The US began supplying a Strategic Oil Reserve in 1975 which currently is the largest in the world. However, the problem is a large percentage of our reserve crude oil is Mexican Mayan high sulfur crude oil, which is difficult to refine and only a few US refineries can process the crude. If there is another oil embargo from the Middle East or closure of the Straits of Hormuz, it will be sweet crude, the more commonly used fuel that will be cut off from the US. The majority of our refineries which can process sweet crude cannot process Mexican Mayan crude.
Mexico is a source of crude oil for the US. The Mexican federal government taxes the state oil company PEMEX 91% of profits for 37% of their federal budget. The iron clad rule in the oil industry is that you must explore and drill to replace your quality reserves, yet PEMEX has not followed the universal rule. The result is PEMEX has not replaced its quality reserves and crude oil production is falling rapidly. In fact at current crude oil production decline rates, in the near future, Mexico will turn into a crude oil importer versus a crude oil exporter. That will eliminate substantial funds for the Mexican federal budget and eliminate the Mexican crude oil exports to the US.
Canada, in the future, will produce considerable crude oil from the Alberta tar sands. However, the cost will be high, since some sources report it takes an equal amount of BTUs to produce a barrel of crude oil from the tar sands. It also takes considerable capital, energy and water to produce the Alberta tar sands, which will make production only feasible with consistently high crude oil costs.
In Washington DC today officials seem clueless as to the coming crude oil crisis. Atomic power plants are being discussed but not being financed or permitted on a large scale. Renewable energy, in the foreseeable future, will not be a large percentage of our energy portfolio. The Obama administration wants to increase oil industry taxes and fees substantially. Also, only a small percentage of federal onshore and offshore lands are open for seismic exploration or leasing, perhaps less than 5%, so future drilling will be hampered due to the uncertainties of leases.
What is needed is a massive continued increase in efficiency and improved technology. The emphasis must cover oil exploration, drilling, production, improve engines, safe and efficient next generation nuclear power, low cost hydrogen power, clean coal-fired power plants, etc. The problem is that innovation in any industry is slow to implement, unless there is a major recognized crisis or war. What we need is a modern Manhattan Project, with public and private funds, to attack the unrecognized crude oil supply crisis. What we do not realize is the international economic war has actually begun and control of crude oil reserves is a key strategic objective.
It is essential to national security that the United States maintain a stable domestic oil industry.