ENERGY RESOURCES AND MANAGEMENT

Coursework 1

María Belén Ochoa Caballero

S1636188
10/24/16

Oil Dependency
People have always used oil; however, it was since the late XVIII century, that this
resource became a fundamental pillar in any society1.

This report is divided in four parts. The first one is a breve introduction and overview
about the topic. In the second one, the reasons for this dependency will be addressed, and
in the next part, the problems that it had caused. Finally, in the last part are my own
conclusions, alternatives and predictions about the future of oil dependency.

1. Introduction

Oil, the black gold, a single word that means power, energy, and development; but also it
means environmental destruction, pollution, and in some extreme situations war. It may
seem extraordinary how a simple word could mean so much, and it makes us wonder why
it does.

To start with, oil is a peculiar resource. It can be used as a source of energy, electricity and
heat, as well as the raw material for everyday products. Besides, oil can be stored and
transported, which means that everyone can afford it, independently of the environmental
and geographic conditions.

However, because of this resource countries like Iraq and Syria had been invaded, while
thousands of hectares of the Amazon rainforest have been deforested. Due to the last one,
contamination and CO2 emissions have increased in the last decade.

These are some manifestations of the oil dependency. However oil is not a renewable
resource and it causes a lot of damage. Therefore, in the last years, people have been trying
to move away from this dependency.

2. Reasons for oil dependency

2.1. Uses of Oil

Crude oil and other liquids produced from fossil fuels are refined into petroleum
products that people use for many different purposes. Biofuels, such as ethanol and
biodiesel, are also used as petroleum products, mainly in mixtures with gasoline and diesel
fuel.

The most common uses of crude oil are:

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 Common uses of crude oil
4% 3% Production of gasoline

9% Heating oil and diesel fuel

45% products derived from

17% petroleum
Jet fuel

Propane
22%

Asphalt

The total is over 100% because there is more than a 5% processing gain from refining. (
TEEIC, 2010) 2

When petroleum products are burned to produce energy, they may be used to propel a
vehicle, to heat a building, or to produce electric power in a generator.

Petroleum may also be used as a raw material in the petrochemical industry to create
products such as plastics, polyurethane, solvents, and hundreds of other intermediate and
end-user goods. 3 The list of these non-fuel compounds is exhaustive: lubricants for cars,
asphalt for roads, tars for roofing, waxes for food wrapping, as well as solvents for paints,
cosmetics, and dry cleaning products. 4

In 2013, the worldwide consumption of petroleum was 91.2 million b/d.3

2.2. Oil and Development

The development of modern industrial societies was possible because of cheap and
abundant energy in the form of fossil fuels. Use of fossil fuels has made possible the
expansion of human population from 1 billion in 1820 to 6.6 billion today. During the
course of history societies have built an extensive infrastructure, which needs constant
maintenance for its proper functioning. This adds to the energy needs of the daily activities
of industry, commerce, and private life.5

There is a relationship between the world economic growth and the oil demand. If the
economic growth and the GDP increase, the oil demand also does. The fact that the GDP
goes up, means that the society has a better standard of living.

For instance, discovery of oil on the territory of the Emirates prompted rapid growth of the
UAE economy. Especially country began to develop rapidly after sharp rise in prices for
“black gold” in 1973. Throughout 25 years the UAE has become a country with one of the
highest living standards. Today, every fifth citizen of the United Arab Emirates is a
millionaire. Government grants to the newlyweds 100 000 dollars for wedding and for each
birth women are paid 20 thousand dollars and in addition land is allocated. 6

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3. Reasons for stopping oil dependency

3.1. War

The results of a research made, showed that from 69 countries that had experienced civil
conflicts between 1945 and 1999, about two-thirds of these wars saw intervention by
another country or outside organization and that the most common reason for this
intervention, “over and above historical, geographical or ethnic ties”, was oil.

Another finding is that, the more oil a country has, the more likely it is that a third party
will intervene in their civil war. And on the flipside, the more oil a country imports, the
greater the likelihood it will intervene in an oil-producing country’s civil war

Among the examples highlighted are the United States’ involvement in Angola’s civil war
from 1975 to the end of the Cold War and in Guatemala, Indonesia and the Philippines.
Also there were the UK’s involvement in Nigeria’s 1967-70 civil war, in contrast to the
non-intervention in civil wars in other former colonies with no oil reserves (Sierra Leone
and Rhodesia, later Zimbabwe); and the former Soviet Union’s involvement in Indonesia
(1958), Nigeria (1967-68) and Iraq (1973). 7

3.2. Environmental issues

Over the past five years oil has consistently been among the UKs top three pollutants. Just
1 litre of oil can contaminate 1 million litres of water. 8

Petroleum products give off the following emissions when they are burned as fuel: Carbon
dioxide (CO2), Carbon monoxide (CO), Sulfur dioxide (SO2), Nitrogen oxides (NOX),
Volatile Organic Compounds (VOC), Particulate matter (PM), lead and various air toxics
such as benzene, formaldehyde, acetaldehyde, and 1,3-butadiene.

Nearly all of these by-products have negative impacts on the environment and human
health:

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  Carbon dioxide is a greenhouse gas and a source of global warming.

 SO2 causes acid rain, which is harmful to plants and to animals that live in water,
and it worsens or causes respiratory illnesses and heart diseases, particularly in
children and the elderly.

 NOX and VOCs contribute to ground-level ozone, which irritates and damages the
lungs.

 PM results in hazy conditions in cites and scenic areas, and, along with ozone,
contributes to asthma and chronic bronchitis, especially in children and the elderly.
Very small, or “fine PM” is also thought to cause emphysema and lung cancer.

 Lead can have severe health impacts, especially for children, and air toxics are
known or probable carcinogens. 9

Also, wildfowl are particularly vulnerable, both through damage to the waterproofing of
their plumage and through eating the oil as they preen. Mammals such as water voles may
also be affected too.8

3.3. Economic problems

The increase or decrease of oil prices is an important factor in the economy of some
countries. There are two prices that should be considered: the exportation and the
importation. Some countries base their economic system on oil extraction and exportation.
While others are dependent on the importation price.

In the first case, every time that the oil exportation price decreases, the country has to
undergo an economic instability. For example, the MENA oil-producing countries that face
a number of immediate challenges related to oil’s dominant role in their economies and the
risk arising from the variability of prices. They have to accelerate their economic reforms
to reduce dependency on oil, including by promoting investment and private sector growth,
thereby creating jobs for their populations. They must pursue prudent fiscal policies and
save their oil revenue windfalls at every opportunity to help cushion the impact of oil price
declines when they occur. 10

On the other hand, the countries like Portugal, Italy, Ireland, Greece, and Spain and in a
lower scale, the US and Japan, are affected by rising oil prices. Businesses find that the
price of oil used in manufacturing and shipping their products has risen. If they raise the
sales price of the goods to reflect their higher costs, it means that fewer people can afford
their products. This too, leads to cutbacks in sales, and layoffs of workers11

In conclusion, the decline of petroleum demand in developed nations could make their
economic growth less vulnerable to oil price shocks, the report states. 12

3.4. Non-renewable resource

According to the IEA, demand rose faster in 2004 than in any year since 1976. China's oil
consumption, which accounted for a third of extra global demand last year, grew 17% and
is expected to double over 15 years to more than 10m barrels a day - half the US's present
demand. India's consumption is expected to rise by nearly 30% in the next five years. If

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world demand continues to grow at 2% a year, then almost 160m barrels a day will need to
be extracted in 2035, twice as much as today.

Oil consumption by part of the world, based on EIA data. 2012 world consumption data
estimated based on world “all liquids” production amounts.

However, it is important to mention that estimating oil reserves is contentious and political.
Companies seldom report their true findings for commercial reasons, and governments -
which own 90% of the reserves - often lie13.

World's largest fields are in decline. The second best producing field in the world, the
Cantarell field of Mexico, peaked in production at 2.1 million barrels a day in the year
2004 and Mexico's national oil company Pemex projects its production to drop to 1.33
million barrels a day by the end of 2007.

In summary, world's oil production will pass its peak before 2010. Analysis shows that
nearly half of world's oil production comes from old and ageing fields. It also shows that
12 of the 26 of world's best oil producing countries are in decline today. Of the remaining
14, which can still increase production, 9 are members of OPEC5. (Seppo Korpela 2007)

4. Future outlook, conclusions and alternatives

Nowadays, with the incursion of nuclear energy, and the threat of global warming, people
and governments are starting to use new and cleaner sources of energy. Therefore, the
usage of oil as a fuel, and a source of heat and energy, is about to end. Nonetheless, oil
would still be used for manufacturing every day products. In other words, “consumption of
petroleum and other liquids are projected to decrease in all sectors except for in the
industrial sector”3. (Energy Information Administration, 2016)

It is important to mention that, even though big companies and industries are the ones that
use oil to manufacture goods, they do so because the people keep buying those products.
So, in order to stop this dependency, everyone should be committed to reduce the
consumption of them. If this goal is achieved, oil dependency would decrease significantly,
and also it would be more environmentally friendly.

Also, as it was said before, many countries had suffered invasions and war because of the
oil that is underground. However, there had never been any of these conflicts for other

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source of energy. Thus, to maintain peace and harmony between nations, it should be
imperative that the people start to move away from oil dependency.

Finally, as an Ecuadorian Petroleum Engineering student, I can say that the target of the oil
industry is no longer the energetic field, which means that the dependency here is coming
to the end. The new objective is the manufacture of oil derivatives.

To conclude, humanity is far from stopping using oil. However, they are starting to think
and apply new options to replace it.

5. References

1. Chow S. (1998) Historia del Petróleo.

http://bibliotecadigital.ilce.edu.mx/sites/ciencia/volumen1/ciencia2/39/html/edicion
.html Accessed 19-10-2016.
2. TEEIC (2010) Oil and Gas Resources and Their Uses.
http://teeic.indianaffairs.gov/er/oilgas/restech/uses/index.htm Accessed 19-10-
2016.
3. Energy Information Administration (2016) Use of Oil.
http://www.eia.gov/energyexplained/index.cfm?page=oil_use Accessed 18-10-
2016.
4. Live Science (2009) The Chemistry of Life: Oil's Many Uses.
http://www.livescience.com/5574-chemistry-life-oil.html Accessed 18-10-2016.
5. Seppo Korpela (2007) Oil and natural gas depletion and our future.
http://www.resilience.org/stories/2007-07-21/oil-and-natural-gas-depletion-and-
our-future Accessed 18-10-2016
6. Emirates News (N/A) Oil in Dubai. https://en.dubai-freezone.ae/uae-news/oil-in-
dubai-history-of-discovery.html Accessed 21-10-2016
7. Smith Carol (2015) War-for-Oil Conspiracy Theories May Be Right.
https://ourworld.unu.edu/en/war-for-oil-conspiracy-theories-may-be-right Accessed
21-10-2016
8. Oil Care (2015) Impact of oil spills. http://oilcare.org.uk/what-we-do/impacts-of-
oil/ Accessed 21-10-2016
9. Environment and Ecology (2016) How Does Oil Impact the Environment?.
http://environment-ecology.com/energy-and-environment/92-how-does-oil-impact-
the-environment.html Accessed 21-10-2016.
10. International Monetary Fund (2003) The Middle East and North Africa in a
Changing Oil Market. https://www.imf.org/external/pubs/ft/med/2003/eng/okogu
/okogu.htm Accessed 21-10-2016.
11. Tverberg Gail (2013) Developed Nations have Already Passed Peak Oil Demand.
http://oilprice.com/Energy/Crude-Oil/Developed-Nations-have-Already-Passed-
Peak-Oil-Demand.html Accessed 19-10-2016.
12. Scientific American (2009) The Other Peak Oil: Demand from Developed World
Falling. https://www.scientificamerican.com/article/oil-petroleum-demand-
developed-countries-alternative-fuel/ Accessed 19-10-2016.
13. Vidal John (2005) The end of oil is closer than you think.
https://www.theguardian.com/science/2005/apr/21/oilandpetrol.news Accessed 17-
10-2016.