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Sustaining Energy and Mobility
in the 21st Century: Challenges
and Opportunities for the U.S.
Amy Myers Jaffe
Wallace S. Wilson Fellow for Energy Studies,
James A. Baker III Institute for Public Policy
Rice University
Richard Lugar/Purdue University
Summit on Energy Security
August 29, 2006
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Geopolitics, not Geology, is
driving the energy future
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International Backdrop for Oil
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UNIVERSITY
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Terrorist attacks on Crude Processing
Facilities in Iraq, Saudi Arabia
U.S.-Iran—Risks to Strait of Hormuz
Saudi Arabia –Political Uncertainties
Middle East –Period of Great Political
Transition
Future of U.S. role in Iraq?
Arab-Israeli Conflict
Russia – Putin and the Statists
Latin America: Populism and Hugo Chavez
Africa: Localized unrest in Nigeria
China: Demand Wildcard
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Current State: High Crude Prices
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Crude prices have more than doubled since late 1999
 WTI largely traded in the $20 range throughout the 1990s
 WTI’s price has since risen to more than $70 per barrel
 2005 average = $56.64
 January 2006 = $64.95
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-96
Jan-97
$18.67 $17.49 $18.91 $18.91 $16.45 $18.64 $22.25 $21.09 $23.00 $26.65 $40.16 $61.97
$0.00
Jan-95
WTI Cushing Spot Price, $/bbl nominal
$70.00
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Total Primary Energy Consumption Per Person (2002)
(Million BTU)
Brazil
48.7
China
33.3
Germany
173.1
India
13.3
Japan
172.3
United States
339.1
Source: EIA
Source: BP
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Net Oil Trade, 2030
Mb/d
The Middle East strengthens its position as the
world’s largest oil exporter
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World Liquids Production
Outlook
MBD
140
120
100
Liquids Demand
80
60
~41
OPEC
~50
~30
Canadian Oil Sands
28
23
NGLs, OPEC Condensate, Other
40
Non-OPEC Crude + Condensate
20
0
1980
1990
2000
2010
2020
2030
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OPEC production capacity has fallen, not increased,
since 1979
OPEC Production and Spare Capacity, 1979-2003 (mmb/d)
Member
Country
1979
1983
1990
1997
1998
2000
2001
2003
2005
Saudi Arabia
10.84
11.30
8.00
9.65
9.80
9.50
9.90
10.15
10.30
Iran
7.00
3.00
3.10
3.70
3.70
3.75
3.80
3.80
4.00
Iraq
4.00
1.50
3.60
2.30
2.80
2.90
3.05
2.20
1.80
Kuwait
3.34
2.80
2.40
2.40
2.40
2.40
2.40
2.50
2.60
UAE
2.50
2.90
2.20
2.40
2.40
2.40
2.45
2.50
2.40
Qatar
0.65
0.65
0.40
0.71
0.72
0.73
0.75
0.75
0.82
Venezuela
2.40
2.50
2.60
3.45
3.30
2.98
3.10
2.50
2.50
Nigeria
2.50
2.40
1.80
2.00
2.05
2.10
2.30
2.30
2.30
Indonesia
1.80
1.60
1.25
1.40
1.35
1.35
1.30
1.15
0.90
Libya
2.50
2.00
1.50
1.45
1.45
1.45
1.45
1.45
1.60
Algeria
1.23
1.10
0.75
0.88
0.88
0.88
0.88
1.15
1.35
Total
38.76
31.75
27.60
30.34
30.85
30.44
31.38
30.45
30.57
Call on OPEC
34.01
16.65
22.20
27.59
25.85
30.04
28.23
29.20
29.87
Spare Capacity
4.75
15.10
5.40
2.75
5.00
0.40
3.15
1.25
0.70
Asian economic crisis
Demand bumps
Opec can replace all
Iraqi/Kuwait oil in 1990 leaves extra capacity in 1998 up against capacity
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National Oil Companies on the Rise
They Control the Resources
Oil Reserves Held by
Russian Companies
Full IOC
Access
70 Bill. Bbl
6%
69 Bill. Bbl
NOC Oil Reserves
(Equity Access)
6%
123 Bill. Bbl
11%
NOC Oil Reserves
(No Equity Access)
77%
886 Bill. Bbl
WW Proven Oil Reserves:
1,148 Bill. Bbl
Full IOC
Oil & Gas:
2,182 Bill. Bbl
Reserves Held by New
Russian Companies
Access
7%
16%
NOC Reserves
(Equity Access)
13%
64%
Source: PFC Energy
NOC Reserves
(No Equity Access)
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Saudi Arabia
From Osama Bin Laden’s Letter to the
American People:
“You steal our wealth and oil at paltry
prices because of your international
influence and military threats. This theft
is indeed the biggest theft ever witnessed
by mankind in the history of the world.”
--Osama Bin Laden
In December 2004, called on the faithful to attack oil
facilities as part of the jihad against the West
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Hurricanes Rita, Katrina
And Gulf Oil & Natural Gas Operations
MISSISSIPPI
ALABAMA
TEXAS
LOUISIANA
R
K
Rita landfall
Katrina landfall
Source: API
Sources: NOAA, EIA
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How to create viable alternatives?
*It is desirable to have diversity of supply
options in our automotive transportation
system.
*Several viable options exist.
*New policy frameworks needed to remove
obstacles and provide incentives.
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Spending on Energy Science has collapsed since 1973
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