In my last column, the unraveling of the domestic oil production myth began with the concept of a global oil market – companies beholden to no specific country – and the dominance of the Organization of the Petroleum Exporting Countries.
But the domestic oil production myth truly unwinds on a few other key points that proponents of domestic resources often pass over.
First is the amount of time between when a company receives its permit to begin production and the first drop of oil that is recovered.
According to the Energy Information Administration, it takes an average of around five years for an oil company that was just awarded a lease of reserve land to recover the first drop of oil. Why not ignore alternative sources for five more years, and hope for more oil? To call this procrastination would be an understatement.
Second, America generally doesn’t come close in total reserves compared to the rest of the world. Again according to the EIA, in 2009 the average amount of proven oil reserves within the United States was 21.7 billion barrels of oil. By comparison, Venezuela had 99.3 billion, Canada 178 billion, Europe 13.6 billion, Russia 60 billion, Africa 117 billion and the Middle East, collectively, is sitting on 745 billion.
But consider the possibility that one of the “super major” oil companies – all international producers – develops an interest in tapping America’s oil reserves either in the Alaska National Wildlife Refuge or off shore. How much oil could America get?
On optimistic speculation by EIA’s analysis of “technically recoverable” amounts surveyed by geologists, it has been estimated that ANWR could produce about 876,000 barrels of oil each day. As of 2009, the U.S. produces 9 million barrels of oil a day, and consumes just over 18 million.
With a world market that consumes a total of about 86 million barrels a day according to data from 2007, ANWR’s recoverable amount accounts to just over 4 percent of our current domestic production, and barely 1 percent of world production. Certainly, the “super majors” are already lining up to get a hand in that.
Proponents for domestic production seem to skip over how negligible a contribution that tapping the ANWR oil reserves would make. Nine hundred thousand extra barrels – in 2025 nonetheless – does not make up any ground in efforts to reduce foreign dependency.
Finally, and most important of all the reasons to reduce foreign oil dependency the public would support, domestic production suggests that gas prices would be lowered. Unfortunately, again, it wouldn’t fix this problem either.
In a 2009 EIA report, “Impact of Limitations on Access to Oil and Natural Gas Resources in the Federal Outer Continental Shelf,” the EIA projected domestic crude oil production through 2030 based on historical and current data for production and reserve availability.
The report explores two options for the future of domestic oil production: the OCS “limited” case, where the currently suspended limits on the development of oil production in the Outer Continental Shelf are reinstated; and the OCS “access” case, which examines the “potentialimpacts of lifting of Federal restrictions on access to the OCS” in various parts of the U.S., such as those sites made available in 2008 when the moratoria was lifted. So it’s limited production versus possible production.
The EIA projected that crude oil production in the limited OCS case would be 6.83 million barrels per day by 2030, and gas prices would average $3.91 per gallon.
Now, for the access case – examining the great potential of domestic oil production by furthering utilization of the OCS – the EIA estimates that by 2030, 7.37 million barrels of oil would be produced per day, bringing the price of gas to $3.88 per gallon.
Just think, in under 20 years, by opening our “possible” OCS reserves we would save 3 cents a gallon! Rejoice, baby, rejoice! Domestic production makes gas cheap…er.
Within the remarks and the push to expand domestic oil production, one may hear arguments for reducing “foreign dependency,” “creating of American jobs,” relying on “American resources,” and so on. But never do you hear a proponent of domestic production directly state that gas prices will go down, or even remain steady. And rightfully so – as shown, more American oil does not truly mean lower American gas prices.
Despite the major downsides, domestic production does do one thing: create jobs. While environmental organizations dispute statistics handed out by petroleum-related coalitions – for example, the 9.2 million jobs related to petroleum industry estimated by the Petroleum Institute – it makes sense that more rigs and transportation would create more jobs.
Yet, on the other hand, the industry also has the power to destroy thousands of jobs, as seen in the British Petroleum oil spill. Furthermore these companies, as stressed within the aforementioned reasons, are international. Wouldn’t the labor be given to those who would take it for the cheapest salary?
Overall, the benefits of domestic production do not exist, or granted, are negligible. “Drill, baby, drill” is a myth. The concept is unrealistic, unprofitable and misleading. The power of domestic production lies purely in political gain, vying for a constituency that stands against the assumed expensive and inconvenient lifestyle changes that comes along with alternative energies.
The reasons given against domestic drilling don’t even touch upon the negative environmental aspects related to oil, and they don’t need to. Proponents of domestic production can be beaten at their own game; Politics, economics and social welfare – domestic production doesn’t better any of it.
We’ve been sold the need to reduce foreign oil for decades, yet nothing has happened. It’s fair to say it never will. Change will only come when global oil becomes scarce. When the resource becomes scarce, control becomes necessary. Consider when that day comes, and the U.S. is still dependent on it, would America then rethink alternative sources?
Eh, who cares? Let’s have the next generation deal with that issue.