Reference no: EM132449850

Oil is a non-renewable resource.  In 1859, the first oil well-the Drake Oil Well-was drilled in Titusville, Pennsylvania, launching the petroleum revolution.  On that day, we began to deplete the resource.  Today, oil has become part of a global market. For example, according to the U.S. Energy Information Administration (2008a), in 2007, the U.S. imported 153.6 billion gallons of crude oil, produced 77.6 billion gallons and exported 420 million gallons of crude oil.  (Canada is currently the largest exporter of oil to the United States).  Some in the U.S. argue that there is a lot of oil sitting in the ground, but is it usable?  If so, who should use it?  The current National Energy Policy calls for more exploration and production of oil within the U.S.  The rationale is that it will reduce prices, reduce our dependence on foreign sources of oil, and improve our national security.  "Questions that we must ask ourselves include:  Is this merely political rhetoric?  Is this good environmental policy?"  In this assignment, we will learn some background before we can answer the questions.

Available Oil

There is a widespread lack of understanding of the significant difference between the terms "resources" and "reserves".

The total resource base of oil is the entire volume formed and trapped in-place within the Earth before any production.  The largest portion of this total resource base is not recoverable by current or foreseeable technology.  Most of the non-recoverable volume occurs at very low concentrations throughout the Earth's crust and cannot be extracted short of mining the rock or using some other approach that would consume more energy than it produced.

Reserves, a portion of the total resource base that is of societal and economic interest, are technically recoverable portions of the total resource base.  Therefore, reserves are not a fixed amount and are estimated.  They can increase or decrease based on geological data, technology and prices and costs.

A hotly debated subject is whether the United States should open up the Arctic National Wildlife Refuge (ANWR) specifically for petroleum production.  Federal law currently prohibits oil and natural gas development in ANWR but, there have been numerous attempts to change this law.  Given the high price of oil, it is likely that this debate will intensify.  The purpose of this assignment is to look at some important facts and the ANWR debate to help you make a more informed decision about the issue of opening up a protected land for energy needs.

According to the U.S. Energy Information Administration (2008b), it will take 10 years from the beginning of the project before oil starts to flow.  The mean estimated oil reserve of ANWR is 4.21 billion barrels.  (A barrel is 42 gallons.)  Mean estimated production in ANWR would reach 780,000 barrels per day in 19 years and then decline to 710,000 barrels per day for the remaining 3 years until depletion.  By 2030, the United States is projected to consume 26.95 million barrels of petroleum each day (EIA, 2008c).

1. Assuming that the estimates are correct, and oil from AMWR achieves the 710,000 barrel level in 2030, based on projected consumption, what percentage of our total oil consumption will be supplied by ANWR?
2. Search the Internet and determine the total number of miles traveled in the United States last year.  Hint:  See https://www.eia.doe.gov orhttps://www.fhwa.dot.gov(in 2013 2.9 trillion (2,956,228,000,000) miles were traveled, https://research.stlouisfed.org/fred2/series/M12MTVUSM227NFWA)
3. Create a table comparing the gallons of gasoline consumed in the United States for passenger cars and trucks every year for the past 20 years to the most currently reported year.  Look at the changes in miles per gallon for cars and trucks over the past 20 years and determine the overall percent change.(in 2013 the average mpg in the US is 23 mpg, https://www.fueleconomy.gov/feg/pdfs/guides/FEG2013.pdf)
4. A gallon of crude oil does not mean a gallon of gaselone.  The conversion of oil to gasoline through distillation at a refinery depends on several facts, including the quality of the crude oil, the efficiency of the refinery, the product mix desired by the refiner (i.e. diesel fuel, home heating oil, jet fuel, etc.), and so forth.  In general, in a 42-gallon barrel of crude oil, refining yields of 19.5 gallons of gasoline. 

Based on this and all the information given above, determine how many years ANWR would be able to supply our GASOLINE (not total petroleum) needs if it were our sole source.  Support your answer with calculations made and clearly identify any assumptions that you made.