries?
CURWOOD: And where might it go then?
STANISLAW: It can go to a variety of different markets. It can go to different parts of South America, it could go to Europe, definitely it could go to China. You actually have people discussing port facilities on the West Coast primarily in Canada, to ship Canadian crude, which they can export obviously, toward Asia, which means primarily China or Japan.
They’re testing the waters now because these companies have what they call stranded oil, stranded because they can’t get the real value for the oil they actually have. You have all this oil sitting in the United States and it can’t go to the proper market. So the companies who produce it want to get more value, thus export becomes a route. So the little toe in the water, which is Canada, by all these companies, may become a foot in the water and then more going forward.
CURWOOD: So, both major Presidential candidates, President Barack Obama, Governor Romney are talking a lot about energy independence, what do you think about this idea of energy independence?
STANISLAW: Well, this mind change, this is a hard adjustment. I thought that I would never say that we would become independent or self-sufficient. But I’ve been saying it for five years - we have the potential to do that. Can we realize it? that’s a different question.
But we actually have the potential to do that. That’s significant. This means economic development and growth. Think about oil and gas. Think about gas – natural gas. You know, this is a major fuel for manufacturing industries. And it also helps us make the adjustments down the road to adjust to a different world, which may be a less-carbon world, and this can help that process by having more robust growth in the United States.
CURWOOD: Joe, can you clarify something for me? What’s the difference in your mind between energy independence and energy self-sufficiency?
STANISLAW: I’m very pleased that you brought this up, actually. You hear energy independence, and people think: ‘Oh, we have our own oil and gas, therefore gasoline can be a dollar fifty a gallon because we’re independent and we can charge what we want. Also, because we have all of the energy we need, we don’t have to worry about the Middle East, the security of oil flows around the world…’ Sufficiency doesn’t say that.
Self-sufficiency says that we have our own, we’re secure. But the reality of the market is, because we have all of the oil that we need, in ten or fifteen year’s time, we don’t control the price of oil… the market controls the price of oil. It’s a global price. So we could have all we want here, if there’s a major blow-up in the Middle East, the prices are going to go up.
CURWOOD: How soon do you think we’ll be able to produce that much oil to be self-sufficient here?
STANISLAW: We are right now producing, depending upon the day, between six and a half to seven million barrels per day. Call it seven. North America can meet all that demand, I think, if we really do everything right, and everything clicks correctly, which probably won’t happen, by 2020. The United States could probably do it by 2025 or 2030. If we do everything right. Now, when I say that, I mean, do things properly environmentally, for the community, to get the oil out of the ground safely.
But, equally, when I say that, I mean that we have to work on the demand side of the equation as well. The car fuel efficiency, making those homes more insulated, it’s also looking at the car fleet, some more cars that we’ll be using… more electric vehicles. Some will become natural gas vehicles. If we push in all those dimensions, plus a supply curve we could be.
CURWOOD: Now, to do this, Joe, do we need to use all this oil that’s in the tar sands of Canada that is so concerning to folks who look at the ecological effects of going after those tar sands?
STANISLAW: If I can do one thing – rather than call it tar sands, if I can – call it oil sands. Slight nuance there, but it’s an important one. It’s an important potential ingredient for the North American supply chain, there’s no question. I think one has to look at the oil sands and compare them to other crude oils, and also look at the oil sands and see what they’ve done in the past decade or two in their own environmental footprint, which has been significant.
They’re not perfect, they’re not 100 percent clean, but the strides they have made in reducing the amount of energy they use to produce the oil is significant, they’ve cut it by over half. Water usage is down by over a half. The scar that people worry about – the footprint – the visible footprint – they now have continuous land reclamation. You dig from one side and you replace from the other side. This is phenomenal stuff.
A lot more work needs to be done, and these companies are working on it, but when you talk about North America being energy self sufficient by the end of this decade, the oil sands plays into that. Does it mean we stay on oil permanently? I don’t think it does. I think it helps us make the path wider to get to where we want to get on the carbon side eventually. And I think we have to have a way there if we want to get robust growth and think about growth differently. It’s not the old growth we had, it’s the new growth we want to get to.
CURWOOD: Joe Stanislaw is an economist and an independent senior advisor to Deloitte. Thank you so much for coming in Joe!
STANISLAW: Steve, thank you for having me, I've enjoyed it!
Living on Earth wants to hear from you!
P.O. Box 990007
Boston, MA, USA 02199
Donate to Living on Earth!
Living on Earth is an independent media program and relies entirely on contributions from listeners and institutions supporting public service. Please donate now to preserve an independent environmental voice.
Sailors For The Sea: Be the change you want to sea.
Innovating to make the world a better, more sustainable place to live. Listen to the race to 9 billion
The Grantham Foundation for the Protection of the Environment: Committed to protecting and improving the health of the global environment.
Energy Foundation: Serving the public interest by helping to build a strong, clean energy economy.
Contribute to Living on Earth and receive, as our gift to you, an archival print of one of Mark Seth Lender's extraordinary wildlife photographs. Follow the link to see Mark's current collection of photographs.
Buy a signed copy of Mark Seth Lender's book Smeagull the Seagull & support Living on Earth