Drilling in America

I don’t usually have TV, but I’m in a hotel tonight. I just saw a McCain ad that would be funny if it weren’t serious. It starts with some blather about high gas prices, and a picture of an old pump (designed to trigger nostalgia for 25 cents a gallon?). It goes on to imply that domestic drilling is the oil security answer. Then it makes the really amazing assertion (“you know who’s to blame”) that the only thing standing in the way of domestic drilling is … Obama. Wow … I had no idea that one senator could single-handedly wield such power.

McCain seeks to lift a congressional ban on offshore drilling, citing 21 billion barrels of undiscovered offshore oil. To put that in perspective, the USGS National Oil and Gas Assessment update finds 48 billion barrels onshore, of which about 10 billion lies in ANWR. The USGS recently estimated that the arctic might contain 90 billion barrels of undiscovered oil, of which about a third might belong to the US. Saudi Arabia reports reserves exceeding all of those, at about 260 billon barrels. On the demand side, world consumption stands at about 30 billion barrels per year. The US represents over 7 of that, of which 2/3 is imported.

Bush II recently lifted an executive order banning offshore drilling, imposed by Bush I in 1990. If congress went along and lifted it’s own ban, that would free up the 21 billion barrels offshore. But it wouldn’t happen overnight, and it would take years to fully exploit those fields. As a wild guess, one might hope for a million barrels a day in production (similar to Prudhoe Bay) – a little more than 1% of global production. From that, one might expect a 10 to 15% reduction in the price of oil in the short run; a lot less in the long run. And of course, after a few decades, the oil would be gone, just at the point when we might be really desperate. So, lift the ban or don’t, but let’s not pretend that it’ll take us back to the good ole days.

Clearly the supply side is not the leverage point here. Too bad Americans are leaning the wrong way.

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