Thursday, June 19, 2008

Myths of Offshore Oil Drilling

Trotted out like yet another cutesy dog and pony show from the Bush administration is the Amazingly Magical Offshore Oil Drilling Miracle - loaded with Campaign Flash and Wonder, and very short on any practical purpose. (NOTE: See also More Myths.)

I'll let Kevin Drum spell it out:

"The immediate, direct impact would, of course, be zero, since it takes years to bring new oil sources online. But what about the indirect impact that new drilling permits might have on perceptions of future supply? Might that help lower oil prices in the near term?

Maybe, but it's unlikely. Take ANWR first. A recent EIA study took a look at the impact that drilling in ANWR would have, and they concluded that it would probably reduce oil prices by 75 cents a barrel in 2025. A change that small two decades in the future almost certainly wouldn't have any effect on commodity traders today.

Offshore drilling is a little harder to get a handle on. Offshore reserves are larger than ANWR, which means their impact on oil prices would also be larger. The problem is uncertainty: even if the federal ban on offshore drilling were rescinded, that doesn't automatically mean there would be any additional offshore drilling. It just means individual states would get to decide what to do. California and Florida are unlikely to allow much offshore exploration, and other states on the Atlantic and Pacific coasts are question marks too."
"Offshore oil reserves affected by the federal ban are estimated at 18 billion barrels, which is indeed larger than ANWR. However, EIA projects that offshore production rates would be about half of ANWR production rates, which means that lifting the ban on offshore drilling would probably have an even smaller effect on future oil prices than ANWR's 75 cents a barrel in 2025. In other words, "tiny" was probably the wrong word in my concluding sentence above. "Minuscule" is more like it.

But the dog and pony show hit the media like it was a Bold and Beautiful Miracle.

Let's be honest: there is no "ban" on offshore drilling:

"Ban" is just more GOPer-speak. In reality, there is a moratorium on drilling in certain coastal areas. Other areas are not only open to drilling but leases and drilling permits have already been issued.

And they are not being drilled.

In fact, only 17% of the leased areas is in production. So, with about 33 million acres of offshore areas already available to drill and not being drilled, why does the oil and gas industry need to have access to still more? The fact is that nearly 25 BILLION barrels of oil off the coast of the United States is currently available for drilling...and industry is not drilling it.

Not to mention natural gas. Most of the natural gas occurring offshore (over 328 TRILLION cubic feet – an eleven year supply at current consumption rates) is currently available for leasing and development.

And they’re not going after it.

This is the story throughout the country, more than 44 million acres of onshore public lands are leased for oil and gas development and yet most of it is not being drilled. All told (onshore and offshore), 68 million acres are leased and sitting idle. Over 10,000 permits are currently 'stockpiled' by industry. But still they want more.

Between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361%. And did you see your gasoline costs drop? How about your electricity costs? Propane? natural gas? There is absolutely no correlation between the industrialization of public lands and the price of fossil fuels.

It has been estimated that if all of those currently inactive leases were drilled, the USA would produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas EVERY DAY, accounting for a doubling of US oil production and a 75% increase in US natural gas production. The Minerals Management Service tells us that about 80% of fossil fuels available in offshore are currently available for development.

What's going on here is yet another cynical attempt by the GOP and the oil and gas robber barons to increase and assure huge industry profits at the expense of the American people. These companies don’t want to drill these areas. They want to hold them as assests to limit the amount of oil and gas on the market so that prices rise still further - and they make more money. They want to hold on to these areas so that they can drill them ten or fifteen years from now and make an even bigger fortune."

1 comment:

  1. Anonymous6:55 AM

    Readers will be interested in the deep thoughts of Nashville's resident economist/philosopher king Phil Valentine.

    It's here: