New Big Lies on Big Oil

March 9, 2012

How much truth is there in President Obama’s latest favorite mantra that we consume a disproportionate share of the world’s oil, especially considering how little of the world’s reserves we have?

Recently, Obama said: “But here’s the thing about oil. We have about 2, maybe 3, percent of the world’s proven oil reserves. We use 25 percent of the world’s oil. So think about it. Even if we doubled the amount of oil that we produce, we’d still be short by a factor of five.”

First, let’s look at the raw numbers and then examine Obama’s misleading framing of the issue. This is important because he uses these statistics to justify his reckless expenditure of federal funds to pursue alternative “green” energy sources, such as the disgraceful and scandalous Solyndra project.

The United States has some 20 billion barrels of oil in reserves. By “reserves” we’re talking “proven” reserves, meaning those that are certain to be recoverable in future years from known reservoirs under existing economic and operating conditions. That is, we have 20 billion barrels of oil that is recoverable at current prices and under lands currently available for development.

That definition excludes many oil reserves that Obama has declared off-limits. According to the Institute for Energy Research, we have more than 1.4 trillion barrels of oil that is technically recoverable in the United States with existing technology. The largest deposits are located offshore, in portions of Alaska and in shale deposits in the Rocky Mountain states. So the United States has more recoverable oil than the rest of the non-North American world combined. The Heritage Foundation says this is enough to fuel every passenger car in the nation for 430 years. Therefore, “it is merely semantics — not a scientific assessment of what America has the capacity to produce — that allows critics to claim repeatedly that America is running out of energy.”

When you add in recoverable resources from Canada and Mexico, the total recoverable oil in North America exceeds 1.7 trillion barrels. “To put this in context, Saudi Arabia has about 260 billion barrels of oil in proved reserves.”

Another critical point: Even using the restrictive definition of reserves Obama is using, the 20-billion barrel figure is misleading, because Obama is clearly implying it is a fixed, or static, number — as though with every barrel of oil we consume, we are pushing the oil energy doomsday clock another second toward the apocalypse. But in fact, that number is not static, but constantly in flux.

The institute tells us that in 1980, for example, the United States had 30 billion barrels of oil in reserves. But over the next 30 years — through 2010 — we produced 77 billion barrels. Now, how can it be that we produced almost 2 1/2 times more oil than we had available, consumed a great deal and still ended up with plenty left over?

Obama’s own Energy Information Administration is predicting a steady increase in reserves on land currently available for exploration. Heritage’s David Kreutzer says, “It projects that improvements in technology and the economics of extraction, production, and sales actually will lead to a 23.7 percent increase in U.S. reserves — even after extracting billions of barrels of oil in the interim.”

There’s more. Obama’s formulation conflates two different measures. True, we might have only between 2 and 3 percent of the world’s recoverable reserves — as narrowly and misleadingly defined — but we don’t consume 25 percent of the world’s oil reserves, which is what Obama wants you to believe. We consume closer to 22 percent — but it’s not of reserves; it’s of the world’s oil production. But, as Heritage notes, “we consume about 22 percent of the world’s production of everything,” not just oil. Consumption is determined by income, not by available resources — and for those who are always knocking the United States, we also produce about 22 percent of the world’s total output of all goods and services.

Admittedly, we don’t produce 22 percent of the world’s total oil output; it’s more like 6 to 10 percent. But experts say this number will increase even if we don’t access the other abundant sources that Obama has declared off-limits.

For overblown and in some cases completely fabricated environmental concerns, Obama is preventing us from greatly expanding the pie of our oil reserves, from offshore drilling to Alaska to Keystone to fracking, and at the same time throwing government money down the ratholes of projects that aren’t sound and economically prudent enough to warrant substantial private investment dollars.

He’s told us he wants to bankrupt the coal industry, get us out of gas-driven cars and into electrical clunkers and onto bike paths, and increase the price of gas.

Why don’t we believe him?