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Artic National Wildlife Refuge (ANWR)
US production of crude oil has declined every year since 2000. This has increased reliance on imports as demand has grown. Annually the US produces 5 million bpd from over 500,000 oil wells – averaging 10.5 barrels per well per day. As these relatively small existing wells dry up the ANWR in Alaska is increasingly being seen as America’s lifeline. The US Geological Survey in 1998 estimated that the area known as ANWR 1002, had between 4.3 and 11.8 billion barrels of technically recoverable crude oil. According to the Geological Survey the mean value within this low and high range was 7.7 billion barrels.
ANWR 1002 could therefore boost US proven oil reserves, which currently amount to 29 billion barrels, by 26% assuming the mean value, or by up to 40% assuming the high value. Clearly, a significant increase. Once tapped, it may be reasonable to assume ANWR 1002 production level of say 1 million barrels per day, which would reduce America’s import requirement by 5% at current consumption levels.
Competing for supplies: China on the horizon
If the addiction seems painful now, than by 2025 it may become even more costly and difficult to satisfy. An important factor in pushing crude oil prices to above $70 per barrel in late 2005 was the increase in world demand coming from the growth in emerging economies such as China. According to data from the EIA, in 2005 Chinese oil demand rose to about 7 million bpd, an increase of 6.5% year on year - higher than the growth in OECD countries. China’s drive for oil is being driven by oil-generated power generation, in contrast to the US whose demand is heavily dependent on the transport sector.
It is argued that if China maintains such a growth in oil demand, than it will overtake the USA’s 2005 consumption level of 21 million bpd, by around 2020. Include India’s quest for oil supplies, to power its economic growth, and you will see competition intensify for limited oil supplies even further. At the same time, as untapped proven reserves are located in the Middle East, the world, over time will be increasingly dependent on oil supplies from the unstable Persian Gulf. In such a climate, due to America’s addiction to oil, the country will be acutely vulnerable to the establishment of new independent regimes, which oppose US foreign policy. Hence: the justification by successive administrations for continued long term strategic involvement in Middle Eastern affairs.
While the detail of some of these future scenarios may be contested it is generally accepted that the main source for future world oil supplies will be the Persian Gulf. Just four countries in the Persian Gulf - Saudi Arabia, Iraq, Iran and Kuwait - together account for an overwhelming 50% of the world’s proven crude oil reserves, according to BP’s Statistical Review of 2005. Increasing dependence on Persian Gulf oil, will be the same for China as it is for the US and other countries. This than raises the greater geopolitical issue of countries like Russia, China and India challenging America’s monopoly on the politics of the region?
Additionally, the potential for new regimes using their energy supplies as tools in conducting foreign policy is not limited to the Middle East. Russia, on 1 January 2006, the day on which it assumed the G8 presidency, suspended all natural gas supplies to Ukraine over a dispute over gas pricing, leading to shortages, which impacted much of Europe.
In conclusion, America’s consumption of petrol is staggeringly high – 375 million gallons per day. However, given its high GDP per capita; large size; low population density; and the lifestyle choices of its people, which are built around the car and consumer goods - its addiction to oil is perhaps unsurprising. With the normally trumpeted alternatives to petrol – ethanol; and the fuel cell – still fundamentally in the development phase America’s thirst for oil will in reality remain high and continue to expand. Indeed, as competing economies grow, countries like Russia, Nigeria and Venezuela become less reliable and while oil reserves deplete and become more concentrated in the Persian Gulf, America’s damaged foreign policy may come under a renewed set of challenges.
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