Oil like Natural Gas - Term Paper Example

? How Much Oil Is There In The World? Definition of Oil Oil may be described as a non-renewable resource which continues to have great impact on the lives of many. Despite its entire prowess, it has inarguable been one of the most influential factors of political clashes and carries with it severe environmental consequences. Oil like Natural Gas, is a fossil fuel and takes million of years to develop. It’s called a fossil fuel because of its formational characteristics (Lee, “What is Oil?” Pg.1). The oil being consumed today was composed millions of years ago. The composure of such a commodity is actually a rather intriguing and unique procedure. Tiny plants and animals and die and sink to the bottom of shallow waters. Then clay and silt cover the thin layer of organisms which begin to decay. The process becomes repetitive and after millions of years, the clay sand, silt from rocks, and the decomposed organisms beneath the rock layers generate into a dark heavy liquid now known as OIL. With reference to Lee’s article “What is Oil?” it is used facilitate a variety of things. It contributes to the creation of fuel, paint, detergent, trash bags etc once it is refined. However, the most widespread use of oil is the fueling of our vehicles, as oil is the main source of locomotion. History of Oil Historians speculate that oil has been flowing since the time of Herodotus-(a Greek Historian during the 5th century), but was being used as a liniment of medicine and not as fuel and also for building purposes. The history of uses’ website explained that oil flows from springs just like water. Some of these springs were in western Pennsylvania and obtained by the Seneca Indians, who used it for medicinal purposes. The site also reported that that the first oil well was drilled by Edwin Drake in 1859 in the area. An article from bydesign.com reported that the well was 69 feet deep and produced 15 barrels a day. The area quickly blossomed and the modern oil industry was born. Then later Texas and Oklahoma became the centers of US production. In addition the Middle East became a major supplier for US use as well after World War II. In previous generations, oil as a fuel was used as kerosene for lighting, replacing animal, vegetable and coal oils. It also became popular in the furnaces then the most popular with the development of automobiles. Presently all modes of transportation; cars, trucks, buses trains, ships or airplanes are fueled by oil, diesel or gasoline. Fuel Oil has become so predominantly essential that it is burnt to produce electricity which has always been a coal’s job. Locating the Oil The Science of locating oil is done through a variety of methods and is the main responsibility of Geologists. First they have to find the best conditions for an oil trap and best sources of rock as well as reservoir rocks and entrapment. According to Craig Freudenrich PhD, and Jonathon Strickland, geologists, many years ago interpreted surface features, surface rocks and soil types and perhaps some small core samples obtained by shallow drilling as a method of locating oil. In comparison to the modern era they now use sensitive gravity meters to measure changes in the Earth’s gravitational field which could indicate flowing oil. In addition they use sensitive magnetometers to measure changes in the earth’s magnetic field caused by flowing oil. Furthermore, they can detect the smell of hydrocarbons, using sensitive electronic noses called sniffers. However, the most common method used in detecting oil is seismology. By using seismology, it creates shock waves that pass through hidden rock layers and interpret the waves that are reflected at the surface. The shock waves are created by either of the following; a compressed air gun which shoots pulses of air into the water, or a thumper truck which slams heavy plates into the ground or by explosives which are detonated after being drilled into the ground or thrown overboard. As marked by Freudenrich and Strickland, the shock waves created by seismology travel beneath the surface of the Earth and are reflected back by the various rock layers. They also noted that reflections travel at different speeds depending upon the type or density of rock layers through which they must pass. In addition, the utilization of sensitive microphones or vibration detectors according to these said sources detect the reflections of the shock waves -- hydrophones over water, seismometers over land. The seismologists will then interpret the readings for signs of oil and gas traps. The Politics surrounding Oil Since the rise of the Petroleum Industry in the Middle East in the 20th century, Petroleum Politics became a crucial aspect of the diplomacy. Competition grew for this now vital non-renewable resource. The strategic calculations of both developing and developed countries had more emphasis on the pumping, refining, transport and the use of petroleum products. Edwin Drake’s success inspired many companies to explore for oil. Between 1860 and 1870 oil consumption in the US soared. California and Texas also explored oil potentials in the in 1879 and 1887 respectively. (Digital History, web, Apr 26, 2011) however, where Economics and surplus is concerned; production went up, prices fell and profits took a toll. According to Digital History’s website, John D. Rockefeller devised a solution to the problem in 1882 to control oil prices. Rockefeller established the Standard Oil Trust in 1863. After molding this business to become the largest Oil refinery, he bought competing companies to create one company. To be more precise, the Standard Oil Trust brought 40 of the Nation’s leading refineries together in an effort to control declining Oil profits. With reference to the said source oil production climbed along with consumption through to 1910. The American consumption was so high they feared depletion on this resource. Out of fear, the search grew worldwide and discoveries were made. Oil was discovered in Mexico in the early 20th century, Iran in 1908, and Venezuela in the World War I and in Iraq in 1927. Unfortunately, this discovered oil occurred in areas either dominated by Britain and the Netherlands: the Dutch East Indies, Iran and British Mandates in the Middle East. By 1919, Britain controlled more than 50% of the world’s proven oil reserves. After World War I, a bitter struggle ensued between countries for the control of the oil reserves erupted. America was exempted from buying oil fields from territories under the British, French or Dutch control. Fortunately, the Americans fear of depletion suddenly ended in 1924, with the discovery of immense oil fields in Texas Oklahoma and California. Here another surplus was experienced, as oil prices declined because of mass production. By World War II, the oil surpluses disappeared and 95% of the oil used in the World War came from the US. By this time again, fear of depletion struck the Americans. They turned the attentions overseas-this time to the Persian Gulf. Britain gained control over Iran’s oil field in the 1930s and the US made new discoveries in Kuwait and Saudi Arabia. The ending of the war saw an increase in the Middle Eastern oil production whilst America’s dependence on imported oil grew. The Oil Industry hit crisis in the 1970s. Oil prices quadrupled in 1973 and 1974 and doubled in 1978 and 1979. This resulted in a surplus in goods and the demand fell. This is also one of the main factors that lead Iraq to invade Kuwait in an effort to gain control of over 40% of their Middle Eastern Oil reserves. (Digital History, web, Apr 26, 2011) Economics of Oil The mounting demand of Oil will continue to increase despite climbing oil prices. There are a myriad of reasons for the increase in demand-one being industrialization. It was projected by the energy outlook of 2010 that a 50% between the years 2007-2035 will take place. There are also other factors that propel production and demand while enhancing growth. Unfortunately Oil Production suffered a massive decline in 1986 due to high projection costs. Then 1988, imported oil price fell so low-it was lower than in 1973 year of the OPEC embargo. This factor is one of the main reasons crude oil production in the United States in 1998 was at its lowest level since the early 1950's. However, maintained low crude oil prices have led many domestic independent producers to either shut in or idle their wells in 1998. The dramatic effects of lower oil prices have not really been felt by the US due to the increased productivity of U.S. exploration, development, and production activities, which is reflected in the decrease in the cost of producing oil and gas and, except for the past few years, the decrease in the cost of adding reserves. Some declines in exploration, development, and production costs occurred mainly because of the technological advancement in the industry. In addition Lifting costs in the United States for the major U.S. petroleum companies have been generally decreasing moderately since 1986 and adjusted for inflation; domestic lifting costs for these companies in 1997 were 38 percent lower than their level in 1986. The Petroleum Industry has been changing drastically with regards to its structure. The smaller companies are keeping a foot in as their role became larger the development of U.S. oil and gas resources. Production shares by non-majors in the business (including independent oil and gas producers, pipeline companies, foreign-based companies, and a variety of other companies) has been generally increasing since 1986. The smaller production companies are so competitive-they drilled more oil than the majors in the 1900s. The small companies drill smaller fields and as such they have a faster depletion rates than the majors. However, the birth of new technology, the smaller companies had a better chance to reduce finding costs to levels comparable to those of the majors. The US Oil Reserves Consequently being in fear of depletion of oil America is trying to stock up on reserves. The New York Times published an article on January 23, 2003 that reported that the country controlled only 3% of the of the world’s proven oil reserves. However, they are unable to capitalize on production because they are constantly being hindered by Environmental Activists. Many peer reviewed sources have expressed that America’s reserves will be sufficient for now. However, this may be an unsafe assumption, as no one is sure what the rate of industrialization will take place or factors to increase demand. According to Jim Ostroff, (Associate Editor, the Kiplinger Letter, Jun 2008), he noted that The U.S. is sitting on the world's largest, untapped oil reserves -- reservoirs which energy experts know exist, but which have not yet been tapped and may not be attainable with current technology. He then stated that, such untapped reserves are estimated at about 2.3 trillion barrels, nearly three times more than the reserves held by Organization of Petroleum Exporting Countries (OPEC) nations and sufficient to meet 300 years of demand -- at today's levels -- for auto, truck, aircraft, heating and industrial fuel, without importing a single barrel of oil. America has some of the largest untapped reserves and Oil shales are one such. The article from Ostroff noted that the oil extracted from the field represents a portion of the reserves-an estimated 1.5 trillion barrels or roughly 200 years worth of supplies at current usage levels. It is also estimated that two-thirds of the oil-shales fields are in Colorado, Wyoming and Utah are in federally-protected areas and closed to development. However, with the present technological opportunities, it is proving a challenge to get to such resource. Ostroff also marked that in order to make oil shale production economical, crude oil prices must remain above $50 a barrel for a protracted period. With the on-going oil prices, oil companies such as ExxonMobil, Royal Dutch Shell Inc., EGL Resources, Brazil's Petrobras and others are gearing up pilot projects on nonfederal lands. He also noted that the main aim is to produce 1 million barrels of oil a day within a decade from lands currently open -- and several times that amount if the lawmakers give the green light to development of lands now off-limits. Another such reserves in the US would be Tar Sands. It was estimated that 75 billion barrels of oil could come from tar sands, like Canadian fields, which is currently producing a million barrels a day. America has such sands located predominantly in Utah, Alaska, Texas and California, and even in Alabama and Kentucky on federal and state lands that, by laws and administrative orders, are closed to mineral and petroleum development. Then there is the outer continental shelf (OCS): sitting beneath the Ocean bed, about 50-100 miles off the Pacific, Atlantic and the Golf Coasts is around 90 billion barrels of Oil. However, this area is under strict provision and is prohibited by Congress for Oil company exploration to take place at least until 2012, but Ostroff believes this ban may be lifted before then. Several policy makers in recent months such as John McCain-presidential candidate and Charles Crist Jr. have decided to reverse their positions on drilling in the OCS according to Ostroff. Their change in position may influence a new trend; however, there is significant concern about potential damage to his state's beaches and Florida's critical tourism industry. Environmental Consequences of Oil A web article entitled “Oil Production and Environmental damage” stated that Oil production, and/or transportation, can disrupt the human populace and the animal and fish life of the region. Oil waste dumping, production pollution, and spills wreak havoc on the surrounding wildlife and habitat. It threatens the extinction of several plants, and has already harmed many land, air, and sea animal and plant species. The physical nature or the chemical components of the oil have severely negative impacts on marine life. Destruction of marine life may be directly or indirectly-either by clean-up operations or even physical damage to their habitats. However, the most ‘at risk’ ones reported by the said article are the marine animals that come in contact with the contaminated sea surface. Pathways for runoff from petroleum processing and petrochemical plants have dumped tons of toxic wastes into nearby waters. These Gas and Oil pipelines now have a negative impact on many rivers, creeks, rivers, pastures and even cropland in terms of halting them if they come in contact with it. The said source also stated, entire bays and lagoons along coasts have been polluted by oil spills and runoff of toxic chemicals. The damage that is caused as a result of Oil extraction and production can also have a severe impact on the human populace of the region. This may include; water pollution and even soil contamination. It will damage vegetation, livestock and human health. In addition, Oil Spills may interfere with the working normalcy of power stations and a myriad of plants that require a continuous supply of seawater to carry out their safe and daily operations. References Digitalhistroy.com, Politics of Oil, retrieved from: http://www.digitalhistory.uh.edu/historyonline/oil.cfm Energy Finance, The role Petroleum and Natural Gas Industry, retrieved from: http://www.eia.doe.gov/emeu/finance/usi&to/upstream/index.html Freudenrich, C. Strickland J., Locating Oil, retrieved from: http://science.howstuffworks.com/environmental/energy/oil-drilling2.htm History of Oil Use, (Feb. 19, 2004), retrieve from: http://www.bydesign.com/fossilfuels/links/html/oil/oil_history.html Kaufman, M.A., America’s Oil Reserves, (Jan 23, 2003), New York Times, retrieved from: http://www.nytimes.com/2003/01/27/opinion/l-america-s-oil-reserves-038865.html Lee, Nhu, What is oil? Retrieved from: http://www.greenscreen.org/articles_sr/Planet%20Earth%20and%20Solar%20System/Natural%20Resources/Oil-%20Sr.pdf Oil Production and Environmental Damage, (2011), retrieved from: http://www1.american.edu/TED/projects/tedcross/xoilpr15.htm Ostroff, J. The US untapped Oil Bounty, (June 2008), Kiplinger.com, retrieved from: http://www.kiplinger.com/businessresource/forecast/archive/The_U.S._s_Untapped_Bounty_080630.html Read More