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Letter: The end of cheap oil

We are indeed in an energy crisis, Michael Loos, but not quite as you describe in your March 12 letter.

It's not about the amount of fossil fuels we have; it is about the costs of extracting, refining and using them. It's not about coal and natural gas, because we do have abundant coal and gas supplies; it is about petroleum oil, about the quantity, quality, and location of petroleum oil.

We have a lot of oil in the U.S. but it is not enough to satisfy the market. In the U.S. we produce 5 million barrels of crude oil every day. We consume every day 19 million barrels of liquid fuels. We import the shortfall, most from Canada and Mexico. We import oil because there is not enough available to extract in U.S. territory, even at today's high prices.

Shale oil would be a good thing but there just isn't an economic case to be made for extracting it. The Gulf of Mexico has a lot of oil, but the oil companies have moved on thanks to BP and Deepwater Horizon. They will return but the costs will be higher. If we could drill ANWR it might produce 1 million barrels per day. But even that would be a temporary stopgap because production has been falling in the U.S. since 1970, just as it is now beginning to fall globally.

Even with increasing and record global demand, global conventional crude oil production peaked in 2006. Since then, the shortfall has been made up by increasing use of more expensive alternatives, such as the 1 million barrels per day of ethanol produced in the U.S., and synthetic crude from the tar sands in Canada. Thank God for the tar sands in Canada, because Mexican production has peaked.

Imports from everywhere around the globe are increasingly hard to buy, because all of the exporting countries are using more of their production for themselves. Add it up country by country, and it means increasingly tight supplies.

Mr. Loos, prices will fluctuate, but the end of cheap oil has arrived.

Jon Folkedahl