Low-Energy Fridays: For How Long Will We Use Oil?
The Biden administration is in a classic no-win scenario as it takes flak from both sides over its approval of a large fossil fuel project in Alaska. This piece isn’t concerned about the merits or demerits of such action, but instead provides context often missing from the news articles: How much oil is the United States is using, and for how long will it keep using it?
The first thing to understand is that there is a reason crude oil is used so widely as an energy source. Liquid fuels (usually derived from refined crude oil) are really energy dense, so you don’t need much to get a lot of utility, and they are easy to store. Think about commercial airplanes, which can travel massive distances with only the fuel they can carry on board.
Crude oil is also cheap and abundant. As much as people bemoan high energy prices, the truth is that the utility people derive from liquid fuels is huge, which is why even at over $6 per gallon, demand for gasoline barely moves. And there are few substitutes for liquid fuels. Electric vehicles (EVs) are great, but they’re only cheaper under certain conditions. Additional complications like charging inconveniences remain a huge issue, and for many, owning an EV remains impractical.
Until another energy source comes along that beats out crude oil in terms of both cost and utility, expect a continued high demand for it. And just how high is that demand? Globally, around 100 million barrels of oil are produced every single day. Of that, the United States alone consumes a whopping 21 percent. And the United States itself is the world’s largest oil producer at around 12 million barrels per day, which is a relatively recent phenomenon; until 2011, U.S. oil production was under six million barrels per day.
This isn’t changing quickly. The Energy Information Administration (EIA) expects consumption of the largest crude oil products (gasoline, distillate fuel oil and jet fuel) to increase by 7 percent through 2050. Globally, the EIA projects liquid fuel consumption to rise by 36 percent through 2050. In short, oil consumption in the United States is massive, expected to remain high, and we are far from phasing out use of crude oil.
The counterpoints are, of course, analyses that show pathways to reach net-zero emissions. Conventionally these rely on massive vehicle electrification efforts globally, often in excess of 80 percent (a far cry from today’s 1 percent). But it is important to understand that these projections are not based on any expectations, but rather are exercises in how emissions can be mitigated, not projections of what will come to be. Capital stock turns over slowly, and even projections of a steady increase in EV sales in the United States show that they would still only account for about 41 percent of vehicles on the road by 2050. To reach 95 percent of vehicles being EV (per net-zero projections), combustion engine vehicle sales would have to end altogether by 2035, which is not a likely (or costless) policy option in the near term.
The takeaway is that we consume a massive amount of oil and that is expected to continue. Changing consumption levels will require either that different fuel types become much more affordable than oil or that policy interventions force a transition, which would likely carry significant cost and controversy. Despite political desires to the contrary, dependency on oil is likely for the foreseeable future.