green econometrics

Information and analysis on the economics of solar and alternative energies

green econometrics header image 2

Energy Perspective

April 13th, 2010 · 5 Comments

After reviewing oil data from the Energy Information Administration (EIA), Global Petroleum Consumption , it may be helpful to put energy consumption into perspective. Most of us are quite familiar with alternative energy such as solar and wind, but the reality is, even if solar and wind could supply all of electric energy needs, the majority of our energy needs is still predicated on access to oil.

While industry experts and scientist debate whether more drilling will ameliorate the energy challenge we face, let’s look at a couple of data points. Figure 1 US Oil Field Oil Production and Drilling Rigs – illustrates that higher drilling activity as measured by Baker Hughes Rig Count data does not necessarily correlate to more oil production as measured by US Oil Field Production by the EIA. Higher drilling activity does not produce more oil.

Figure 1 US Oil Field Production and Drilling Rigs US Oil Demand
Source: Energy Information Administration and Baker Hughes research

Despite the large investment in drilling rigs that more than doubled from 1,475 in 1974 to over 3,100 in 1982, US oil production remained relatively flat. Moreover, even the most recent drilling expansion activity that again more than doubled from 1,032 rigs in 2003 to over 2,300 rigs in 2009, resulted in relatively flat oil production, suggesting that on the margin unit oil production per drilling rig was declining. Perhaps even more disturbing is that the most recent drilling activity in the US was accomplished through extensive use of technology. Seismic imaging technology is being used to better locate oil deposits and horizontal drilling technologies are employed to more efficiently extract the oil, yet oil production still lags historic levels. While on the margin, newly announced offshore drilling could add to domestic oil production, extraction costs of oil will continue to rise adding to further oil price increases.

However, what is most profound is our dependence on oil for most of our energy needs similar to how wood was used for fuel construction material during the 1300’s and 1600’s. If we translate energy consumption into equivalent measuring units such as kilowatt-hours, we can compare and rank energy consumption. Although electricity is captured through consumption of several fuels most notably coal, a comparison of energy usage between oil and electric provides an interesting perspective.

Figure 2 Energy Perspective – provides a simple comparison of the consumption of oil and electricity measured in gigawatt-hours (one million kilowatt hours). A barrel of oil is equivalent to approximately 5.79 million BTUs or 1,699 KWH and the US consumed approximately 19.5 million barrels per day equating to 12 million gigawatt-hours a year. The US uses 4 million gigawatt-hours of electric energy annually. The critical point is that even if solar and wind supplied all of our electric energy needs, it would still only comprise 30% of our total energy needs. Therefore, without an energy strategy that facilitates migration towards a substitute for oil, particularly for transportation, we are missing the boat.

Figure 2 Energy Perspective Oil
Source: Energy Information Administration and Green Econometrics research

It’s not all doom and gloom. Technologies are advancing, economies of scale are driving costs lower, and the economics for new approaches to transportation are improving. From hybrids and electric vehicles benefiting from advances lithium-ion batteries to hydrogen fuel cell vehicles getting 600 miles on a tank of fuel. These advanced technologies could mitigate our addiction to oil, however, without formulating an energy strategy directing investments towards optimizing the economics, energy efficiency, environment, and technology, we may miss the opportunity.

The bottom line is that oil is supply-constrained as there are no readily available substitutes, and therefore, without a means to rapidly expand production; supply disruptions could have a pernicious and painful impact on our economy, national security, and welfare.

Tags: Alternative Energy · Automobile Fuel Efficiency · Battery Power · Carbon and Climate · Carbon Emissions · Coal Energy · Energy Costs · Energy Economics · Energy Expenditures · Energy Independence · Energy Security · Fuel Cells · Global Warming · Hydrogen Economics · Hydrogen Energy · Oil Energy · Oil Independence · Peak Oil · Solar Energy · Solar Energy Economics · Transportation Energy Economics · Wind Energy

5 responses so far ↓

  • 1 chemotropism // Dec 23, 2013 at 2:26 pm

    We are a group of volunteers and opening a new scheme in our community.
    Your website provided us with valuable information to work
    on. You have done a formidable job and our whole community
    will be grateful to you.

    Here is my blog … chemotropism

  • 2 chemotropism // Dec 24, 2013 at 4:33 am

    I’ve been exploring for a little for any high quality articles or weblog posts in
    this kind of house . Exploring in Yahoo I ultimately stumbled
    upon this website. Studying this info So i am happy to express that I have an
    incredibly excellent uncanny feeling I found out exactly what I needed.
    I most indubitably will make sure to don?t fail to remember this website and provides it a look on
    a continuing basis.

    Here is my blog post :: chemotropism

  • 3 my singing monsters cheats // Mar 6, 2014 at 4:00 am

    Howdy! This post could not be written much better!
    Looking at this post reminds me of my previous roommate!
    He continually kept preaching about this. I’ll forward this information to him.
    Pretty sure he will have a great read. Many thanks for sharing!

  • 4 free google advertising // Aug 31, 2014 at 4:10 pm

    Howdy! I just wish to offer you a big thumbs up for the great info you have got
    here on this post. I’ll be coming back to your site for more soon.

  • 5 Google // Oct 24, 2014 at 8:06 pm


    The time to read or stop by the material or sites we have linked to below.