The Revolutionary Pen - beta

By Frank Schiavone

With less than three percent of the worlds oil reserves (21 billion barrels on shore), our nation simply doesn’t have enough oil to impact the global market or drill our way to lower prices at the pump. Lacing the Arctic Refuge and our spectacular coastlines with oil rigs would boost oil company profits, but it would impoverish our natural heritage and deepen our already destructive dependence on oil.

Even if reserves in ANWR (4.3 billion barrels according to government sources) and ocean tracts that are currently off limits could be brought online quickly, they’d have virtually no impact on the price we pay for gas. The most optimistic estimates are that these sources would produce roughly 750,000 barrels per day. The world consumes 80-85 million barrels per day. It is projected that the world will consume 95 million barrels/day by 2012. We use roughly one quarter of worldwide output (about 21 million barrels/day). So increasing our supply by roughly three percent will have no effect on price as worldwide demand grows by nearly 12 percent.

Roughly, 89 billion barrels are thought to be offshore (including roughly 30 billion offshore Alaska). Oil companies already hold leases on vast areas off Alaska and the Gulf of Mexico giving them immediate access to 71 billion barrels of oil or roughly 80% of projected offshore reserves.

Some simple math that counts both offshore and onshore reserves: daily usage divided by proven reserves equals 5200 days or approximately 14 years. Now, I don’t know about you but 14 years is not a very long time. T. Boone Pickens is right about one thing. We can’t drill our way out of our problems. They are of our own making. We will never be energy independent if we continue to rely on petroleum. The only real solutions are developing alternate energy sources and conservation.

Moreover, the suggestion that the declining price of oil can be attributed to this new push to expand offshore drilling is absolutely ludicrous. Demand has dropped off as world economies begin to slow and we American are driving less. Have you been on the freeways lately? Demand is currently driving the price, not supply.

Back when oil was $60 a barrel in 2006, the Republican Congress and the president enacted “The Gulf of Mexico Energy Security Act,” which opened for drilling 8 million acres of the Outer Continental Shelf (OCS) estimated to contain 41 billion barrels of oil.

The current federal moratorium only blocks another 18 billion barrels of oil from being developed. Of this number, 10 billion barrels lies off the coast of California.

Let’s face it; there is no bipartisan support for offshore drilling here. Even if the other coastal states acquiesced like Washington, Oregon, Maine, Virginia (highly unlikely since the Navy has major bases there and uses the area for training exercises) and Florida that leaves just 8 billion barrels or roughly what the world uses in just three months.

So in the real world, opening up areas currently off limits would only yield about 50,000 barrels/day, a mere drop in the bucket (less than one thousandth of world supply). We may remember that when the Saudis promised to raise their production by 500,000 barrels/day earlier this year prices continued to climb. What would make us think that relief from high gas prices is just a simple vote away?

According to the federal Energy Information Administration, “The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.” In government speak, this does not mean that oil prices will be lower after 2030. It simply means that no significant effect could be discerned as far out as the analysis projected.

OK. What about the 41 billion barrels that the oil companies can get to? Of this amount, they have only “developed” 7 billion barrels. What about the other 34 billion barrels? Turns out it’s not easy, it’s darned expensive, and there is shortage of resources (both manpower and drilling ships). For these reasons, oil companies are extremely cautious. They do a lot of seismic analysis beforehand to prevent dry wells. The cost of mistakes can be staggering. So talk of bringing new areas online within one or two years is simply not credible.

Finally, it’s important to note that oil is sold on international markets. The US actually exports about 1.8 million barrels per day. Say what? Seems counterintuitive, doesn’t it?

These are serious times that call for serious solutions. Sorry, the government can’t do much to lower gas prices. What is needed is a transition plan that moves us away from our reliance on petroleum. Currently, about 99% of the energy consumed by the U.S. transportation sector derives from petroleum. We need to get that number much lower.

The drilling controversy is just one more canard or wedge used to polarize us.

Copyright © 2008 Frank Schiavone