Home
hamburger menu icon

Oil

Oil remains the single largest component of the world's energy supply and is hence critical to the world's economy. It is unlikely that a peak in world oil production will occur soon, but growing reliance on unconventional oil, such as heavy oil, tar sands, and tight oil (oil that is in low-permeability formations and is thus difficult to extract), might raise prices in the long term 1.

Uses of Crude oil

Crude oil is refined primarily into transportation fuel, with motor gasoline the largest component. As of 2017, United States refineries produced the following products.

The image: "refinery_production.svg" cannot be found!

United States refinery yield. Source: Energy Information Administration 2.

Other fuel usages include hydrocarbon gas liquids, petroleum coke, and still gas. Petrochemicals include plastics and various other chemicals.

Refining

Crude oil, as harvested from a well, is not in a form that is usable for end purposes; it must first be processed in a refinery into gasoline, diesel, petrochemical feedstocks, and other products. Refining has a typical efficiency of 90.1-90.8%, which means that about 10% of the crude oil's energy content is consumed in the refining process 3. Additionally, a refinery requires 0.0034 joules of electricity for every joule of refined product it produces 4, in turn requiring about 0.008-0.009 joules of fossil fuels if the electricity is fossil-generated.

Pollution

Pollution damages from gasoline are estimated as follows.

The image: "gasoline_external_cost.svg" cannot be found!

Non-climate air pollution damages associated with gasoline combustion in light-duty vehicles are estimated at about 33¢ per gallon of gasoline 5, assuming the gasoline is refined from conventional oil, while the damage from greenhouse gas emissions is about 61¢ per gallon if emissions are valued at $50/ton CO2-equivalent 6, 7. As of June 25, 2019, according to the American Automobile Association 8, the average retail gasoline price in the United States is $2.67 per gallon.

Problem:
Methane Leaks
Solution:
Methane Control on Oil Wells

Oil Spills

Despite an increase in oil production over the last 50 years, the average annual spillage from tanker traffic is generally going down.

The image: "oil_spills.svg" cannot be found!

Average annual tonnage of oil spilled, presented by decade. 2020s data includes 2020 and 2021. Source: International Tanker Owners Pollution Federation 9 via Our World in Data 10.

The U.S. Oil Pollution Act of 1990, passed in the wake of the Exxon Valdez spill of 1989, requires responsibility parties to clean oil spills and establishes the Oil Spill Liability Trust Fund (OSLTF) when responsibility parties cannot do so. Excluding some large events, the average settlement from the OSLTF is about $985 per barrel of oil spilled in the U.S. 11. From this figure, and considering all tanker oil spills from 2010 to 2021 and the Deep Water Horizon disaster 12, unfunded clean-up costs amount to about 1 cent per barrel 13.

Problem:
Oil Spills
Solution:
Continue Oil Spill Liability Trust Fund

Flaring

Oil is typically pumped with associated natural gas. When that gas cannot be sold or used on site, it is typically flared. While gas flaring is more environmentally benign than mere venting, flaring comes with environmental costs and is a waste of what could be a valuable resource. The rate of flaring decreased in the 2000s and has been stagnant since.

The image: "gas_flaring.svg" cannot be found!

Source: International Energy Agency 14.

A total of 144 billion cubic meters of gas was flared in 2021, or about 3.5% of total natural gas production 15, with a value of $55 billion 14. Worldwide, greenhouse gas emissions from flaring, including CO2 released from combustion and methane leakage, were about 400 million tons in 2021, or about 1% of total greenhouse gas emissions 15. Other emissions from flaring include benzene, particulates, nitrogen oxides, heavy metals, black carbon, and carbon monoxide, and are linked to respiratory problems 16 and low birth weights 17.

Unconventional Oil

As conventional oil supplies become strained, there is growing development of unconventional alternatives. The three main forms of unconventional oil are light tight oil (LTO), oil shale, and oil sands, though coal-to-liquids, gas-to-liquids, and biofuels are also potential conventional oil alternatives.

About 8% of the world's liquid fuels today come from unconventional sources, led by LTO in the United States, and this share expected to continue to increase 18. Following are estimated breakeven costs for various forms of conventional and unconventional oil production.

The image: "oil_breakeven.svg" cannot be found!

Sources: Kapustin and Grushevenko 18.

Unconventional oil generally has higher greenhouse gas emissions than conventional oil. The following shows the greenhouse gas emissions from a gallon of gasoline produced from different oil sources.

The image: "oil_ghg.svg" cannot be found!

Sources: Lattanzio 19 and Environmental Protection Agency 7.

Oil sands and oil shale have greater water requirements per barrel than conventional oil.

The image: "oil_water.svg" cannot be found!

Source: Center for Sustainable Systems 20.

Oil Power Plants

The levelized cost of electricity from petroleum power plants is estimated at around 16-18 ¢/kWh 21, 22. Petroleum accounts for about 3% of world electricity generation 23, and oil plants are generally being phased out due to high cost. The externalized cost of oil power plants has been estimated from 0.03 to 39.93 ¢/kWh, with an average of 13.57 ¢ 24.

Abiogenic Oil Theory

Abiogenic oil theory is the theory that most petroleum on Earth is created through non-biological process in the upper mantle of the Earth, some of which seeps near the surface 25,26. Abiogenic oil theory generally holds that crude oil is renewable on human-relevant time frames. The theory was popularized in the United States by Thomas Gold 27. Most geologists believes that most crude oil is formed through biological processes and that abiogenic oil theory is not well-supported by evidence 28.

References

  1. World Energy Council. "World Energy Resources, 2013 Survey". 2013. ↩

  2. U. S. Energy Information Agency. "Refinery Yield". Accessed June 25, 2019. ↩

  3. Palou-Rivera,I. and Wang, M. "Updated Estimation of Energy Efficiencies of U.S. Petroleum Refineries". Center for Transportation Research, Argonne National Laboratory. December 2010. ↩

  4. Rikhtegarr, F., Sadighi, S. "Optimisation of energy consumption". Digital Refining. Accessed December 2022. ↩

  5. Committee on Health, Environmental, and Other External Costs and Benefits of Energy Production and Consumption. Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use. National Research Council of the National Academy of Sciences, The National Academies Press, Washington, DC. 2010. ↩

  6. Interagency Working Group on Social Cost of Carbon. "Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis". Under Executive Order 12866, United States Government. August 2016. ↩

  7. U.S. Environmental Protection Agency. "Lifecycle Greenhouse Gas Results". Accessed June 11, 2019. ↩ ↩2

  8. American Automobile Association. "Gas Prices". Accessed June 25, 2019. ↩

  9. International Tanker Owners Pollution Federation. "Oil Tanker Spill Statistics 2021". Accessed May 10, 2022. ↩

  10. Roser, M., Ritchie, H. "Oil Spills". Our World in Data. Accessed May 10, 2022. ↩

  11. Dunford, R. W., Gmur, S., Lynes, M. K., Challenger, G. E., Dunford, M. A. "Natural Resource Damages from Oil Spills in the United States". Environmental Claims Journal 31(2), pp. 176-190. 2019. ↩

  12. NOAA Fisheres. "Deepwater Horizon 10 Years Later: 10 Questions". National Oceanic and Atmospheric Administration, United States Department of Commerce. April 2020. ↩

  13. U. S. Energy Information Administration. "Short-Term Energy Outlook". Accessed May 16, 2022. ↩

  14. International Energy Agency. "Flaring Emissions". September 2022. ↩ ↩2

  15. World Bank. "2022 Global Gas Flaring Tracker Report". May 2022. ↩ ↩2

  16. Blundell, W., Kokoza, A. "Natural gas flaring, respiratory health, and distributional effects". Journal of Public Economics 208: 104601. April 2022. ↩

  17. Cushing L. J., Vavra-Musser K., Chau K., Franklin M., Johnston J. E. "Flaring from unconventional oil and gas development and birth outcomes in the Eagle Ford Shale in South Texas". Environmental health perspectives 128(7): 077003. July 2015. ↩

  18. Kapustin, N., Grushevenko, D. "Global prospects of unconventional oil in the turbulent market: A long term outlook to 2040". Oil & Gas Science and Technology 73(1):67. January 2018. ↩ ↩2

  19. Lattanzio, R. "Canadian Oil Sands: Life-Cycle Assessments of Greenhouse Gas Emissions". Congressional Research Service. May 2012. ↩

  20. Center for Sustainable Systems. "Unconventional Fossil Fuels Factsheet". University of Michigan, Pub. No. CSS13-19. 2018. ↩

  21. Breyer, Ch., Görig, M., Gerlach, A.-K., Schmid, J. "Economics of Hybrid PV-Fossil Power Plants". Proceedings of the 26th European Photovoltaic Solar Energy Conference, 5–9 September 2011, Hamburg, Germany. September 2011. ↩

  22. Schinke, B., Klawitter, J. "Electricity Planning for Sustainable Development in the MENA Region". Middle East North Africa Sustainable ELECtricity Trajectories: Energy Pathways for Sustainable Development in the MENA Region. 2017. ↩

  23. International Energy Agency. "Global Energy & CO₂ Status Report". Accessed April 3, 2019. ↩

  24. Bielecki, A., Ernst, S., Skrodzka, W., Wojnicki, I. "The externalities of energy production in the context of development of clean energy generation". Environmental Science and Pollution Research 27, pp. 11506–11530. February 2020. ↩

  25. Kolesnikov A., Kutcherov V. G., Goncharov A. F. "Methane-derived hydrocarbons produced under upper-mantle conditions". Nature Geoscience 2(8), pp. 566-570. August 2009. ↩

  26. Kutcherov V. G., Krayushkin V. A. "Deep‐seated abiogenic origin of petroleum: From geological assessment to physical theory". Reviews of geophysics 48(1). March 2010. ↩

  27. Gold, T. "The Deep Hot Biosphere: The Myth Of Fossil Fuels". Springer, ISBN-13: 978-0387952536. May 2001. ↩

  28. Glasby, G. B. "Abiogenic Origin of Hydrocarbons: An Historical Overview". Resource Geology 56(1), pp. 83-96. March 2006. ↩