- The Washington Times - Monday, October 9, 2000

The extra 800,000 barrels of crude oil that OPEC has started pumping is a mere trickle in a world that consumes 76 million barrels a day.

Americans are particularly thirsty for oil, sucking up a quarter of what the world produces and relying on oil for 40 percent of the booming economy's energy needs.

Though the typical American grouses about paying near-record-high prices of around $1.55 for a gallon of regular unleaded gasoline, it costs less than bottled water and is downright cheap compared with the $3 or more many urban dwellers pay for a cup of Starbucks coffee.

Frequent vows by political leaders to reduce dependence on the Organization of the Petroleum Exporting Countries' 11 member nations have yielded little result over the years. Despite being the second-largest oil-producer in the world, after Saudi Arabia, the United States' reserves of oil are dwindling, making Americans more dependent than ever on OPEC's willingness to pump more oil at reasonable prices.

Americans are just about as dependent on oil as they are on water, consuming on average 3 gallons of oil a day per person. Two-thirds of that is used for transportation and most of the rest is used for heating, cooling and power generation. But small amounts of petroleum also can be found in a dazzling array of products consumers rely on, from medicines and cosmetics to chewing gum, candy and asphalt.

Petroleum's role in the production of food alone is astounding: It is a principal component of fertilizers and farm pesticides; it fuels the heavy machinery that sows, tends and harvests crops and brings them to market; and it is the basic component of the plastic wrapping used to cart and store food.

Petroleum is a major component of roofing and other materials in homes, and it is used to make much of the clothing Americans wear and the detergent they use for washing.

A century ago, the United States supplied 90 percent of the world's oil. But at the dawn of the 21st century, 56 percent of the 19 million barrels of oil the United States consumes each day comes from OPEC and other foreign producers. If current trends continue, imports would rise to 70 percent by 2020, according to the Energy Information Administration.

Most of the imports of crude and refined petroleum products reaching the United States currently come from OPEC members Kuwait, Venezuela, Saudi Arabia and Nigeria, and non-OPEC producers Mexico, Canada, Colombia, Norway and Gabon.

The largest known oil field, the Ghawar field, lies in Saudi Arabia. Surrounding areas in the Middle East contain the world's largest oil reserves, estimated at 676 billion barrels. A barrel contains 42 gallons.

The United States, by comparison, has 22 billion barrels of known reserves, most of which are in Texas, Alaska and California, although it may have another 78 billion barrels of unproven reserves offshore and in unexplored regions of Alaska.

Extracting offshore oil is more difficult and expensive than extracting it from wells on land such as those in Saudi Arabia and other Middle Eastern countries. That is a major reason production declined dramatically in the United States after the collapse of oil prices in 1986 and 1998 but picked up afterward when prices rose, analysts say.

Offshore wells like those in the Gulf of Mexico are more complex than onshore wells, including facilities for crews to sleep and eat, as well as landing pads for the helicopters they need to get there. Such offshore wells cost $526 per foot to drill, on average, compared with $74 a foot for onshore wells, according to the American Petroleum Institute.

Once the oil is pumped, it is moved by pipelines or barges to refineries. Most imports arrive by tankers and supertankers, which can hold as little as 70,000 barrels to as much as 3.5 million barrels. Oil coming from the Middle East takes 45 days to arrive by tanker and another few weeks for processing before it can be distributed to consumers.

More than half of the imports are deposited at ports along the Gulf Coast in Texas and Louisiana, where the biggest U.S. refineries are located.

The number of refineries in the United States has dwindled in recent years from 276 in 1970 to 164 in 1997, but the ones that remain are larger and increasingly complex, producing almost one-quarter of the world's motor fuel and other refined products.

The value of refined petroleum products made in the United States each year is $160 billion, according to the Commerce Department. For decades, refineries used a simple atmospheric distillation process to make gasoline, kerosene and other fuels. But the demand for greater yields from each barrel of oil and cleaner fuels to protect the environment has greatly increased the complexity of refining.

Today, complicated processes such as "alkylation," "thermal cracking," "catalytic reforming" and "isomerization" are needed to produce high-performance, clean fuels.

Not all crude oil requires the same amount of processing. Sulfur-laden supplies from South America dubbed "heavy, sour crude," for example, require more severe processing than the "light, sweet crude" produced in Texas, for example.

Refineries need increasingly sophisticated equipment to deal with ever-increasing imports of heavy crudes to produce the light, clean fuels demanded by the Environmental Protection Agency.

Bottlenecks can develop because of competing demands. Soaring demand for low-emission gasoline mandated by environmental regulations last summer, for example, helped cause a spike in gasoline prices to more than $2 a gallon in the Midwest as refineries scrambled to produce the heavily processed gasoline amidst rising prices for even the heaviest foreign crude oil.

Fuel prices have remained high across the board this year as a result of the jump in demand caused by a booming economy at home, reviving economies around the world and dwindling capacity at refineries. U.S. refineries are running at 96 percent of capacity today, compared with 69 percent in 1981, according to the Energy Information Administration.

Once the oil is refined, it enters a vast network of storage and transportation facilities that deliver fuel to consumers and businesses. Altogether, pipelines, water carriers, trucks and railroads carry crude oil and refined products more than 1 billion miles per year in the United States, according to the petroleum institute.

Pipelines are the least expensive way to transport oil, and they carry about 60 percent of the oil in the United States. Large pipelines are more economical than small ones and can be equipped to carry several products.

Pipelines range in size from the 2-inch ones that carry oil flowing out of small wells to the 4-foot-wide Trans-Alaska pipeline and Loop pipeline that transport crude oil flowing out of wells around the Arctic Circle in Alaska and in the Gulf of Mexico, respectively. Oil moves slowly in the pipelines, at up to 6 mph, aided by computerized pumping stations.

Most crude oil arrives at refineries via pipeline, while trucks are mainly used to deliver products to retail outlets and consumers. Within the United States, barges and railroads also transport smaller amounts of oil.

A network of major pipelines supplies fuel processed at the Gulf Coast refineries to consumers in the Midwest and on the East Coast. But New England has notably few pipelines. There, critical heating oil supplies in the winter are delivered by barges that can be immobilized during a cold snap if the rivers ice up.

Storage facilities are found at each stage of oil's journey from wellhead to consumer. Underground caverns and salt caves often are used to store crude, including the 571-million Strategic Petroleum Reserve located in salt mines on the Gulf Coast the largest store of crude in the world. Salt deposits are good storage containers because oil cannot permeate the salt structure.

Storing oil above-ground can be tricky, since it is highly volatile, evaporates easily and the vapors expand and contract with changes in temperature. Many above-ground tanks have floating or movable lids to minimize evaporation and danger from explosion.

The underground storage tanks at most gas stations also present environmental hazards to ground water if they spring leaks and are heavily regulated by the Environmental Protection Agency.

While most oil refineries are owned by major international oil companies such as Exxon-Mobil and Chevron, most service stations are operated by independent dealers. Dealers may act as franchises of a major brand company, such as Exxon, but they are free to set their own prices.



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