The Growing Oil Crisis
THE “lifeblood” of every industrial nation is OIL, that is, petroleum. Without it many homes would go unheated in winter. There would be no gasoline for automobiles, trucks and tractors, or fuel for airplanes.
A host of electric appliances would not function without oil. Lights, ovens, washing machines, air-conditioners, television sets and many others would shut off. Why? Because much of the electricity used in the world today comes from generators fueled by oil.
Most machines depend on lubricants made from oil. Too, without oil a wide range of products would be affected. These include paints, plastics, synthetic fibers and rubber, fertilizers and others. Their production involves the use of oil.
Truly, if oil were no longer available, the economies of the industrial nations would grind to a halt in a matter of months! Even serious shortages would be severely damaging, as has been evidenced by what has happened since the Arab lands have cut down the amount of oil they were supplying other nations.
Which industrial nations are especially hard hit? An American official states: “An energy crisis of unprecedented dimensions today grips the whole world. It hits hardest at advanced industrial lands dependent on the Middle East as prime source of oil, among them the United States, Japan and the nations of western Europe.”
But why the crisis? Aside from the Arab cutoffs, was the world running out of oil? Would there still have been a shortage? Why are the Western nations and Japan so affected, and not the Communist lands?
Is Oil Running Out?
First of all, is the world’s supply of oil running out? No, there is not really a shortage of oil on this planet, as of now. True, if present usage continues, someday it could conceivably run out. But that is not the case now, for proved reserves are more than enough for the industrial nations for quite a few years yet.
However, there is indeed an oil crisis. One reason centers on the availability of the oil. In some places it is being used faster than new oil can be pumped out of the ground and refined into its various products. Any nation that uses more oil than it produces will have a problem. And the world is using it so fast that at times it has trouble getting enough from various sources. Time magazine says: “The world’s consumption of oil is increasing by 8% a year, and U.S. consumption, now nearly 40% of the total, is rising by 8.7%.”
This leads to the more fundamental problem: the largest oil users are often the ones that do not have large supplies within their borders. They are more often ‘oil poor,’ not having enough reserves within the ground that they can tap. The western European nations have hardly any oil pools at all within their borders. Japan has very little. And the United States has far less than it needs, with its oil fields tapering off due to overuse for many years.
So there is enough oil still under the ground to last large users such as western Europe, Japan and the United States several decades. But because they are using it so fast, and because the large reserves they need are not found within their borders, they have the problem of trying to get it from where it is available. That is not so easy.
Other Energy Sources?
However, are there not other sources of energy that the industrial nations of the West and Japan can use instead of oil? Why not atomic energy, natural gas, coal, water power, or even solar (sun) energy?
Such other energy sources have been used, or are under development. But none of them can fill the gap in energy requirements for the next ten to fifteen years at least. The demand for energy rises so fast that these other sources simply cannot provide enough at present. They can only supplement the use of oil, not replace it.
For instance, atomic energy has been hailed as a future major energy source. But it is not that as of now. Scientists do not expect it to be for at least another decade or two. Also, atomic energy is mainly used as a fuel for generators to make electricity. But can it fuel automobiles, tractors, airplanes? Not in the near future. So while atomic energy can generate electricity, and is doing so on a relatively small scale now, it does not solve the energy problem that exists today and that will worsen in the next few years. Also, there is the problem of radiation pollution that may jeopardize its use on more than a limited scale.
How about coal? Coal is abundant in many areas. It can be used as a fuel to turn generators making electricity. It can also be used for heating homes and in other ways. But to use it in such things as automobiles it must be converted to a liquid fuel. This is an expensive process. Oil is cheaper. Also, coal is generally regarded as a “dirty” fuel, a greater pollutant than “cleaner” oil. For this reason, in some areas where pollution standards have been set, it is not possible to use coal.
But is there not talk of large amounts of oil-containing rocks (known as shale) in the western United States? Also, how about the oil-containing sands of Canada? There is said to be billions of barrels of oil locked into those rocks and sands. True, but the cost of getting the oil out is far greater than the cost of merely pumping it directly from the ground. Entire industries would have to be developed to process the huge quantities that would be needed. It is not at all likely that this can or will be done in time to satisfy the growing demand for fuel.
What about water power? The building of dams along rivers harnesses the mighty power of water. But this is principally as a source of generating electricity. The descending water turns generators that make electricity. But such a source of energy is limited. It cannot fuel automobiles. It cannot provide lubricants for the machinery of industry. Also, in many lands the use of rivers and dams even for the generation of electricity is limited. That is why water power contributes only a small part of the total energy produced today. It will contribute an even smaller proportion in the near future as the energy demands soar.
Natural gas is also a desired energy source. But the nations of western Europe and Japan have little. In the United States, natural gas production is not likely to increase much, as new fields are harder and harder to find. Yet it is in these particular nations that the demand for energy fuels leaps ahead.
Is solar energy, the energy that can be harnessed from the sun, the answer? Someday—perhaps. But surely not in time to meet the growing crisis now.
Thus, to repeat—there are oil shale, oil sands, water power, natural gas, coal, solar energy, even wood—yet none of these energy sources can take the place of oil during the time of crisis now and in the near future. The industrial nations are simply too locked into oil use to be able to make the vast, rapid and very expensive changes to another fuel in the next ten to fifteen years, even if it were somehow possible.
However, since there is enough oil somewhere on earth, could the nations simply pump it up faster to meet demand? There is no assurance that they could. Why not? Because the oil needed, especially by western Europe, Japan and the United States is not theirs to control. That is the real problem.
As noted previously, Japan produces only a small amount of oil. Western Europe produces very little, although oil fields now being developed in the North Sea will help somewhat. But these North Sea fields are not expected to produce enough in the next ten years to supply anything but a fraction of the demand. In the United States, its oil fields are now producing at peak capacity. And the oil is being used up faster than new oil-producing areas can be found. Not even the incoming Alaska oil fields will make enough of a difference in the 1970’s. That Alaska production will be far more than offset by growing demand.
Thus, a leading company in the oil industry states: “The U.S. . . . faces a critical oil-and-gas supply problem from now to about 1985.” And it adds: “We are not alone in this critical supply problem for the next 12 to 15 years. Europe and Japan are facing the same problem.” The New York Times also says:
“In the 1970’s a new common danger threatens the industrialized societies of Western Europe, North America and Japan. . . .
“Talk of an energy crisis is now commonplace in all the major industrial capitals. . . .
“A committee of the European Parliament warned that the lights could go out ‘quite literally’ by 1980 if conclusive steps to coordinate energy sources are not taken immediately.”
Huge Imports Needed
What all of this means is that these industrial nations are required to import huge amounts of oil. And in the immediate future they will have to import far more. As U.S. News & World Report comments: “Only imports keep the lights burning and machines running.”
For example, Japan uses about 5,000,000 barrels of oil every day. It has to import practically all of that! Of those imports, about 90 percent come from the Middle East. It is estimated that by 1980 Japan could be using as much as 13,000,000 barrels a day. Nearly all of that, too, would have to be imported, mostly from the Middle East.
Western Europe uses about 15,000,000 barrels of oil a day. Nearly all of that is imported. About 80 percent of these imports come from the Middle East and North Africa. If oil usage there continues to grow, experts assert, by 1980 western Europe would be using 26,000,000 barrels a day, mostly imported. Even the North Sea oil fields now being developed could, according to most estimates, provide only about 3,000,000 barrels a day by 1980. The rest would have to come mostly from the Middle East and North Africa.
The United States produced less than 11,000,000 barrels of oil a day in 1973. But it used more than 17,000,000 barrels a day! So it had to import over 6,000,000 barrels each day to make up the difference. Thus, in 1973 it imported about 35 percent of its oil. And domestic production is expected to decline in the future as its own oil fields are ‘running down’ from long usage.
For the United States, the situation, if it continued, would become far more serious by the end of the 1970’s. By 1980, some authorities estimate, the nation would be using about 27,000,000 barrels of oil each day. Of that, about 15,000,000 would have to be imported—over 55 percent! By 1980, it is claimed, production in the ‘lower 48’ states would drop to about 10,000,000 barrels a day. Some 2,000,000 barrels a day would come from Alaskan oil fields, leaving the 15,000,000-barrel deficit. Most of that would have to come from the largest supply available, the Middle East and North Africa.
During the winter of 1972-73 Americans had problems getting enough heating oil due to shortages. The result was that some factories and even schools temporarily closed down. Also, in the summer of 1973 some had difficulty getting enough gasoline for their automobiles. Europeans had similar problems. So even before the Arab cutoff of oil to the United States the fact of the matter was just as the Los Angeles Herald-Examiner reports: “The U.S., which currently has no spare oil production capacity, is becoming increasingly dependent on foreign oil.” And the New York Times adds:
“There is general agreement in industry and government that Western Hemisphere sources will be unable to expand their shipments to the United States significantly and that the bulk of the future increases in crude oil imports will have to come from the Eastern Hemisphere sources in the Middle East and Africa.”
Canada, a major supplier of oil to the United States, is also having its problems. So it may soon have to curtail its oil and gas exports. The Toronto Star relates:
“Canada faces a return to the era of the horse and buggy and the dirty coal furnace unless we protect our [oil] resources against rapid depletion by the energy-hungry United States, warns Toronto geophysicist J. Tuzo Wilson, one of the world’s most distinguished scientists.
“Demands on dwindling supplies of oil and natural gas could plunge North American civilization into a desperate crisis within 10 years, he says . . .
“‘The demands for gas and oil are so insatiable and rising so rapidly that it is clear that Arctic petroleum reserves offer no long-term solution to the problem of energy supplies,’ writes Wilson.”
Thus, like it or not, North America, western Europe and Japan will have to import more and more oil from other countries, and in gigantic quantities. This creates several huge problems. One is because the only proved sources of such vast oil deposits are in two places generally unfavorable to those nations.
The first location is in the Arab and Moslem lands of the Middle East and North Africa. The second-largest proved oil reserve is found in the Soviet Union. This means that the Communist and Arab-Moslem lands control the largest oil sources on earth. And we have seen what can happen to those sources since the latest Arab-Israeli war.
Yet, the location of these oil reserves poses not only political problems, but also enormous financial ones for the nations buying the oil. How so?
The cost of imported oil to the United States, western Europe and Japan is already gigantic. They are paying billions of dollars a year for this oil, principally to the producing countries of the Middle East and North Africa.
Even if the price of oil stayed the same, the increased volume needed by the industrial nations that are short would cost them a growing fortune. But the price of oil has not stayed the same! It has been going up sharply, more than double what it was a few years ago. And everyone expects the price to keep going up, since the demand for oil grows by leaps and bounds.
That is why authorities state that, no matter what happens, the price of energy in all its forms, especially oil, is bound to go up in the future. The days of cheaper fuels, of low-priced gasoline for automobiles, are gone.
Because of the much higher costs, and growing needs for imports, the consuming nations have to pay out more and more money to buy the oil. This worsens the deficits in their balance of payments with other nations. In other words, they spend more than they are able to make. This increased spending of such vast sums is bound to heat up the already bad inflation in those nations. It pushes higher the prices and costs of many things, not just oil. This is because people who use oil products pay higher prices, and they will eventually demand higher wages to make up for it. Higher wage costs make manufacturers increase the price they charge for their products. So the higher and higher cost of oil fans the flames of what is already bad inflation.
The United States, the foundation of the Western world’s economy, has already been having grave problems with its balance of payments. For many years the country has been spending more money than it has made overseas, going farther and farther in debt to other nations. The payments it will have to make for rising oil imports will worsen the situation.
To illustrate: during 1973 it is estimated that the United States spent about $7 billion for oil imports. By 1975 economists expect this to rise to $15 billion. By 1980, says James Akins, American ambassador to Saudi Arabia, the cost of imported oil “would be more than 40 billion dollars a year in outflow.” Such staggering payments would be very difficult to make. Few experts think that the United States would be able to export enough products to pay for all of that. It becomes apparent, then, why the oil problem is called a crisis.
The situation is not much different for Canada, western Europe and Japan. All those nations will have growing difficulty paying for the staggering quantities of oil they will have to import in the years just ahead.
Yet, what if these nations are not able to pay for that oil, or for some reason supplies are curtailed? Then the industrial way of life of North America, western Europe and Japan, as we know it today, will be drastically changed.
Since the Soviet Union has large reserves of oil, it is not confronted with such shortages. It, together with Romania’s smaller oil fields, can supply the Communist nations of eastern Europe. So the Soviet Union and its friends are in a good position. So also the Arab and Moslem nations of the Middle East and North Africa, and their friends.
But that is not the case with North America, western Europe and Japan. They already have a problem getting enough oil, and that problem can only grow in the next few years. What it really means is that every person living in such countries will have his life affected one way or another. The cost of things, the entire way of life of those nations, will never be the same again.
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OIL PRODUCTION AND USE
MILLIONS OF BARRELS OF OIL PER DAY
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WHERE THE WORLD’S LARGEST OIL RESERVES ARE FOUND
Gulf of Aden