
The Organization of Petroleum Exporting Countries (OPEC), has a simple charge, seen in the map below. For the geographically curious, mouse over any of the OPEC members to see an expanded view of the country. As you look through these, take special notice of the positions of borders and access to major bodies of water, as these often account for much of energy-related political intensity in these regions.
This oligopoly (a monopoly only has a single controlling entity, an oligopoly has cohorts acting together to form a controlling entity) controls production via quotas for each member country. The lower the production, the higher the price per barrel (providing there is enough demand). The higher the production, the lower the prices per barrel, but more barrels are sold. (Note that Qatar is leaving OPEC to focus on natural gas production).
OPEC is important for 2 very important reasons:
- OPEC countries produce 40% of the crude oil.
- OPEC countries have 75% of the World Reserve of crude oil.

Click to expand to provide more information
Country | 1992 (total 1039.3 thousand million barrels) | 2002 (total 1321.5 thousand million barrels) | 2012 (total 1668.9 thousand million barrels) |
---|---|---|---|
Middle East | 63.7 | 56.1 | 48.4 |
S. and Central America | 7.6 | 7.6 | 19.7 |
North America | 11.7 | 17.3 | 13.2 |
Europe and Eurasia | 7.5 | 8.3 | 8.4 |
Africa | 5.9 | 7.7 | 7.8 |
Asia Pacific | 3.6 | 3.1 | 2.5 |
Oil Prices
If we look at the price per barrel over a long time period (normalized to adjust for inflation) it is very evident that price instability influences the industry. This has major impacts because oil is still the dominant energy source for the world, including the US.

This graph gives you a visual sense of crude oil prices relative to important political events and legislative actions over the past 30 years. Click on the link below for events and details. Pay special attention to The Arab Oil Embargo, the Iranian Revolution, Petroleum Price Decontrol, and the Persian Gulf Crisis. What's most important to grasp here is the basic relationships between certain events and oil prices. Description of the critical Petroleum-Related Events, 1970 - 2000
After 2000 the price increased, dipped, and spiked at above $100 per barrel! This link shows missing data.
Flow of Energy
Now take a look at what the flow of U.S energy sources looks like. This chart is represented in quadrillions of BTU's, which about covers a year's worth of energy for this country. Notice the breakdown of where our energy comes from, how it is used and consumed, and particularly how dominant oil is in the mix. Most of the oil goes into transportation, there is some contribution from biomass but in 2018 it was ~5%.

Video Description
View a 7:45 video describing the Sankey Diagram from 2015.
Dr. Mathews: This is a Sankey diagram that gives us an indication of where we're using energy in the United States and its various sources. And so if I point a couple of things out, we have electricity generation over here, and we also have various sectors-- the residential, the commercial, the industrial, and the transportation systems.
So here's what we call energy services. So this is the combination of all our transportation energy and energy that we utilize. One other thing to note is that we reject a great deal of energy. Obviously, when we are using steam as a means of generating electricity, we are having a great deal of rejected heat. So the energy coming into the turbine, we don't extract all of it because we throw away this hot water, this low-temperature steam as well, and that's where that rejected energy comes from.
Even in transportation services, our vehicles are inefficient. We generate a lot of heat, where really we'd rather have kinetic energy. And so there are limits on how much we can improve that if we're, indeed, being restricted to the thermo cycle, that steam, that high-temperature means of generating energy.
So the thickness of these lines from these various sources-- so petroleum, biomass-- gives you an indication that we use a great deal more petroleum than we do biomass in our energy systems, but we get a sense of where those various energy sources contribute towards. The units here are in quadrillion BTUs, and so this is a great deal of energy. But let's simplify it a little bit and see where the individual fuel sources contribute to.
So petroleum is definitely serving transportation. You can see that the bulk of it goes to our transportation services. Again, note the inefficiencies in the system because we generate a great deal of heat when we'd really like that kinetic energy to get us from A to B. Industrial users, obviously, some fuel oil as well goes into industrial uses. But the bulk of this transportation you can see is really coming from petroleum.
If we add in-- clicking the wrong button. If we add in biomass, you can see that biomass goes to industrial users. So a lot of that is going to be agricultural waste. People like the paper industry, they're going to cut down trees, use the rest of the biomass in their industrial heat needs to generate steam. But other uses as well. A lot of this is agricultural waste.
We do have a contribution to transportation services. The bulk of that is going to be in the form of ethanol in the United States, with a smaller contribution of biodiesel.
If we look at natural gas, we have a lot of industrial users. Again, they're using that for heat. Commercial users. Again, that's heat. Industrial users are going to use it for high-temperature steam as well for their particular needs. And of course, at home, natural gas for cooking, water heating, and home heating as well is now a significant source.
We are using a great deal more, however, going to electricity. The shale gas revolution has enabled natural gas prices to be considerably reduced and cheaper than coal. And so what we see is more utilities switching to utilize natural gas. When I do turn on coal, you can see it's actually a little bit larger.
This is 2015 data. I'm recording this in early 2017. I expect the new data to come out in another month or so, and we'll see a little bit of changing in the thickness. But for the most part, this would still be a good representation for a couple of years on. If we're now in 2020 and I haven't updated, please yell at me and I will certainly do so.
So moving on and adding in the coal, obviously, coal primarily serves electricity generation. Around 10% of the coal doesn't go into that area. Some of that's going to be coking coal, some of that's going to be direct uses for industrial, where they're looking at steam generation. A lot of it's coking coal, particularly for the steel industry.
Moving on to nuclear. You can see that, obviously, it serves electricity generation. And then if we start adding in the renewables, hydro is, of course, the largest. Mostly electricity generation. Some large industrial users will deliberately move close to hydroelectric sources and be very large consumers there and benefit from that large scale cheaper pricing. And of course, we don't want to move electricity over any considerable distance either, and so that makes that process a whole lot more efficient.
Wind, growing significantly. Still not as large as hydro but is certainly getting there. So while hydro is generally stagnant in its production, we're not going to see any significant increases in the big scheme of things, wind is still a growing contribution. Geothermal is next. That's been relatively steady. We don't have many locations where we generate electricity from geothermal. That, of course, may change, if CO2 has value and/or depending on how effective wind and other renewables can compete.
Moving next to solar. Solar I wouldn't have even mentioned a number of years ago. It's more than geothermal now. It is one of the most rapidly growing contributions to energy. Mostly, you can see here in the form of electricity, we have both solar plants serving the grid, as well as individual solar cells on roofs serving commercial and primary residential users.
So solar is one of the most rapidly growing entities. It started off very small so it can grow very rapidly, high percentages. We'll get to see what happens with policy and cost and subsidies, so the continuing contribution or the increasing contribution of renewables to our energy usage. Remember, we also have challenges with things like closing down nuclear plants. And we'll see whether natural gas prices still, indeed, stay relatively cheap or whether there are more users and then the price starts to go up again. And then I think we'll flip-flop a little bit back and have a little bit more coal and natural gas in the coming years for electricity derived percentages. Anyway, that is the flow of energy in the United States.
The 1973 Arab Oil Embargo
To understand the events leading to the Arab Oil Embargo of 1973 you need to understand why Israel is in its unique situation. Go to the CIA World Factbook and select "Israel" look at the "background." Just as we Brits managed to screw up completely every country we ever "owned," Israel is no exception. It is a United Nations created country. In 1973 Egypt and Syria jointly attacked Israel on Yom Kippur (the holiest day in the calendar). It was the age of the "Cold War". Syria was receiving military supplies from Russia and Israel military supplies from the US, UK, and the Netherlands. When Israel had survived the initial attack, recovered their lost ground, and looked to be capable of capturing large chunks of Egypt, the Arab nations (note this is not the OPEC nations) embargoed (refused to sell) crude oil to the US, UK, and the Netherlands. They later expanded the embargo to the rest of Europe. The "Arab nations" are many of the key OPEC members. The resulting loss of crude oil and considerable uncertainty in the markets resulted in something America was not used to: rationing of gasoline and very significant gasoline price increases. As a result, conservation, efficiencies, nuclear power, the strategic petroleum reserve, membership in the IEA, increase domestic crude production, and fuel diversity became important to America's security. Does this sound familiar? Consider these options when you listen to the current administration's Energy Plan!
The Strategic Petroleum Reserve
The events of the 1973 Arab Oil Embargo resulted in the US joining the International Energy Agency and the formulation of the Energy Policy and Conservation Act of 1975. There were 2 important outcomes from these events (the act and joining IEA):
- The Strategic Petroleum Reserve was authorized in the Energy Policy and Conservation Act of 1975; it was also a requirement for membership (90-day supply of crude oil) in the IEA. This 90-day storage of crude and the promise to share crude oil between member countries was to dilute the influence of an embargo on individual countries. In the US we "drilled" massive skyscraper-sized holes in deep salt deposits to store crude oil from around the world. Look at the SPR website to find out when these stored reserves can be released.
- The CAFÉ (Corporate Average Fuel Economy) standard was also introduced, setting goals of 18 mpg with the 1978 model year increasing to 27.5 in 1985. Do you remember seeing this graph below? Now MPG standards are getting higher and this will impact how much oil we need (reduce the demand). So environmental and energy security benefits!

Natural Gas
Similarly, the Middle East also has much of the World supply of natural gas.

Click to expand to provide more information
Region | Years |
---|---|
North America | about 10 |
South and Central America | about 45 |
Europe and Eurasia | about 60 |
Middle East | about 145 |
Africa | about 70 |
Asia Pacific | about 30 |