Friday, June 25, 2010

Deepwater Horizon Oil Spill: A case for Alternative Energy, Biodiesel

The Deepwater Horizon oil spill in the Gulf of Mexico has been ongoing now for 66 days. The amount of oil spilled is now estimated at 67 to 127 million gallons of oil, by far the largest US oil spill and coming close, using the upper bound estimate, to becoming the worlds largest accidental oil spill, second only behind the IXTOC-1 spill also in the Gulf of Mexico (Saddam Hussein’s army purposely released around 400 million gallons of oil when retreating out of Kuwait, easily topping the list of largest oil spills in history, but the Deepwater and IXTOC-1 spills were obviously accidental).

Is it worth the risk of another disaster like this occurring to continue offshore drilling? I will now attempt to answer this question with numbers and facts rather than with ideals and speculation.

First of all, how much oil, currently, does the US get from deepwater wells? The US produced about 97.6 million barrels of oil in 2009 from offshore drilling, which includes deep water offshore drilling. The total crude oil produced in the US was about 2 billion barrels, so offshore drilling contributed 5% of the total oil that the US produced. However, if you look at the amount of oil we import, export, as well as produce, then you see that crude oil from offshore drilling was about 1.8% of total crude oil consumed or stored in the US in 2009 (see calculations and references at the bottom). So, almost two percent of the oil in the US comes from offshore drilling. That is not an insignificant number and may actually increase in the future with more oil drilling.

If we cut out 2% of US oil production can we continue life as usual? The answer is, emphatically, yes. We have seen what effect it has on short-term oil prices: absolutely nothing, in fact the prices have gone down in the three months since the oil spill. If demand were suddenly so much greater then you would expect prices to go up proportionally. Though, of course, the price of crude oil isn’t necessarily tied directly to demand so we should look at anther statistic.

Let’s look at biodiesel. The production capacity of biodiesel in the US was estimated to be 2.69 billion gallons or 62 million barrels of pure diesel. Of course this is not actually being produced at the moment in the US but it is a possibility. Though the prices would be fairly high for these bio-products it would at least be able to easily compensate for any lost crude oil. If the government used $10 billion of the $20 billion escrow account to fund current biodiesel companies, that are capable of mass production, to kick production into high gear and get things moving then we could easily surpass the amount of lost crude from offshore drill with domestic diesel. Using the estimate that one barrel of crude oil produces 20 gallons of motor oil and 7 gallons of diesel that puts the total number of barrels of diesel fuel from offshore diesel at 16,278 barrels of diesel fuel, which is far, far, less than the upper limit of biodiesel fuel production predicted. The reason that biodiesel does not currently have larger market is because the cost per barrel of crude is low enough that it is not competitive, but if the US increased taxes on oil companies (or just got rid of their subsidies, which are somewhere around $15 to $35 billion annually!) and used the money for biodiesel production subsidies then we could easily ban offshore drilling altogether with no effect on the usage of oil in the US.

Unfortunately, diesel fuel cannot be used in all engines, just diesel engines. Most trucks and construction equipment that require heavy loads or a large amount of torque use diesel fuel. Lower power engines such as cars do not require that kind of energy and can use motor oil. If most diesel engines were required to run on biodiesel then the crude oil taken from land could be refined so as to produce more motor oil for cars instead of diesel fuel, thus making up for the lack of motor oil coming from offshore drilling.

So, I have shown one option that makes offshore drilling unnecessary and keeps the US operating completely normally. Biodiesel is an easy, proven, alternative to the dangers of offshore drilling and therefore that option should at least be tried before allowing for the possibility of another environmental disaster like the Deepwater Horizon spill. Most biodiesel also has the added benefit of being a carbon neutral source of energy, in that it requires as much CO2 from the air to create it as is produced after the fuel is burned—two birds with one stone—seems like an easy decision to me.

[Update: Below is a comment on this post by an industry scientist working for a leader in biodiesel production in the US, and one of the smartest people I’ve ever met (my dad!). His research uses genetically engineered yeast to produce diesel fuel.]

“Your analysis is sound, but the situation is more complicated because biodiesel is only for diesel engines (so only a small fraction of cars and no airplanes) [this post has now been updated to attempt to take this into account]. Crude oil can be converted to fuels that work in any engine. As long as there is a high demand for gasoline, there is an economic incentive to drill for crude wherever it is. Deep water drilling will only be stopped with laws, and those laws can only apply near the country that passes those laws. We may be able to stop deep water drilling in the Gulf of Mexico, but not elsewhere in the world. Furthermore, as long as we have a Senate, such laws will probably never get passed anyway. It’s a crazy world out there.


In 2009, total US production of crude from land and sea was 2,035,797 barrels. Offshore drilling accounted for 97,669 barrels. That means that 4.8% of US crude oil production in 2009 was from offshore drilling. The US also imported 3,307,058 barrels and exported 15,985 barrels. So a total of 3,307,058+2,035,797-15,985 = 5,326,870 was either used or stored in the US. So 1.8% is the percentage of crude oil versus all crude oil sources in the US.