## RAND reports suggest US DoD use less petroleum fuel to deal with high prices, not count on alternatives

##### 20 June 2012

According to three new reports on “Promoting International Energy Security” issued by the RAND Corporation, because the energy purchases made by the US Department of Defense are not large enough to influence world oil prices—despite DoD requiring considerable amounts of fuel to function—cutting fuel use is the only effective choice to reduce what the Pentagon spends on petroleum fuels.

From a cost perspective, the potential of alternative fuels is of limited, if any value, according to the lead report written by James Bartis, a RAND senior policy researcher. However, the US military can play an important role in promoting stability in major oil producing regions and by helping protect the flow of energy through major transit corridors and on the high seas, the reports suggest.

Bartis and RAND colleague Lawrence van Bibbe were the authors of a 2011 RAND report concluding that if the US military increased its use of alternative jet and naval fuels that can be produced from coal or various renewable resources, including seed oils, waste oils and algae, there would be no direct benefit to the nation’s armed forces. Any benefits from investment in alternative fuels by the US Department of Defense would accrue to the nation as a whole rather than to mission-specific needs of the military, they concluded. (Earlier post.)

While the Department of Defense (DoD) is one of the world’s largest fuel users, its consumption of about 340,000 bpd is a small fraction (less than one-half of 1 percent) of global petroleum demand. Considering that the United States produces over 8 million barrels of oil per day domestically and imports an additional 3 million bpd from secure supplies in Canada and Mexico, we can find no credible scenario in which the military would be unable to access the 340,000 bpd of fuel it needs to defend the nation.

While DoD and the services will have access to the wholesale fuel supplies they require, the purchase price may be uncomfortably high. As fuel consumers, DoD and the services have only one effective option to deal with high petroleum prices: to reduce use of petroleum fuels overall. This can be accomplished by purchasing equipment that is more energy efficient; by adopting maneuvers schemes that are more energy efficient; and, in the short term, by implementing energy conservation measures to reduce petroleum use. Alternative liquid fuels do not offer DoD a way to appreciably reduce fuel costs.

—Bartis 2012

Pending a major technical breakthrough, renewable jet and marine fuels will continue to be far more expensive than petroleum-based fuels, Bartis said.

The RAND reports specifically examine the role of the US Air Force in promoting international energy security and provide a broad overview of the dynamics of the world oil market (volume 1), in addition to examining energy security issues in Turkey and the Caspian (volume 2), and the role the Air Force plays in assisting the US Navy in protecting the sea lanes from Hormuz to Asia (volume 3). A fourth volume examining energy security in Nigeria and other nations in the Gulf of Guinea is scheduled for later publication.

The other two key findings from Bartis’ introductory report are:

• Where security shortfalls impede hydrocarbon production or transport, current and future US Air Force partnership-building capabilities offer security improvements that could promote greater production of petroleum and natural gas resources. Notable examples of nations where security shortfalls are significantly impeding investment and production are Nigeria; Iraq; Sudan; and, most recently, Libya. Unless addressed, pipeline security issues will impede investment in Turkey, Bartis suggested.

Although current and future Air Force partnership-building capabilities offer security improvements, partnerships associated with energy infrastructure protection are impeded by concerns that US assistance will threaten the sovereignty of the host country. Additionally, U.S. government concerns about human rights violations and corruption may impede partnership building in such countries as Nigeria, he noted.

• The vulnerability of the petroleum supply chain can be leveraged to achieve broader US objectives, such as diffusing tensions along the Asian sea-lanes, where the US’ primary concern is the potential for conflict between the two regional pillars, India and China. Energy security concerns also may help strengthen existing partnerships (e.g., Turkey) or building new partnerships (e.g., India) with current and prospective allies.

Peak oil. In the lead report, Bartis notes that global oil supplies are finite and thus, at some point, oil production must peak. The question, he notes, is not whether but when and how that peak comes about. Considering both conventional and unconventional sources of petroleum, RAND’s best estimate is that global production will peak between 2030 and 2050.

More important than “when” global oil production might reach its maximum is the form that that maximum takes on. A consensus is developing that global oil production is less likely to come to a sharp peak and more likely to hit a plateau that might continue for some decades and then slowly decline. While a production plateau is far less catastrophic than a sharp peak and rapid decline, it is likely that oil prices could be both high and very volatile during the plateau period. In response to these high prices, demand will moderate as petroleum consumers look for transportation options that are more energy efficient. Also, during this period of high prices, vast amounts of alternative fuels, derived from oil shale, coal, biomass, and possibly algae, would become economically competitive, which would moderate further price increases and extend the duration of the plateau.

Could oil production peak before 2030? Yes, but the reasons for an earlier peak have less to do with geology and more with above-ground actions that might occur in producing and consuming nations. For example, enduring political instability or conflict in a major oil-producing nation or region could reduce production levels and cause global production to peak earlier than it would otherwise. In this case, we would expect petroleum prices to rise considerably. Alternatively, an early supply peak could occur in response to a global agreement to reduce greenhouse gas emissions...If [a 50% reduction in greenhouse gases by 2050] is to be achieved or even approached, it is inconceivable that global oil production will continue to grow much beyond its current level of about 85 mil- lion bpd. In this case, we would expect consumer prices for petroleum products to increase (for example, as a result of a tax or other mechanism that would decrease demand) but prices paid to crude oil producers to drop in response to decreased demand.

Could oil production peak after 2050? That is also a possibility; in fact, continued growth in production would be consistent with the 120-year historical experience of growing oil production despite periodic episodes of oil anxiety. This would occur if advances in technology allowed economic expansion and greater recovery of global oil resources, including access to unconventional resources, such as oil shale; improved recovery of tight oils, such as those being produced from North Dakota’s Bakken formation; and greater development of oil sands.

—Bartis 2012

Caspian region. The study highlights the growing importance of the Caspian region for global oil supplies. In this region, energy infrastructure protection appears to be addressed fairly well, considering relatively low threat levels.

Turkey has ambitions to become an international energy hub, moving oil and natural gas from the Caucasus, Central Asia and the Middle East to Europe, said Andrew Weiss, the lead author for this portion of the study. To achieve that ambition, he said, Turkey needs to improve protection of its pipelines and energy infrastructure, which have been the target of repeated terrorist attacks by the Kurdistan Workers Party (PKK).

Weiss highlighted oil tanker traffic through the Bosporus Strait—a major international chokepoint—as another vulnerable area.

Asia. The Asia sea lanes are a growing security concern because of the increasing dependence of Asian economies on imported oil and natural gas from the Middle East. Three-fourths of the oil passing through the Strait of Hormuz is heading toward Asia, while less than 15% is directed toward the United States.

Those statistics alone suggest that overall US interests are best served by a multinational approach to the protection of the energy sea lanes to Asia, according to RAND senior fellow Ryan Henry, lead author of the third volume of the series. Multinational cooperation in sea lane protection also provides a means of dampening the simmering tensions and lingering disputes that prevail within Asia, he suggested.

The research was sponsored by the Office of Operational Planning, Policy and Strategy, Deputy Chief of Staff for Operations, Plans and Requirements of the US Air Force. It was conducted within the Strategy and Doctrine Program of RAND Project AIR FORCE.

RAND Project AIR FORCE is a federally funded research and development center for studies and analysis aimed at providing independent policy alternatives for the US Air Force.

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BAU, and periodically spend a few trillion to have a go at all those folk with their sand on top of our oil.
I sense a relationship to the 'defence' industry.

Complete Eff'ing morons. This is about energy security for the military...having a source that is not provided by potential enemies to run your forces.

And as DaveMart points out...we'll just ignore the little fact that we end up trying to control the middle east and invading countries once or twice a decade to "help stabelize some poor country where they abuse their people". Of course, you have to have oil for us to give a rat's patooty whether or not anyone is abusing you and to fight for your freedom. Or we can decide you're a threat to Isreal in which case our Christian morals kick in and we try to make sure you don't threaten them...that way the end times can come and Jesus can come back and lead our armies to glory, kill all those Jews and send them to hell. Seriously, that's why US Christian fundamentalist defend Isreal so much....they think it has to reach it's "original borders" so we can kick off the "end times".
Those of you who are not listening to our Congress don't realize that is a big factor for them.

Okay....I got off on a bit of a tangent there...sorry :-)

The part about "above-ground factors" could have come right out of a CERA report.  Meanwhile, even those zones where oil extraction is increasing (e.g. the Bakken) are ramping up slo-o-owly as decline continues elsewhere.

It's claimed that some BEVs are already more economic than ICEVs for some use cases.  The cost of batteries is bound to decline, and their performance is not likely to halt its gradual improvement.  The result is that batteries will beat petroleum in more and more use cases.

np

We could all use 3X less liquid fuel and so could DoD, if not more.

Partial and/or full electrification of all ground vehicles, boats, ships, locomotives, tools, machinery etc is the way to do it. Resistance is futile.

One way to send a clear message would be to progressively raise (1% to 2% per month) import/export/carbon taxes on all liquid fuels (400% to 500%), coal (400% to 600%) and NG (100% to 200%).

Fifty percent (50%) of the dirty (fossil and bio) energy new revenues should be used to progressively pay off the huge national debt and to reduce income tax for all families with revenues less than $100K/year and single with revenues less than (50k/year. The other 50% should be used to build and repair roads and bridges. Attaboy Harvey! This is the rational analysis we have come to expect. I suggested raising gas taxes by 5¢/gallon/month years ago. Yes E-P but Coal, NG (which is only about 25% cleaner than coal), Ethanol & bio-fuels (which could be almost as harmful as fossil fuels) have to be included and taxed proportionally to the harmful pollution and indirect health care cost created. Of course, the extra cost would be passed on the end users who would have to be more selective with their use/purchase of energy. Selectively taxing dirty energy sources would favor the production of clean energy sources such as Hydro, Wind, Solar, Waves, Geothermal, etc. So the US uses approximately 135 billion gallons of gasoline a year (note this discussion only includes gasoline). Over ten years, that's 1.3 trillion gallons of gasoline. Over a little more than ten years we spent about 3-4 trillion dollars on "defense" of Afghanistan, Iraq and Pakistan. That's a tax of about$3 per gallon (okay, oil is about 35% gasoline). If we had charged the American people $1 a gallon tax on gas and ignored the events in the middle east we would have used less gasoline, thus driving down demand and the price of oil. We would have accomplished taking money out of the hands of opec, accrued less debt, and improved the lives of Americans. Too bad we don't have a representative government, that could do what is best for the country rather than what special interest lobbyists want. I guess that the way it works though. BK4, That is a spot on synopsis of the situation. And if you included the ongoing cost of the larger military we must maintain and the bases all over the world, and the pipelines and shipping we must protect, then those cost are easily doubled. What I've never understood is why we do it? Why try to prop up a gov't that is "friendly" to us? Oil is a global commodity and we're going to be buying it on the open market. Nixon's stupid experiment with the Shah of Iran only caused the hatred we get from the middle east and did nothing for the price of our oil. In fact, he even agreed to let them drive the price up to give them more money to buy arms from us! Imagine, our consumers spent more at the pump so we could sell more planes to the Shah from Boeing, McD. Douglas, Lockheed, etc. But those are well documented facts and not even under dispute. But for some reason we've forgotten that those actions are at the root of our current policies. I suggest not waging war in all corners of the globe because we are in a time warp about to re emerge in the year 1938. That would save a lot of fuel in a hurry. Instead the US goes around threatening nations be nice to us or we'll bring democracy to your country. Euphemism for a shock and awe bombing campaign. @ DaveD You must understand Capitol Hill is Israeli occupied territory. DaveD, you shouldn't be sorry. Yes it was "a bit of a tangent" but you were also expressing more truth than most people would have the courage to. Bravo sir! Mann...it is our God given right and responsibility to convert the other 200+ nations of the world to our special type of$ oriented democracy. That's is the only way we can continue to prosper and accumulate more wealth for our 1% to 3%.

Look at the mess we have created in the middle East and North Africa in the last 20 years or so. By pushing (so called non-democratic) stable governments over board, we have created the political vacuum required for the arrival of the most anti-American intolerant religious leaders in many countries. Whenever they gang together, with their common believes and hatred, the rest of the world will have plenty to do to protect their borders.

Is the US going to retreat back to its borders again?.. we know what happened the last two times we tried that.

If oil security is what the military is after, building a few coal-to-liquid FT plants is all that is needed.. do it the easy way and require the national refineries to blend-in 5% coal derived synthetic diesel and gasoline.

This will be a relatively painless (no subsidies) way to jump start the industry. In theory the petroleum reserved is for the military, but you know civilian leaders will tap into it for consumers.

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