Why the U.S. Can’t Use the Oil It Produces

Summary

This video delves into America's oil revolution, detailing the transition from declining production to becoming the world's top oil producer. It explores the historical context of US oil reliance, the impact of the 1973 oil crisis, and the subsequent drive for energy independence. The script explains the technological advancements in fracking that unlocked vast oil reserves, particularly in shale formations. Despite domestic production surges, the US still imports significant oil volumes due to refining infrastructure designed for different oil types. The video also touches on the complexities of achieving energy independence, emphasizing the importance of energy security and the gradual transition to cleaner energy sources.

Takeaways

• 🇺🇸 The US has been striving for energy independence to reduce reliance on foreign oil.
• 🔍 Contrary to common belief, the world, including the US, has substantial oil reserves expected to last for decades.
• 📈 In the past decade, US oil production has more than doubled, making it the world's leading oil producer.
• 🚧 The US exports a significant portion of its oil, only to import different types of oil, indicating a complex global oil logistics system.
• 🛠 The advent of fracking technology has revolutionized US oil production by unlocking resources previously deemed inaccessible.
• 🚨 The 1973 oil crisis marked a turning point for US energy policy, leading to a focus on energy independence and a ban on oil exports, which was later lifted in 2015.
• 🌐 Geographical and logistical challenges, such as the lack of pipelines in California, affect the distribution and use of domestically produced oil.
• ⚙️ Refineries play a crucial role in determining the types of oil that can be used; US refineries are often equipped for specific types of oil, influencing import and export decisions.
• 🌐 International trade in oil is influenced by the type of oil, refinery capabilities, and economic considerations rather than just availability.
• 🌿 The pursuit of energy security and environmental sustainability is a complex balancing act for the US, as it continues to rely on oil while transitioning to cleaner energy sources.

Q & A

Why did the US focus on energy independence after the 1973 oil crisis?

The 1973 oil crisis led to a significant disruption in oil supplies to the US, causing gasoline stations to run dry and impacting the economy. This crisis prompted the US to focus on energy independence to reduce reliance on foreign oil and ensure a stable energy supply.

What was the role of George Mitchell in the US oil industry?

George Mitchell played a pivotal role in the US oil industry by pioneering the successful application of hydraulic fracturing, or fracking, in the Barnett Shale. His innovations made it economically viable to extract natural gas and oil from shale formations, leading to a significant increase in US oil and gas production.

How did the fracking technique evolve to become more effective?

The fracking technique evolved by incorporating a special water-based mixture to crack open the rocks and drilling horizontally instead of just vertically. These improvements allowed for more efficient extraction of oil and gas from shale formations.

Why did the US lift the ban on exporting oil in 2015?

The US lifted the ban on oil exports in 2015 due to a significant increase in domestic oil production, largely attributed to the success of fracking. This move was aimed at allowing the US to capitalize on its energy resources and participate more fully in the global oil market.

What is the significance of the Chevron's El Segundo refinery in the context of the US oil industry?

Chevron's El Segundo refinery is significant as it is one of the largest oil refineries on the US West Coast. It processes a variety of crude oils from different countries, illustrating the complexity of the US oil supply chain and the reliance on international sources despite domestic production.

Why does the US still import oil despite being a significant producer?

The US still imports oil because not all domestic oil production is located near refineries or the areas that consume it. Additionally, the type of oil produced in the US may not match the specifications required by existing refineries, which are often configured to process specific types of crude oil.

What is the role of pipelines in the US oil industry?

Pipelines play a crucial role in the US oil industry by transporting crude oil from production sites to refineries. However, the lack of pipelines in some regions, like California, forces the importation of oil to meet local demand.

Why are some US refineries unable to process domestically produced oil?

Some US refineries are unable to process domestically produced oil because they are configured to refine specific types of crude oil, often heavier types that were historically more prevalent in the US. The shift towards lighter, 'strawberry' oils from fracking has created a mismatch between the oil produced and the capabilities of existing refineries.

What is the concept of energy security, and how does it differ from energy independence?

Energy security refers to the reliable and affordable access to energy resources to meet the demands of the economy and consumers. It differs from energy independence, which implies self-sufficiency in energy production. Energy security focuses on ensuring a stable supply through diversification, including imports, while energy independence emphasizes producing all needed energy domestically.

How does the US's oil production and consumption impact global oil markets?

The US's oil production and consumption significantly impact global oil markets by influencing supply and demand dynamics. As a major producer and consumer, the US's decisions on oil exports and imports can affect international oil prices and the strategies of other countries.

Outlines

00:00

🚧 America's Oil Revolution and Energy Dependence

The paragraph discusses the historical context of the United States' relationship with oil, highlighting the shift from self-sufficiency to reliance on foreign oil. It mentions the US's initial dominance in oil production and consumption, the rise of Middle Eastern oil producers, and the subsequent increase in US oil imports. The 1973 oil crisis is noted as a turning point, leading to discussions of energy independence. The paragraph also touches on the US's strategic response, including a ban on oil exports and plans for nuclear power plants. The narrative then fast forwards to the 2000s, where technological advancements in fracking led to a resurgence in US oil production, challenging the notion of energy independence due to continued oil imports and exports.

05:01

💧 Fracking's Impact on US Oil Production

This paragraph delves into the technical aspects of oil extraction, focusing on the process of hydraulic fracturing or 'fracking.' It discusses the evolution of fracking technology, which enabled the US to access previously untappable oil reserves, particularly in shale formations like the Barnett Shale. The success of George Mitchell's fracking methods in the late 1990s is highlighted as a catalyst for the US oil boom. The paragraph also addresses the economic factors that contributed to the expansion of fracking, such as high oil prices and low-interest rates, leading to a significant increase in US oil production between 2008 and 2018. The lifting of the US oil export ban in 2015 is noted as a milestone in the country's energy policy.

10:01

🌐 International Oil Logistics and Refining Challenges

The final paragraph explores the logistics behind the US's oil trade and the refining process. It explains why the US exports a significant portion of its oil production despite having a surplus. The discussion centers on the mismatch between the types of oil produced in the US and the capabilities of its refineries. The US has historically produced and refined a different type of oil than what it extracts today, primarily due to fracking. As a result, US refineries are not always equipped to process the newly available oil, leading to imports of oil that better matches their refining needs. The paragraph also touches on the environmental and economic considerations of building new refineries or retrofitting existing ones. It concludes with a broader discussion on energy security versus energy independence, emphasizing the importance of a stable and affordable energy supply for the US economy.

Keywords

💡Energy Independence

Energy Independence refers to a nation's ability to meet its energy needs without reliance on foreign sources. In the context of the video, it highlights the United States' historical pursuit to reduce its dependence on foreign oil, particularly after the 1973 oil crisis. The script mentions efforts such as the ban on oil exports and the push for domestic oil production, which eventually led to the US becoming the world's largest oil producer. However, despite this, the video points out that the US still engages in an international oil swap, indicating that energy independence is a complex and nuanced goal.

💡Fracking

Fracking, short for hydraulic fracturing, is a method of extracting oil and natural gas from underground rock formations by injecting high-pressure fluid. The video discusses how the advancement in fracking technology, particularly the use of a water-based mixture and horizontal drilling, revolutionized the US oil industry post-2008, leading to a significant increase in domestic oil production. This technological innovation played a major role in the US reclaiming its position as the largest oil producer.

💡Oil Refineries

Oil refineries are industrial plants where crude oil is processed and transformed into various petroleum products like gasoline, diesel, and jet fuel. The script explains that the type of oil produced in the US, particularly from fracking, often doesn't match the specifications that existing refineries are designed to process. This mismatch between the type of oil produced and the capabilities of refineries is a key factor contributing to the US importing oil, even when it has surplus production.

💡Barnett Shale

The Barnett Shale is a significant natural gas reserve located in Texas. As mentioned in the video, it was initially considered 'unconventional' due to the difficulty in extracting the gas trapped within the shale rock. The development of effective fracking techniques in the Barnett Shale marked a turning point in US energy production, unlocking vast reserves and contributing to the surge in domestic oil and gas output.

💡OPEC

OPEC (Organization of the Petroleum Exporting Countries) is an intergovernmental organization of oil-exporting countries that coordinate and unify their petroleum policies. The video refers to OPEC countries as significant suppliers of oil to the US, especially during periods when domestic production was insufficient to meet the country's high demand for oil. The script also touches on the geopolitical dynamics that can influence oil supply and prices.

💡Domestic Oil Production

Domestic oil production refers to the extraction of oil within a country's borders. The video script emphasizes the US's efforts to increase domestic oil production as a strategy to achieve energy independence. It outlines the historical context, including the 1970s oil crisis, which spurred the US to invest in domestic oil exploration and production technologies, eventually leading to a boom in the 21st century.

💡Energy Security

Energy security is the uninterrupted availability of energy sources at an affordable price. The video contrasts energy security with energy independence, arguing that while the US may not be energy independent, it has energy security through a diversified supply of oil from various sources, including domestic production and imports. The script suggests that focusing on security rather than independence is a more pragmatic approach to ensuring a stable energy supply.

💡Horizontal Drilling

Horizontal drilling is a technique used in oil and gas drilling where the drill bit is steered horizontally through the rock layers after a vertical descent. This method, as highlighted in the video, was crucial in the success of fracking, allowing for more efficient extraction of oil and gas from shale formations like the Barnett Shale, thus contributing to the US oil boom.

💡Oil Pipelines

Oil pipelines are systems used to transport crude oil and refined petroleum products from production sites to refineries or distribution centers. The video script notes the absence of crude oil pipelines in California, which forces the state to rely on oil imports despite being a significant oil producer. This infrastructure gap illustrates the logistical challenges in moving oil from production areas to where it's needed most.

💡International Oil Swap

The international oil swap refers to the practice of exporting domestic oil and importing different types of oil from other countries. As explained in the video, this occurs because the US refineries may not be equipped to process the specific types of oil produced domestically. Instead, it's more economically viable for these refineries to import oil that matches their processing capabilities, leading to a situation where the US both exports and imports oil.

💡Environmental Standards

Environmental standards are regulations and guidelines that aim to protect the environment and human health from harmful effects of industrial activities. The video script mentions that stringent environmental standards in the US make it a risky investment to build new refineries or update existing ones to process different types of oil. This contributes to the US's reliance on imported oil and the ongoing debate about balancing energy needs with environmental protection.

Highlights

The US aims to reduce reliance on foreign oil and move towards energy independence.

US oil production has more than doubled in the last decade, reclaiming its position as the world's largest oil producer.

Despite increased production, the US still sends away nearly a third of its oil for swapping with other countries.

The US has been historically a major oil producer and consumer, with a growing demand outpacing domestic production.

The 1973 oil crisis led to a significant shift in US policy, emphasizing energy independence.

Fracking technology, particularly the use of water-based mixtures and horizontal drilling, revolutionized US oil production.

The US lifted the ban on oil exports in 2015, leading to a significant increase in production and exports.

Refining is a critical step in making oil usable, and the US has refineries that are not always compatible with domestically produced oil.

Geographical distribution of oil fields and refineries plays a significant role in the US oil logistics.

California, despite being a significant oil producer, relies heavily on foreign oil due to a lack of pipelines and refinery compatibility.

The US oil industry's focus on energy security rather than independence is driven by economic and logistical considerations.

The international cost of oil is a significant factor in gas prices, with the US having limited influence over it.

The transition to clean energy is necessary but must be managed carefully to ensure economic stability and environmental sustainability.

The US continues to drill for oil, which could be beneficial for the world due to its relatively low greenhouse gas emissions from production.

The concept of energy independence is complex and may not be as beneficial as ensuring energy security and affordability.

The book 'Read Write Own' by Chris Dixon discusses the future of the internet and the potential of blockchain to reclaim control for people.

Transcripts

we're closing the border and we're

drilling drilling Drilling and you keep

us moving towards energy Independence

our country must cut back its Reliance

on foreign oil I said we're going to

need oil for at least another decade

see and beyond that we're going to need

it based on how much politicians talk

about oil and using the oil reserves I

always kind of thought the US was

running out we've got a about 35 years

worth of oil left in the whole world but

I couldn't be more wrong in just the 10

years after 2008 the US went from a

place with slowly dropping oil

production to more than doubling its

output and reclaiming its spot as the

biggest oil producer in the world but

there's something peculiar the US is

sending away nearly a third of its oil

just to get it swapped out with oil from

somewhere else this is the story of

America's wild oil Revolution and why it

still won't give the US Energy

Independence this video is brought to

you by Reed W own but more on that a

little later to understand America's

relationship with oil let's start with a

quick crash course so for most of the

last 150 years the US has been the place

to get oil we drilled almost all of it

and we also used the most oil in the

world but in the late 1930s other

countries namely Saudi Arabia and a few

other Middle Eastern countries realized

they also have tons of oil so they

started drilling like crazy around this

time the US starts importing a little

bit of oil but it still drills most of

it itself but America's ravenous demand

for oil to fuel its Planes Trains and

Automobiles can't be contained America's

demand for oil starts significantly

outpacing us production so bring in the

Imports pretty quickly the US becomes

increasingly reliant on foreign oil but

then in 1973 after the US gave money to

Israel Saudi Arabia's enemy in the yam

kapore War they and other AR Arabian oil

exporters were like actually no more oil

for you an Imports slide theil us

doesn't have enough oil to make up for

this loss so there's just no oil for

consumers gasoline stations ran dry

empty gas pumps no more road trips to be

sure that there is enough oil to go

around for the entire winter all over

the country it will be essential for all

of us to live and work in lower

temperatures the problem was so bad that

President Nixon literally told

businesses to stop working if it would

save energy I am directing that the

daytime temperatures in federal Offices

be reduced immediately to a level of

between 65 and 68° and that means in

this room too and with this the US

really starts talking about this thing

called Energy Independence and the US is

crippling lack of it to respond Nixon

bans oil exports from the US and makes a

plan to build 1,000 nuclear power plants

by the year 2000 according to one

estimate if all of these nuclear power

plants were actually built the US would

be able to meet twice its energy demands

in 2022 with no fossil fuel emissions

from the production but instead there's

54 anyway in the meantime the US needs

more oil because those gas engines

aren't going to run themselves but

that's a little awkward because the US

still can't find that oil in its own

soil we start importing more oil from

Canada our pretty peaceful neighbor but

our oil habit still requires we bring in

a bunch from the Middle East it's in

this context slowly getting more oil

from Canada using a lot from OPEC

countries and not getting much here that

perfectly sets up a revolution so as you

can see the line that I'm on right now

is going down and a similar thing is

happening with natural gas the other big

fuel source we use in America that's

collected largely the same way as oil

you'd think that it's going down because

we're out of oil but that's actually not

true at all the US had and still has

tons of oil the problem was we couldn't

get it this is The Barn at shale it's a

giant natural gas reserve around Fort

Worth Texas and in 1995 the US

government said it had just like a bunch

of natural gas in it but it was

unconventional see there are two ways

that things we want tend to exist

underground conventionally or

unconventionally the conventional oil

wells were just you know think about a

big oil puddle underneath the ground

you're just tapping it like a straw

sucking it out if we still have plenty

of weals like that like Saudi Arabia the

Middle East they basically have that

kind of oil in plentiful right that's

why it's super cheap but this Barnett

Shale is not like that it's made up of

these big rocks called Shale that have

natural gas and some oil trapped inside

of them but the question is how to get

in people have kind of known the answer

for a long time was fracturing the rock

or fracking even John wil's Booth a

month before he killed Abe Lincoln was a

fracker but the problem with early

fracking was it didn't always work super

well like for John W's boot he put some

explosives into a well and made a huge

hole but there wasn't a drop of oil left

so naturally he left Pennsylvania and

killed the president I guess see this is

the type of anger not getting oil can

give to people especially when they

spend tons of money on it so in the late

1990s when this guy named George

Mitchell was looking at his document

that said all of your land and the

Barnett Shale has tons of gas stuck in

it but you can't get it he might have

had murder on his mind he was

hemorrhaging cash trying to get fracking

to work when his team switched things up

a little bit they used a newer technique

of cracking open the rocks by shooting

in a special water-based mixture and

drilled sideways instead of just

straight down with the perfect tweaks

production gushed a revolution this

finally made it fast and cheap enough to

drill all of the Lush resources trapped

in America's Shale for a few years

producers were still skeptical but then

in 2008 oil prices hit alltime highs

interest rates hit alltime lows and from

2008 to 2018 the US doubles its oil

production and in 2015 they lift the ban

on exporting us oil which explains this

graph this increase isn't 100% because

of fracking but it's mostly fracking so

this explains how we got to where we are

where the US has a surprisingly high

amount of oil because of this new

technological innovation but there's

still something weird going on the US

produces pretty close to the amount of

oil that Americans use and yet we send a

huge portion of it out of the country

just to get different oil from other

countries and bring it back to America

there's some strange Logistics that

explain why this International oil swap

is

happening so the one remaining part that

we still haven't really talked about

between oil being in the ground and

actually getting used is refining for

any oil from anywhere to actually be

used it first has to be refined

otherwise it's just this thick black

toxic sludge that really can't be used

for anything so the refinery I'm going

to right now will help explain why

American Oil isn't always the best

answer this is chevron's elsag gundo oil

refinery which is one of the biggest oil

refineries on the west coast and most of

the oil it's cooking isn't American

instead it's coming from one of these

ships which sit a couple miles offshore

and quietly get their oil sucked out

through these big pipes in October of

last year the most recent data we have

this Refinery got crude oil from South

Korea Argentina Guyana Mexico and

Colombia and it's not just this Refinery

another Chevron in California imported

crude oil from Iraq Venezuela to

Mississippi Canada to Michigan and even

Texas the state that drills almost half

of the US's crude oil imported 26

million barrels of crude just last

October quick interlude this honestly

probably won't help you that much but a

barrel of oil is 42 gallons so kind of

similar to a bathtub so this seems like

a lot of work to just move all this oil

around when we have it right here we

just don't use it so why don't we use

our own oil well there's a few reasons

we don't so first of all a lot of

American oil does stay in America like

Texas drills a ton of oil and then

refines it down the street then Texans

can pump it into their pickup truck at a

gas station when it's all really close

like this almost all Transportation

costs are gone which is why Texas has

some of the lowest gas prices in the

union but the first problem is that not

all the oil is next to a Refinery and

the refineries aren't always next to the

people who need it we use Los Angeles as

an example in 2021 California used 65

million barrels of oil the state happens

to be one of the largest producers in

the country so part of that oil comes

from inside the state like a few miles

from this Refinery is an oil field in

the middle of LA and there are some

other famously hidden oil wells that are

scattered through throughout the city

and next to people's houses but all of

the oil drilled in California still only

accounts for a fifth of what it needs so

how about we just bring in some extra

from Texas for most of the country

there's a system of oil pipelines that

take oil from the places where lots of

oil is being produced to the people who

want it but California is an exception

the state and its almost 40 million

residents have no crude oil pipelines

coming in and they probably never will

that's because even if the oil from

Texas came to California most refineries

in the state wouldn't be able to use it

this is the biggest reason the US can't

use its own oil it's just not the right

type let me explain for Simplicity sake

I got this from the explain like I'm

five subreddit let's imagine there are

two types of oil in the world one is

strawberry and the other is chocolate

for a long time the US produced a bunch

of chocolate oil so to use it we also

created a bunch of refineries that turn

chocolate into gold not actually gold

but you know what I mean

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but then over time especially with the

use of fracking the US oil supply became

a lot more strawberry and those

chocolate refineries can't use that if

they do they'll have some really big

problems oil refiners could create more

refineries if they wanted but according

to one commentator the US government's

environmental standards and push to

abandon fossil fuels makes it a risky

investment this might be why the last

significant oil refinery build in the US

was made almost 50 years ago so instead

of going through the super expensive

process of updating America's refineries

to use strawberry oil refiners decided

it would be a better idea to just import

chocolate oil from other countries who

still make it and use that in our

chocolate refineries then just send all

that strawberry oil overseas where they

have refineries for it so this is why in

2022 59% of oil going to California

refineries came from foreign countries

and 80% of Elsa gundo oil originates

abroad and despite exporting more the US

still Imports pretty hefty sums of oil

the real picture is more complicated

than this like there's a whole range of

differences in oil types and refiners

don't just use one super specific type

but the end result is the same the

companies who buy and sell oil decided

that keeping the same refineries in

America and just importing the right

type of oil just makes them more money

than using oil from the states and that

leads us to the final concern a lot of

people have about American oil energy

and depend energy Independence the

concept of energy Independence is this

really nice idea it gives these Vibes of

ultimate control over one's Destiny no

other country can decide whether we have

power and it seems like it's just like

The Logical answer if we make it

ourselves it can be closer and cheaper

maybe but the reality is that in a lot

of cases it's just not it would be very

very disruptive to the economy for the

US to say all of a sudden we're not

importing or we're not exporting we're

just going to do you know we're just

going to work with what we have the

Chicago refineries would find they have

no oil to refine it would take decades

to sort that out it would be a mess

biggest factor in gas prices is nothing

more than the international cost of oil

which the us only has a small part in

determining and then beyond price just

because oil is close doesn't mean we can

use it you'll hear you know Joe Biden

screwed up and that's why we don't have

energy Independence but we never have

had energy Independence and every

country should worry about energy

security

you know that they have enough energy to

meet the needs and demands of the

economy of the people of the consumers

the US has energy security focusing on

energy security instead of Independence

is why I've been slowly riding up this

Canadian line for so long historically

speaking it's a lot less likely that the

US gets in a fight with Canada than it

will a country in the Middle East so

it's a pretty safe bet their oil will be

there for us and as for our oil

addiction as much as some people would

like to stop using oil altogether the US

is still highly dependent on it we have

to do our best to March along this

transition in a very determined way to

make sure that not only we are

mitigating climate change greenhouse gas

emissions limiting local environmental

harms but also keeping energy affordable

we have to make sure that our most

vulnerable communities are taken care of

if the US keeps drilling oil here versus

abroad the world might benefit somewhat

from the country's relatively low

greenhouse gas emissions from production

but at the end of the day to curb

emissions the oil needs to stay in the

ground so I don't want to be sounding

like a Brash you know just

environmentalist who like we just need

to do Clean Energy Technologies and just

stop all fossil fuels that cannot happen

overnight but it can happen faster than

what we can think and what possibly the

fossil fuel industry thinks it can

happen and while America and the rest of

the world are still figuring out how

they'll find energy security let's

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more Jesus Christ oh my God