Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on November 2, 2013
These maps show where the U.S. is most vulnerable to oil shocks
Nearly 40 years ago to the day, oil producers in the Middle East retaliated against America’s support for Israel during the Yom Kippur War by cutting their output by five percent. The result? Oil prices quadrupled and dented the U.S. economy.
(Lucy Nicholson/Reuters)
In the decades since, the United States has been trying to insulate itself from similar shocks. The U.S. military dramatically expanded its presence in the Middle East to keep the crude flowing. The nation created a Strategic Petroleum Reserve to be tapped during shortages. And Congress enacted stricter fuel-economy standards to reduce the amount of oil we use.
How much did these measures help? My colleague Steven Mufson took an in-depth look at this topic and concluded that the United States has done a lot to “defuse the power” of an OPEC embargo. But there are still plenty of vulnerabilities.
Today, the United States still imports about one-third of its oil from abroad — roughly the same fraction as it did in the 1970s. Even with the recent boom in domestic production, oil prices are higher, in real terms, than they were 40 years ago, thanks to surging demand from countries like China and India. And if prices spike — driven by, say, unrest in the Middle East — then recessions can quickly follow.
America’s oil vulnerabilities
Just how exposed is the United States to a modern-day oil shock? A new paper from the Council on Foreign Relations tries to assess the situation. If the price of crude rose 25 percent, U.S. unemployment would rise by about 0.5 percent, the authors estimate, as the shock rippled through the economy.
But the impact wouldn’t be evenly distributed. Most oil-consuming states would lose a lot of jobs (red), but a few oil-producing states, like Texas and North Dakota, would actually gain jobs (green):
One reason why states like North Dakota and Texas would do so well in a price spike is that they’ve seen a boom in oil production in recent years, thanks to new technology that has boosted production from shale deposits and other sources.
But the flip side is also true: These states would be disproportionately hurt if the price of oil dropped suddenly. That’s happened before: Texas suffered a severe two-year recession after oil prices collapsed back in 1986. And, while the Lone Star State has taken plenty of steps to diversify its economy since then, the shale boom has pushed it back toward oil.
“Texas is actually becoming more dependent on oil and natural gas in recent years,” says Stephen Brown, an economist at the University of Las Vegas, Nevada and a co-author of the report.
Stacking up globally
How do America’s vulnerabilities compare globally? For that we can turn to the “Oil Security Index,” a new project from Securing America’s Future Energy (SAFE) and Roubini Global Economics. The United States, they find, is still more exposed than most other advanced economies to disruptions in the global oil supply:
This is a more sophisticated index that looks at a variety of variables: How much oil does a country use to generate a unit of economic activity? How much gasoline do its drivers consume? How much oil do the countries import and export? What sort of emergency stockpiles do they have? How vulnerable are their supply lines?
The report suggests that countries such as Japan, Germany and Great Britain are best insulated from oil shocks because of their stringent fuel-economy policies. The United States is in the middle of the pack, but it has become markedly less vulnerable to shocks since 2000, and is now less exposed than, say, Australia or South Africa.
At the same time, China and India are becoming increasingly reliant on steady supplies of oil, while Russia and Saudi Arabia are quite vulnerable to steep drops in price — not least because both countries require oil revenue to fund their budgets. You can see the full report here.
8 Comments on "These maps show where the U.S. is most vulnerable to oil shocks"
shortonoil on Sat, 2nd Nov 2013 4:11 pm
“producers in the Middle East retaliated against America’s support for Israel during the Yom Kippur War by cutting their output by five percent.”
Between 1980-1985 Saudi Arabia cut its production by almost 50% to force prices higher. Prices rose 292%. If that happened today crude would rise above $250/b, and Western civilization would come to a halt. If anyone thinks that some places can be insulated from Middle Eastern oil, they are hallucinating.
rockman on Sat, 2nd Nov 2013 6:01 pm
“If anyone thinks that some places can be insulated from Middle Eastern oil, they are hallucinating.” Given that US consumers are spending 300%+ more for oil then they were not long ago any sense of “insulation” even today is delusional. But given the relentless push by Big Oil, the MSM and many politicians telling folks there’s nothing to worry about it’s easy to see how many Joe6packs have become stoned on the hype.
Even this story can be taken as some level of affirmation that times haven’t gotten bad yet but there could be trouble down the road.
DC on Sat, 2nd Nov 2013 6:21 pm
LoL@WP.
Forget all those artificial lines on a map. Color the ENTIRE US of WAR red. In an oil ‘shock’, driving to your McJob 50 miles away will be the least of amerikas sheeples worries. Oil based countries need an oil based economy to even function.
No oil=no economy. Those neat little colored boxes wont mean shyt.
I mean, what is the take away message here? When things go bad, move to Texas? Water stressed, on fire, crops withering,cattle-dying, Rick Perry Texas? LOL!
Saudi Arabia and Russia have lots of oil left too, but I am not planning on moving to either nation once the price of gas really starts to take off.
bobinget on Sat, 2nd Nov 2013 6:47 pm
Two weeks ago an Israeli minister predicted Iran would be in a position to make a nuclear weapon in a month.
BTW, Israel did in fact bomb Syria yesterday.
http://www.nydailynews.com/news/world/syria-destroys-chemical-arms-equipment-day-watchdog-deadline-article-1.1502465
another view:
http://timesofindia.indiatimes.com/world/middle-east/Israel-bombs-Syria-as-envoy-presses-peace-talks-bid/articleshow/25073820.cms
bobinget on Sat, 2nd Nov 2013 6:57 pm
Although oil prices generally go down in November
there was no reason for it last week.
Brent closed around $106.
Maybe Europeans are a great deal more concerned about the future of oil supplies for different reasons.
Oil tankers are working overtime (rates are much higher) shlepping crude to China. Stocks in America have been permitted to reach record storage despite
DEMAND being one percent higher this year then last.
GregT on Sat, 2nd Nov 2013 8:48 pm
So, the country that is the MOST reliant on fossil fuels to run it’s economy, would be one of the least affected by an oil price shock?
Words fail me.
The US national debt has almost doubled since the last oil price shock of 2007/2008. If that is not an indicator of vulnerability, then what is?
Kenz300 on Sun, 3rd Nov 2013 1:33 am
Biofuels can now be produced from waste or trash……
Every landfill can be converted to produce biofuels, energy and recycled materials for new products.
Producing local energy with local inputs and local jobs makes the economy less vulnerable to disruption.
BillT on Sun, 3rd Nov 2013 1:35 am
GregT, reality is not a feature of the Washington Post. It is nice to live in a country that does NOT appear on these kinds of ‘maps’. The Philippines in not immune to oil shocks, but they would be less felt than in the US or the other Western countries.
The Philippines are a multi-source energy country. The only kind they do not have is nuclear. They do have a plant that was built during the Marcos years but never started up. They were smarter than others. No spent fuel problems or decommissioning costs to worry about.