The Global Oil AddictionThe Global Oil Addiction

Some FactsSome Facts

Israel’s security = Eliminate oil addiction

• The first strategic priority of Israel’s defense policy is to minimize US dependency on oil

• The second priority of Israel’s defense policy is to minimize the world’s dependency on oil

IEA forecast of global all-oil production, mbd

Source : IEA, The Guardian Newspaper

US: Oil share of goods & services trade deficit

0%

10%

20%

30%

40%

50%

60%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009 *

Source: US Bureau of Economic Analysis * Jan-Nov 2009

Oil and the US Defense Budget

More than 50% of the US defense issues are oil related:

•Protecting the “Oil States”(e.g., the Gulf War, Iraq)

•Protecting the “Oil Routes”(Navy)

•War on Terror (Radical Islam)

Oil Prices and Recession

Every major recession in the last 40 years was preceded by a rise in oil prices.

Can the US/world come out of the recession when oil is 80$?

Israel: Oil share of GDP

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Net oil imports of oil in millions, present value $

Expenditure on oil as % of GDP

Oil imports as a % of total imports

Source: Modelim estimates

Africa: Oil share of trade deficit

Country Fuel Imports as % of current account balance

Kenya -174%

Senegal -90%

Tanzania -85%

Uganda -124%

Mali -83%

Source: Development Indicators, World Bank, 2007

What is the best way to reduce US oil dependency?

•Nuclear

•Wind

•Solar

•None of the above

Oil is hardly used (1%) to generate electricity

2008 United States Electric

Power

OIL

1%

GAS

22%

COAL

48%

MISC

2%

HYDRO

6%WIND

1%

NUCLE

AR

20%

If the US replaced all of its coal based electricity with nuclear, wind or solar… it would not reduce its oil dependency by a single gallon.

Source: US Energy Information Administration

What is the largest source of CO2 in the US?

CoalorOil?

2008 United States

Total CO2 emissions (Mt)

COAL,

2125,

37%

OIL,

2436,

42%

GAS,

1242,

21%

Source: US Energy Information Administration

It is oil

Distorted Priorities

• The US Stimulus Bill allocated $64 billion to electricity/coal related energy (like CCS, wind and solar) and only $3 billion to oil replacement issues.

• If our goal is to reduce CO2 emissions, why aren't we attacking the larger source?

Death Tolls - A Comparison

• Deaths as result of oil related wars (last 35 years)-

6- 6.7 million

• Possible deaths as result of oil related wars (next 20 years)-

100 million

• Possible deaths as result of global warming (next 20-50-80 years)-

Hard to determine, but according to IPCC the severe impact

will happen in 50-80 years

A Question of Priorities

Putting Climate Change ahead of eliminating the strategic value of oil … it is like a physician telling a 25 year old… “You have brain tumor and without treatment you will die in three years. However, we will not do anything about it. Instead you should take medicine to reduce your cholesterol.”

We have a brain tumor

It is called global oil dependency:

• It ruins our economy

• It funds radical Islam

• It kills millions today and most likely will be the cause of a new world war

It is time to get our priorities right

Drill, baby, drill ?

The United States:• Uses 23% of world oil supply• Has 3% of the world's oil reserves• Most likely production costs of new US

oil findings at $50-100 /barrel

OPEC:• 79% of the world’s oil reserves • Production costs under $10 /barrel

Save – efficiency – CAFE

• If the US will implement the current CAFE standards, its oil consumption in 2030 will be a few percent lower than today

• Yes – we should improve efficiency (and faster), but we cannot save our way off oil

• Smoking 18 cigarettes a day instead of 20 is marginal – we need to quit smoking altogether

What is the increase of OPEC production since 1973?

•100%

•50%

•20%

•-2%

OPEC since 1973- Controlling Oil Supply (and prices)

15

17

19

21

23

25

27

29

31

33

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009 a

nnualize

d

Year

mbd

0%

20%

40%

60%

80%

100%

120%

Indexed a

gain

st

1973 p

roducti

on

levels

Source: Energy Information Administration

OPEC Crude Oil Production

82

83

84

85

86

87

88

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09

2727.52828.52929.53030.53131.532

Global Oil Demand, mbd OPEC Avg Production, mbd

What happened in 2008?

Demand falls… OPEC cuts production

Source: Oil Market Report, IEA and EIA

21

SummarySummary

Food vs. Fuel

One of the best false PR campaigns in history

Guess who said this?

“Ethanol and other biofuels do not meet environmental and energy security goals… their cultivation eats into the human food supply, reduces the absorption of carbon dioxide as forests are cut down, has not improved the security of energy supply and has not reduced petrol prices… we have to look beyond biofuels… and concentrate instead on truly renewable sources of energy,” he said, flagging solar energy as “perhaps the best source”

Ali Al-Naimi Ali Al-Naimi Saudi Minister of Petroleum and Mineral Resources at Saudi Minister of Petroleum and Mineral Resources at

the International Oil Summitthe International Oil Summit ` `

Biofuels- Good for oil or Bad for oil?

The US no longer produces electricity from oil. Whereas biofuels:

• Directly displace oil

• Snatch petrodollars from the Saudi coffers

Merrill Lynch Commodity Strategist Francisco Blanch:

Without biofuels, the price of oil would be about 15% higher than it now is.

It’s the OIL - not the Ethanol.

Higher commodity prices (like corn) are driven by OIL prices, not Ethanol production volumes!

Sources: NYMEX, USDA, RFA

The campaign against biofuels

The Lie:

“Growing biofuels destroys the rainforests”

The Truth- Growing biofuels does not destroy the rainforests

• Brazil has substituted over 50% of what would be its gasoline consumption with ethanol sugarcane

• Should Brazil double its ethanol production, this would take up 3.3% of its total agricultural land

• This land is not the Amazon

• In fact, you cannot grow sugarcane in the Amazon

A Billion Acres Of Abandoned Agricultural Land

Source: Campbell et al., Env. Sci. Technol. (2008) ASAP Article, 10.1021/es800052w

Not Enough Land For Biomass?

Total Global Acreage 26B acres

ForestForest CropsCrops PasturePasture OtherOther

8B acres 3.2B acres

6.8B acres

4B acres

10% = .6810% = .68

0.675 B acres x 20 t/ac x 2.38 B / t

= 88M barrels per day

Source: Ceres, FAO Statistical Database

Varying regional yields are barriers to meeting food demand

Corn Yield

1990 1995 2000 2005

Year

Bushels

per

Acre

0

20

40

60

80

100

120

140

160USA

China

World Average

Brazil

India

Sub-SaharanAfricaArgentina

Source: IMF

Historically, food is not expensive

Food expenditures by families and individuals as

percentage of disposable personal income

0

5

10

15

20

25

30

1929

1932

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

Year

Perc

enta

ge

Home Away from Home TotalSource: USDA