If We Drill in the U.S., We Don't Get the Oil

[Midnight Son]

http://www.alternet.org/environment/93619/if_we_drill_in_the_u.s.%2C_we_don%27t_get_the_oil/

One thing has been driving me crazy about this drilling debate -- everyone seems to assume that if we drill for oil in the US, that we will get the oil. And hence, we won't be dependent on foreign oil anymore. But we won't get anything, Exxon-Mobil will.

The oil that comes from that drilling will not be United States property (Republicans aren't suggesting we nationalize the oil companies, are they?). It will be the property of whichever oil company got the rights to that contract. They can then sell it to whoever they like -- and they will. They will sell it on the world market, so the Chinese will have just as much access to the oil that comes out of the coast of Florida as we will.
The Democrats have done a decent job of beating back the argument that this will effect prices in the short run, or even in the long run. But no one has addressed the point above. The Republicans make it seem like we won't be dependent on foreign oil -- and that prices will go down in the US -- if we have our own oil. But it won't be ours. And it will be sold on the world market, so its effect on global oil prices will be even smaller.

When we ask the question of whether there should be drilling off the coast of Florida or in the Arctic National Wildlife Refuge, we should ask the question this way -- would you be comfortable with the Chinese or the Germans or Russians or the Saudis drilling on American land? Because for all intents and purposes, they will be.

Large multi-national firms like Exxon-Mobil are not US property. They sell to the world and their allegiance is to corporate profits. So, when they drill, they drill for the whole world, not just us. Some might find that heart-warming, but it certainly has nothing to do with the US having more oil or lower prices.In retrospect, this is obvious. Just hadn't seen anyone point it out.

[Sarkus]

Sure it's true, but it also ignores the basic point, which the more oil you have, the lower the prices. Also, who's going to be paying more for oil than the US? And oil produced in the US will be a lot cheaper to transport to a US refinery than to buy oil elsewhere and bring it here. So the real effect is there in that sense.

[Midnight Son]

Next: we discuss currently unused oil drilling licenses in the US. They could already be pumping more, which would lower the price, which in the end doesn't benefit them.

[Ben Sones]

Sure it's true, but it also ignores the basic point, which the more oil you have, the lower the prices.

It does bring up a good point, though, because whenever anyone talks about how much of an effect that oil is likely to have on oil prices, they always compare the amount of oil likely to be gained through offshore drilling to US consumption figures. But, as that article points out, that's misleading. If the oil is flowing into the global market, you'd need to compare it to global consumption figures to determine the effect that it's likely to have on oil prices. Right?

[Jasper]

Exactly. The effect on price would be minimal at best, certainly far less than the effect the declining dollar has had -- i.e. it'd be far more effective to cut short foreign adventurism, and curtail off shoring of jobs.

The main effects of opening up refuges to drilling would be A) more profit for oil companies, and B) more kickbacks to the politicians who vote their way. In other words, surprise!, it would primarily benefit exactly those arguing for it.

[Tim Partlett]

There's another key issue that the article ignores: control and stability. Exxon probably won't turn off the taps because they don't like American policy, and American oil sources aren't likely to be shut down by civil war.

[Jasper]

That's a good point. However, the expected oil extraction rate from refuge drilling is relatively small, and would only be a drop in the bucket were external sources cut off.

Such drilling would have no impact on US dependence upon foreign oil.

[Dirt]

Dude, Capitalism before Democracy.

[mystery]

Also, who's going to be paying more for oil than the US?

Uh, China? I don't have a source at my fingertips, but I've heard that worst case conditions are offshore drilling platforms up and functional by 2030. By that time, China's demand is going to completely dwarf ours.

It's simple math, really: They have more people, and they're becoming more and more industrial. The fact that Tiananmen Square is no longer the epicenter of the bicycle world, and is now looking more like a huge roundabout in downtown London should tell you something.

Hell, when I worked for an oil company back in 1997, all they could talk about was the looming Chinese demand.

[Sarkus]

Uh, China? I don't have a source at my fingertips, but I've heard that worst case conditions are offshore drilling platforms up and functional by 2030. By that time, China's demand is going to completely dwarf ours.

It's simple math, really: They have more people, and they're becoming more and more industrial. The fact that Tiananmen Square is no longer the epicenter of the bicycle world, and is now looking more like a huge roundabout in downtown London should tell you something.

Hell, when I worked for an oil company back in 1997, all they could talk about was the looming Chinese demand.

Oh sure, no one is arguing about demand. But that doesn't mean China will be willing to pay more for oil than we will. For all it's improvements economically, China is still a poorer nation.

The point is that transportation and transfer costs, combined with demand, will make oil pumped in the US most likely to stay in the US. We're already producing a lot of oil - we were the third largest producer in 2006 (http://en.wikipedia.org/wiki/Oil_production) - and almost all, if not all, of it is staying here. The only scenario where that's not the case in future is if our demand for oil drops, in which case the worst outcome would be that we export to the benefit of our trade balance.

[JeffL]

Hmm. What percentage of oil being pumped in the U.S. today goes to foreign markets?

[Sarkus]

Hmm. What percentage of oil being pumped in the U.S. today goes to foreign markets?

That's hard to define. A quick google of "US oil exports" brought up several recent "outrage" type stories, but the fine print is that what's being exported is refined products like gas and diesel, not oil per se. And it's hard to quantify as US pumped oil being the source, since we import both raw oil and refined products since we have a large refining capacity. So a simple "export" angle doesn't account for the ide of importing more than we need in order to refine and resell the rest in other places.

[Malathor]

In retrospect, this is obvious. Just hadn't seen anyone point it out.

The government doesn't just give away drilling rights offshore or on government land, it auctions them off, netting billions of dollars. Here is an example, opening up the eastern gulf would net much much more:


http://blog.nola.com/tpmoney/2008/03/oil_drilling_auction_to_happen.html

Also the federal government gets a cut of the revenue, 18.75% for deep water drilling in the Gulf, the rate is higher in places less expensive to produce in (such as ANWR would be).

http://www.forbes.com/2008/06/18/offshore-drilling-bush-business-cx_bw_0618oil.html

This doesn't even include local government takes. You know what the income tax rate in Alaska is thanks to Oil production there? Zero. In fact, every resident gets a significant check from the government instead.

Then there are the jobs, lots of well paying jobs, that offshore drilling rigs (even better in Alaska) provide and the taxes those people pay.

Then there are corporate taxes, which top out at 30% in the US. One of the highest around.

So the reason nobody brings up this point is that it's rubbish. We, (if you define "we" as being the government as you seem to) would all benefit, to the tune of hundreds of billions of dollars, and this without even including any impact of lower prices that increased production would give. Anyone who knows anything at all about oil production would know this.

[Enidigm]

Next: we discuss currently unused oil drilling licenses in the US. They could already be pumping more, which would lower the price, which in the end doesn't benefit them.

This is just sort of nonsense. Where does this idea come from? I hate to sound like some talk radio chogglehead, but it seems like it originated from Nancy Pelosi.

Do you have some information about how there are all these unused leases that are just sitting around? Point some out to me. Because i know people with whom we could together make lots, and lots, of money.

[Mordrak]

This is just sort of nonsense. Where does this idea come from? I hate to sound like some talk radio chogglehead, but it seems like it originated from Nancy Pelosi.

Do you have some information about how there are all these unused leases that are just sitting around? Point some out to me. Because i know people with whom we could together make lots, and lots, of money.

Ok. Here's the report (http://resourcescommittee.house.gov/images/stories/Documents/truth_about_americas_energy.pdf) that I think started this idea and here's the excerpt:


Combined, oil and gas companies hold leases to nearly 68 million acres of federal land and waters that they are not producing oil and gas (Figure 4).Oil and gas companies would not buy leases to this land without believing oil and gas can be produced there, yet these same companies are not producing oil or gas from these areas already under their control.

If we extrapolate from todays production rates on federal land and waters, we can estimate that the 68 million acres of leased but currently inactive federal land and waters could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.


Now, it doesn't go into if there's oil and gas left on that land or if it ever existed. However, I find this statistic more interesting...


Proponents of opening additional lands to oil and gas leasing assert that vast quantities of oil and gas are closed to energy development. In fact, according to the Minerals Management Service, of all the oil and gas believed to exist on the Outer Continental Shelf, 82% of the natural gas and 79% of the oil is located in areas that are currently open for leasing.

[Enidigm]

Interesting. Give me some time to drum up some response.

Here is an article published with some graphs about then-current 2005 forecasts about offshore drilling. Some highpoints include a cost of 77m$ AFE and a 30% success rate for each wellbore drilled. Not cheap.

Notice that the gulf rig count was still declining as late as 2005. Right now on land rig availability is the real bottleneck to development (ie, not enough rigs), and i imagine the same is true of the Gulf. I'm not really certain but i imagine the real reason the oil companies want to open up the rest of the Gulf is that the easy, shallow proven reserves have all been taken, and their rig count is limited.

http://www.worldoil.com/magazine/MAGAZINE_DETAIL.asp?ART_ID=2539&MONTH_YEAR=Apr-2005

[StGabe]

As Malathor points out, this analysis of the benefits of offshore drilling is a bit naive. That said, I think that it's also naive to think that offshore-drilling is of a tangible benefit to our current oil difficulties.I've done what reading I can on the topic and here's a quick version of what I've found:
There is significantly more oil in areas that are already available than in the newer areas.
This is in spite of the fact that we've been drilling offshore for 120 years now. Off-shore drilling isn't fast.
The DOE estimates that we won't have significant increases in oil production, based on opening up new offshore areas until 2030. Even then, the "significant" increase will be only 200,000 barrels a day, a small fraction of our current output and consumption.
Pretty much everyone agrees that offshore drilling would have little impact on global prices. Some say it would be no impact, some optimistic sources claim a possible gain of a few cents.
The mainstream media consistently throws around numbers that I can't find validated by any sources.
Environmental costs probably aren't as bad as I originally thought, but they do exist.My take-away is that that we can safely disregard offshore drilling when talking about solutions to our current oil problems. I don't dismiss it out of hand and I don't think that it would have zero benefit (or zero cost). I just think that the benefit is small enough, and far enough away, that this doesn't really deserve to be treated as a central issue in the election.

I also think that all those people lecturing on economics and using that to tout offshore drilling need to look up discounting functions (http://en.wikipedia.org/wiki/Discount_function), understand how economists (at least consistent ones) value things that won't be available for 20 years, and also do a better job of accounting for the costs and time required to get this oil. In the long analysis I think the overall profit, as considered in "today dollars" is pretty small. "Hundreds of billions of dollars" is a huge exaggeration. Ironically, discount functions (which I think are often over-applied and abused) are often used to "discount" the environmental costs of things like global warming which won't occur for some time. In this case, if applied consistently, they provide a good reason to discount the rationale for offshore drilling.

Personally I favor letting the states decide but think that most states should probably opt out.

[Enidigm]

The thing is StGabe is that you have to look at developing those offshore resources like an investment needing development and not just something that is sitting there easily exploited. We don't have the drilling capacity unless we build new rigs; and we won't build new rigs unless we have the developmental potential. Otherwise, rigs will go to more profitable destinations worldwide.

The crash of the 80s and low prices of the 90s nearly decimated the onshore rig market. By the end of the 90s drilling companies were operating in a dystopian, Battletech 3025 like world, where no new rigs had been built in over 20 years, and those that were running were kept on line by cannibalizing parts from other rigs. The rough estimate was that for every 5 rigs a company owned, only 3 were capable of actually drilling. The majors sold out, the minors sold out, and by the year 2000, the majority of rig companies that existed were minor players that hadn't even been incorporated ten years previous.

Today rigs are being built, but now the commodity prices have ruined the manufacturing ability of rig companies. In the good old days of the 50s, tens of thousands of wells were drilled to enormous depths replete with 8in dia. steel casing, because steel was cheap. Having virtually no steel industry left, the domestic oil industry has to scavenge worldwide for parts; and today, parts are scarce. A tiny, insignificant well drilled in West Texas might have packers from the UK, tubing from Romania, and a rig from China. Just the logistics of building new offshore rigs, much less their employment, is considerable.

I know you're opposed to oil on principle, and feel like the topic is a distraction, but unless you can understand how business works you can't move that powerful force into the service of more than it's own selfish interest. Things like the health of the oil economy, the refining capacity, electrical generation capacity are all interelated in how little we regard these important industrial elements of economic health however smoggy and uncomfortable we are with their existence.

The US right now is stuck with a mid-70s infrastructure that is badly in need of renovation. If we want to take a completely different route we need to do this rationally, and not out of fear of one or another alternative. So, if we want electric cars/sheep, we need to seriously look at how to get there, and whether it's feasible. If it isn't than another direction is required. But not more stagnation and rejection of either more capacity (however dirty) or alternatives (however NIMBY they are), like what's happened for 30 years; neither progress forward nor backward, just a stalemate leaving things as they are.

But in the days of widespread political irresponsibility, record deficits, and an unwinding valuation of US economic strength, if you want an economic revolution you'll need a similarly compelling and thorough blueprint on how to get there. And not just more politically expedient misdirection like the above linked document, more stagnation, more "leave things as they are, because we hate doing more, don't know how to do less, and are too confused to do anything different".

[StGabe]

Uhh, thanks for a thoroughly patronizing reply SelfishGene.

However I'm not really sure what you're saying. That's not because I'm reacting out of "fear" as you put it. I've nothing personal against oil. You're wrong to say that I dislike it "on principle". I dislike it for purely practical reasons: it's an increasingly inefficient and ineffective solution to our energy problems and its use isn't terribly efficient from an environmental stance either. As I stated, I support letting states determine whether to drill offshore but hope that most will pass. Mostly what I object to is pretending that this issue is more important than it is.

Now pointing out the rising cost of steel is interesting. You haven't really made an argument about it though. I.e. you haven't drawn a line of reasoning from the increase of steel to an inability for the American oil industry to be competitive and productive or further towards repercussions on alternative energy solutions. The price of steel has increased dramatically but he price of oil has kept pace (both having increased by over 500% in the past 7 years). Oil companies are making a lot of money these days. Are you suggesting that they need help raising capital?

You aren't arguing against any of the points I've made. And those points speak to far greater context: the nature of solving our oil problem. If I'm to take your comments seriously then continuing to try and squeeze oil out of the ground is an even more expensive and difficult proposition than I'd thought. It only makes it more clear that the real solutions lie elsewhere. Oil was a great industrialization starter-kit. But it was always clear that it would start to get a bit thin eventually. Well, appears to be coming sooner than we initially thought. With demand for oil skyrocketing and new supplies only trickling in we're going to have to look elsewhere.

I'm not necessarily opposed to looking to eek a bit of profit out of oil while the party is still on, but please let's stop wasting breath on offshore drilling this election cycle when it's clear that we need solutions that will be far more reaching than 200,000 barrels per day and will happen far sooner than 2030.

[Mordrak]

However I'm not really sure what you're saying. That's not because I'm reacting out of "fear" as you put it. I've nothing personal against oil. You're wrong to say that I dislike it "on principle".

This is what really gets old, people trying to fit a position into a little box so the can easily dismiss it. Ohh, you oppose X, it must be because of Y, so in the Y box you go, you left/right wing nut. Or, You support X, it must be because of Y. The latter can get really frustrating, because you can seriously disagree with someone about why something should be done, which is important. It's important because the why sets a precedent for later actions.

[Enidigm]

/Shrug.

I think it's wierd, when prices are skyrocketing, supplies are dwindling, and deficits are soaring, not to want to drill. You don't. You see it as purely political. You're wrong here, and pretty dramatically, imo, which is why i'm hard on you. It's like saying there is a worldwide food shortage, but the solution isn't to make more food, but to have fewer people.

Saying that oil is an "increasingly ineffective and inefficient solution to our energy problems" is so catch-phrase laden it's almost hard to parse. Hydrocarbons are the single most effecient source of energy (as far as energy used/energy produced) on the earth. Nothing that we've come up with approaches their total economic efficiency - except, perhaps, nuclear. Maybe you meant to use different words?

I mentioned the steel thing because it has nothing to do with price but availability; permits are being filed but not used because there aren't enough rigs to drill, and we can't build the rigs. Right now supply constraints are hitting everything in the oil business. It doesn't matter what you can pay if it's just not there at all. This causes materials prices to skyrocket and the price of oil wells to surge. 15 years ago at 10$ oil, the average payout for a well was 5 years (before a land well drilled paid the cost of it's drilling back). And today at 120$ barrel oil? 5 years.

I guess i feel frustrated with you because all you focus on is the price of gasoline, and then wave your hand and say, "look, what does it do for me!" It seems like a very short sighted, rust-belt mentality, the kind of inertia that causes auto unions to trundle along at 70$ an hour even as their companies go bankrupt. Wanting to wave away trillions of dollars in tax revenue, because it doesn't "solve" the oil shortages, is, i don't know, idealistic? Stupid?

[Midnight Son]

Also, the idea that we can drill our way to energy independence is complete and utter hogwash. Our peak oil was way back in 1971 and production has been declining ever since. No magic bullets.

[Enidigm]

Doing nothing =/ solution, though, either, MS.

[Midnight Son]

Conservation. Increase car mileage requirements. Raise oil taxes to cut consumption. Continue to develop alternate technologies. Light rail. Plug in hybrids. Gimme some 50 mpg diesels, etc. Sounds like a lot more things can be done than just DRILL DRILL DRILL!

This whole idea that growth can continue forever is really fucked up. Not when you count on finite nonrenewable resources.

[Talorc]

I really cant believe you guys are still having this debate, like offshore drilling is seriously going to do anything about peak oil.

Firstly, nobody knows how much oil is "out there" offshore. Any figure quoted is an extrapolation across a vast area by a petroleum geologist, based upon geological trends, historical results from similar fields and maybe a bit of geophysics (geophysics is some Star Trek crap where they measure the earth's electric current / magnetic field or bounce sound waves through and then draw up a pretty coloured graph with the data) eg, its all a big guess (er sorry, "best available estimate")

If they knew exactly where the oil was and how much of it there was, they would have drilled an oil well into it by now - because it would be FREE FRICKING MONEY. Exxon Mobil spent $680 million in exploration expenses over the last 6 months, trying to find more oil to replace the stuff it sold. They have only been marginally successful over the last 10 year - 104% replacement of liquid reserves (where 100% means they replaced what they pumped out).

http://www.financialexpress.com/news/Exxon-Mobil-Corporation-Announces-2007-Reserves-Replacement/275116/0


(Reserves are not the same as resources. Reserves are what you are pretty sure you have in the ground. Resources are what you think you might have in the ground - levels of confidence. Again, no magic eight ball that tells you exactly how much oil is down there, until you try pumping it up and it runs out)

Anyone who confidently states precisely how much oil could be produced from "offshore drilling" is either lying and couldn't give a shit, or badly misinformed. (Both if they work for Fox News)

Nobody really knows if offshore drilling could "reduce dependence on foreign oil".

The argument seems predicated on the fact that nasty "foreigners" are ripping off Americans by selling them oil expensively. It's a globally traded commodity people - any oil you find offshore will be sold at the same price as the oil from the nasty foreigners. Unless you all suddenly decide you dont actually like capitalism as an economic system anymore and go all national command economy.

Sure if oil production goes up by a whole lot, there may be more supply then demand, so the price drops. Until OPEC has a production cut to keep the price where they want it.

As for the whole "oh noes our domestic steel industry is the shits so we can't make our own oil rigs any more and it is all like mad max" argument - do what everyone else does for large scale mining equipment these days - buy it from the Chinese! They can probably make it for half what it would cost you to do it.

Also the argument is bullshit - these guys built at least 5 new rigs in the last 10 years, and have 6 more on the way:

http://www.enscointernational.com/default.aspx?id=55

You may note it cost about $100,000 dollars a day for the rig to drill in shallow offshore waters. $360,000 for deep water. You better hope you found some oil (and enough to actually flow at a decent rate) or you just blew a big hole in your bank account....

[Harkonis]

At any rate, if the oil was drilled here wouldn't it be exempt from any tariffs either incoming or outgoing?

[wahoo]

The oil that comes from that drilling will not be United States property (Republicans aren't suggesting we nationalize the oil companies, are they?). It will be the property of whichever oil company got the rights to that contract. They can then sell it to whoever they like -- and they will. They will sell it on the world market, so the Chinese will have just as much access to the oil that comes out of the coast of Florida as we will.



This is so damn stupid it makes me head hurt. It's a jingoistic column that preys on economic ignorance and fear of foreigners. Imagine how stupid it sounds if you change the words to cars in the US can be sold abroad. Or wheat isn't the property of the US government but the person who grew it.

[mystery]

Firstly, nobody knows how much oil is "out there" offshore. Any figure quoted is an extrapolation across a vast area by a petroleum geologist, based upon geological trends, historical results from similar fields and maybe a bit of geophysics (geophysics is some Star Trek crap where they measure the earth's electric current / magnetic field or bounce sound waves through and then draw up a pretty coloured graph with the data) eg, its all a big guess (er sorry, "best available estimate")

That's overstating it, quite a bit. I worked for Schlumberger (http://en.wikipedia.org/wiki/Schlumberger) Dahl Research (picture Haliburton, but older, bigger, and French) for a year, and the project at hand was 3-D modeling reservoirs based on core samples, electric-resistance measurements in said core holes, and radar soundings. Certainty based on these models was extremely high, and that was a decade ago.

The difficulty in measuring oil deposits off shore isn't one of lack of methods of data analysis, it's acquiring the data. North Sea data acquisitions from the last 30 years have measured it pretty accurately as one of the largest oil reserves in the world but you have to be able to get to it.

[Andrew Mayer]

I think it's wierd, when prices are skyrocketing, supplies are dwindling, and deficits are soaring, not to want to drill. You don't. You see it as purely political. You're wrong here, and pretty dramatically, imo, which is why i'm hard on you. It's like saying there is a worldwide food shortage, but the solution isn't to make more food, but to have fewer people.

I think it's more like saying "grow different food". Or perhaps, "Change your methods of farming."


This is so damn stupid it makes me head hurt. It's a jingoistic column that preys on economic ignorance and fear of foreigners. Imagine how stupid it sounds if you change the words to cars in the US can be sold abroad. Or wheat isn't the property of the US government but the person who grew it.

I'm imagining it, but it doesn't read the same. Renewable resources aren't the same as limited ones. If there were food shortages in the US I'd expect the government to do something about it, but it's still an imperfect allegory.

Libertarianism isn't a death pact, and being a sovereign nation should, sometimes, trump pure capitalism.

[Talorc]

That's overstating it, quite a bit. I worked for Schlumberger (http://en.wikipedia.org/wiki/Schlumberger) Dahl Research (picture Haliburton, but older, bigger, and French) for a year, and the project at hand was 3-D modeling reservoirs based on core samples, electric-resistance measurements in said core holes, and radar soundings. Certainty based on these models was extremely high, and that was a decade ago.



I have stated the point strongly, and I will admit the Star Trek stuff works (most of the time :-)

But you are talking about reservoir modelling though - not saying how much oil is available off the entire continental shelf of the united states. core samples also implies that you had already done some drilling in the area.

[Glenn]

I kinda like drilling bans just because they're the closest thing we have to long-term oil reserves. I have no doubt we'll open them eventually, I'm just not sure there's any reason to do it now that isn't political. $4 a gallon sucks, but it's not a severe supply disruption.

[Reldan]

Also, the idea that we can drill our way to energy independence is complete and utter hogwash. Our peak oil was way back in 1971 and production has been declining ever since. No magic bullets.

Nuclear power is pretty damn renewable. Electricity could be used to replace many of the energy needs we currently need oil for. It's almost like a magic bullet, except we live in some sort of weird dark ages society that's afraid of magic and thinks it's the devil!

[Aeon221]

I'm imagining it, but it doesn't read the same. Renewable resources aren't the same as limited ones. If there were food shortages in the US I'd expect the government to do something about it, but it's still an imperfect allegory.

Libertarianism isn't a death pact, and being a sovereign nation should, sometimes, trump pure capitalism.

The best response to a food shortage is maintaining an open market in food. The closer you get to an autarky situation, the higher prices go and the more food that gets siphoned out into the black market. Likewise with oil.

[salwon]

That's overstating it, quite a bit. I worked for Schlumberger (http://en.wikipedia.org/wiki/Schlumberger) Dahl Research (picture Haliburton, but older, bigger, and French) for a year, and the project at hand was 3-D modeling reservoirs based on core samples, electric-resistance measurements in said core holes, and radar soundings. Certainty based on these models was extremely high, and that was a decade ago.

The difficulty in measuring oil deposits off shore isn't one of lack of methods of data analysis, it's acquiring the data. North Sea data acquisitions from the last 30 years have measured it pretty accurately as one of the largest oil reserves in the world but you have to be able to get to it.

As a geophysicist currently sitting at a desk in a Schlumberger subsidiary (WesternGeco), I take offense to the Star Trek comment as well. These days we can get 50%-70% out of a known field - 30 years ago that number was a hard 20% limit. And we can do a lot to find them too.

But you are talking about reservoir modelling though - not saying how much oil is available off the entire continental shelf of the united states. core samples also implies that you had already done some drilling in the area.

True, but reservoir modeling can do a lot these days. Having core samples (Well logs) is nice, but by no means necessary.

But the initial statement sort of stands - anyone saying "There are x barrels in the ground offshore" is an idiot. Any data that exists is probably about 20 years old, and let me tell you how much fun it is to work with acoustic waves recorded 20 years ago. There would be at least 5-10 years before the first well was placed - bidding would take a few years, then we'd have to collect new data in the areas, about 1-3 years for processing (depending on how accurate they wanted it)...and that would be just to say how much is down there.

[Midnight Son]

Nuclear power is pretty damn renewable. Electricity could be used to replace many of the energy needs we currently need oil for. It's almost like a magic bullet, except we live in some sort of weird dark ages society that's afraid of magic and thinks it's the devil!

I'm looking forward to my fusion car! (No, not the Ford.)

We import 80% of our Uranium. That's not gonna help the old "energy independence."

[Midnight Son]

The best response to a food shortage is maintaining an open market in food. The closer you get to an autarky situation, the higher prices go and the more food that gets siphoned out into the black market. Likewise with oil.

How about we quit wasting corn on the "ethanol" lie?

Oh, that's right, our massively rich agribusinesses like ADM get billions of $ from our gubmint. I need more lobbyists, eh?

[Unicorn McGriddle]

The best response to a food shortage is maintaining an open market in food.

Book. (http://en.wikipedia.org/wiki/Late_Victorian_Holocausts)

[Andrew Mayer]

The best response to a food shortage is maintaining an open market in food. The closer you get to an autarky situation, the higher prices go and the more food that gets siphoned out into the black market. Likewise with oil.

I think that a national scale doesn't trigger your doomsday scenario.

[Reldan]

I'm looking forward to my fusion car! (No, not the Ford.)

We import 80% of our Uranium. That's not gonna help the old "energy independence."

And where does the world's uranium come from?

Canada (http://en.wikipedia.org/wiki/Canada) (27.9% of world production) and Australia (http://en.wikipedia.org/wiki/Australia) (22.8%)

Crikey! We'd have to declare war on Canada to steal their uraniums, eh?! Shock and awe, mate. Shock and awe.

With Fast Breeder Reactors we can use and reuse the abundant U-238. While this isn't necessarily infinite power, current estimates are that the world's uranium resources would last for BILLIONS of years.

This also discounts Thorium which can be converted into U-233, and which North America has abundant amounts of.

[Midnight Son]

Well, great! Everything is fine and we can all live happily everafter! Woot!

[Reldan]

Well, great! Everything is fine and we can all live happily everafter! Woot!

So... you're behind nuclear as the solution to the energy crisis then? Spread the word, brotha!

[Midnight Son]

Can't wait to play Fallout 3, either, bro!

[Reldan]

Can't wait to play Fallout 3, either, bro!

You know, 20% of the US's power is already coming from nuclear. And these are mostly from plants built back when people thought Pong was high-tech.

Isn't your message already that the world is doomed because there are no solutions for the energy crisis? Would you rather the apocalypse occur because we run out of energy and the world gets plunged into war over control of the remaining (non-nuclear of course) resources?

Do you even have a reason to dismiss nuclear beyond hand-waving and a strong belief that there absolutely could not possibly be a solution? (IE, you might be wrong)

[Midnight Son]

I believe that there is no single best solution. I think you're focusing on the wrong issue here, this isn't about electricity generation, per se, but what can/could replace the millions of barrels of oil in our cars? If we're all going to be driving plugins with a 100 mile range, then fine, we're going to need much more power generation.

I don't really care what we use to generate electricity as long as the pollution is kept down, way down. I'm not against coal power plants but mountain top removal is a travesty and plants need to have pollution controls in place.

http://www.theoildrum.com/files/Electricity_Fuels_2007.png

Looks like we could raise the percent for wind and solar quite a bit. If the will was there.

[Mordrak]

/Shrug.

I think it's wierd, when prices are skyrocketing, supplies are dwindling, and deficits are soaring, not to want to drill. You don't. You see it as purely political. You're wrong here, and pretty dramatically, imo, which is why i'm hard on you. It's like saying there is a worldwide food shortage, but the solution isn't to make more food, but to have fewer people.


Projecting your convenient narrative that boxes people into perspectives they don't have is being hard on people? Ok.


I mentioned the steel thing because it has nothing to do with price but availability; permits are being filed but not used because there aren't enough rigs to drill, and we can't build the rigs. Right now supply constraints are hitting everything in the oil business. It doesn't matter what you can pay if it's just not there at all. This causes materials prices to skyrocket and the price of oil wells to surge. 15 years ago at 10$ oil, the average payout for a well was 5 years (before a land well drilled paid the cost of it's drilling back). And today at 120$ barrel oil? 5 years.


Well, maybe innovation needs to come on more fronts than just, "give us more federal land!"


I guess i feel frustrated with you because all you focus on is the price of gasoline, and then wave your hand and say, "look, what does it do for me!" It seems like a very short sighted, rust-belt mentality, the kind of inertia that causes auto unions to trundle along at 70$ an hour even as their companies go bankrupt. Wanting to wave away trillions of dollars in tax revenue, because it doesn't "solve" the oil shortages, is, i don't know, idealistic? Stupid?

Trillions of dollars? Where's your projections on that? And what's the time table?


Doing nothing =/ solution, though, either, MS.

And neither is trying to gulp down as much as we can before we run out.

[Ben Sones]

I am actually a proponent of nuclear power, in general, but I think it would take an incredibly radical effort--one involving dismantling and rebuilding the NRA and its Byzantine maze of regulations from the ground up, and also massive government subsidies for new plant construction--to get any serious effort to build new plants off the ground in the US. McCain's plans for nuclear power sound like a pipe dream, frankly--the kind that will be quickly forgotten the moment he is elected. He says he plans to get 45 new plants constructed and online by 2030, and despite the fact that he'd be hard-pressed to reach that goal even if the construction of those new plants started right now, he provides absolutely no details at all on how he'd make it happen, or even on how much federal money he is prepared to spend toward that goal. And in the past, McCain has voted against subsidies for nuclear power.

Other aspects of his energy policy are much more specific (and there are a number of proposals that he makes that I like, such as large tax credits for the purchase of low- or no-emission vehicles). With nuclear, though, I suspect that he is just dicking us around. His attempt to portray Obama as anti-nuclear (despite the fact that Obama has said that he doesn't oppose nuclear power as part of a green energy policy, and has--unlike McCain--voted in favor of nuclear power subsidies in the past) just reinforces my skepticism.

[Reldan]

I believe that there is no single best solution. I think you're focusing on the wrong issue here, this isn't about electricity generation, per se, but what can/could replace the millions of barrels of oil in our cars? If we're all going to be driving plugins with a 100 mile range, then fine, we're going to need much more power generation.

I don't really care what we use to generate electricity as long as the pollution is kept down, way down. I'm not against coal power plants but mountain top removal is a travesty and plants need to have pollution controls in place.

I'm focusing on the issue you brought up - energy independence. Now you're talking solely about how we're to fill our cars up with gasoline? They're related issues, but not the same thing.

I think you're focusing on the mentality that everyone is still going to be driving gas-powered cars in ten or twenty years. We need to replace the use of oil for gasoline (decreasing our dependence on it) by shifting to pure electrics for most of our daily travel needs. To do that we need more electricity to replace the energy we previously were burning in the form of gas. Nuclear is the sustainable, proven, economical option to fill that future need for electricity that we actually could get started on today.

Recharging EVs uses a lot of electricity. Right now our household uses 700-800 KW/h's each month. Current EV's can travel about 3-4 miles per kW/h. A family switching over is going to probably need 40-50% more electricity than they currently are using, and our current infrastructure cannot handle that on anything beyond a small scale.

[Midnight Son]

Since we live in a totalitarian state, we don't have to worry about NIMBY! Nukes everywhere!

[Sarkus]

We import 80% of our Uranium. That's not gonna help the old "energy independence."

Only because it's been cheaper to import it for some time and the military doesn't need much anymore to support our nuclear arsenal. There are numerous uranium mines around the US that just aren't being worked.

[Glenn]

On the subject of ethanol: I saw an economist on something somewhere last week (hey, he seemed legit, he was an old guy with a bad haircut and a slouch) arguing that th only thing that would have a significant effect on gas prices in the US short- or medium-term would be to eliminate the tariffs protecting domestic ethanol production from cheap, sweet, slutty Brazilian sugar. A move Bush is actually in favor of, but not Obama or McCain.

Also, in a fascinating twist, Midnight $on's constant Tourette's outbursts have sparked some really useful posts.

[Moore]

The oil that comes from that drilling will not be United States property (Republicans aren't suggesting we nationalize the oil companies, are they?). It will be the property of whichever oil company got the rights to that contract. They can then sell it to whoever they like -- and they will. They will sell it on the world market, so the Chinese will have just as much access to the oil that comes out of the coast of Florida as we will.



This is so damn stupid it makes me head hurt. It's a jingoistic column that preys on economic ignorance and fear of foreigners. Imagine how stupid it sounds if you change the words to cars in the US can be sold abroad. Or wheat isn't the property of the US government but the person who grew it.

They going to make cars out of our national parks?

[salwon]

Republicans aren't suggesting we nationalize the oil companies, are they?

You say "nationalize," I say "no-bid contract."

Can we call the whole thing off? Please?

[StGabe]

Hydrocarbons are the single most effecient source of energy (as far as energy used/energy produced) on the earth.By definition you've decided we're only going to talk about generating energy from matter. I.e. you've ruled out solar, wind and hydro. You move on from this claim to an economic claim which is just rapidly being proven wrong. Oil supply is stagnant and demand is vastly increasing. In order to argue that offshore drilling will offset supply deficiencies you have to be able to argue that it is a significant source of oil. You aren't doing this.

As I said, oil was a nice industrialization starter kit. However now it's time to look elsewhere for solutions.

It's like saying there is a worldwide food shortage, but the solution isn't to make more food, but to have fewer people.

Worst analogy ever.

Firstly, are you trying to tell me that if we had a food shortage, and people were starving, that we should spend all of our time on a solution that would increase food supply by small fraction of consumption, and wouldn't take effect for 20+ years? Heaven forbid people consider rationing or alternative food sources.

The real analogy is to imagine that we all rely on a supply of food that is non-renewable. Say, rock candy growing in the ground. That supply starts to run out and there are increasingly more people to feed (stagnant supply and increasing demand). We could spend all our effort finding a way to find .5% more candy or we could just try to figure out this agriculture thing. Right now, rock candy will still be easier to get than agriculture (on a unit-per-unit basis) but if there isn't enough of it, there isn't enough. Period. So we'd be looking at rationing, looking at ways to make rock candy feed more people, and looking for new sources of food.

[StGabe]

I guess i feel frustrated with you because all you focus on is the price of gasoline, and then wave your hand and say, "look, what does it do for me!" It seems like a very short sighted, rust-belt mentality, the kind of inertia that causes auto unions to trundle along at 70$ an hour even as their companies go bankrupt. Wanting to wave away trillions of dollars in tax revenue, because it doesn't "solve" the oil shortages, is, i don't know, idealistic? Stupid?


Also meant to reply to this.

First of all, find any post on this topic where I've said "what does this do for me?" I most certainly have never made any comments to that effect.

Secondly if it isn't significant enough to affect the price of gasoline then, as a society, why should it be a priority when our concern is exactly the price of gasoline. I have consistently said that I'm not opposed to trying to make a little profit off of oil, if that seems worthwhile to some states, but that I think it is an extreme misrepresentation to claim that offshore drilling will have a net effect on problems we are currently encountering with oil scarcity.

Also "trillions of dollars in tax revenue" is a vast exaggeration. You've just spent a lot of time arguing why oil companies are having problems capitalizing on new sources of oil. On top of that, we have to discount the value of the oil based on the timeline to achieve it. Then we have to remember that we only get a fraction of that. If you do the math it's really not that exciting of a windfall. It's worth considering and I think that should happen on a state-by-state basis but it's clearly irrelevant to the greater conversation about energy scarcity.

I just wish people would shut up about it already and move on to an issue that actually matters. There's a big opportunity cost here in terms of focusing our attention on the real problems that need solving.

[Midnight Son]

Also, in a fascinating twist, Midnight $on's constant Tourette's outbursts have sparked some really useful posts.

Think of me as Cramer, of Mad Money Infamy, except with brains and more hair.

[mystery]

On the subject of ethanol: I saw an economist on something somewhere last week (hey, he seemed legit, he was an old guy with a bad haircut and a slouch) arguing that th only thing that would have a significant effect on gas prices in the US short- or medium-term would be to eliminate the tariffs protecting domestic ethanol production from cheap, sweet, slutty Brazilian sugar. A move Bush is actually in favor of, but not Obama or McCain.

I've seen this data as well, and it seems like a slam-dunk. You could actually reduce subsidies for corn-based ethanol and shuffle that money over to the sugar growers in the Gulf Coast states in order to promote more US-based cheap (and actually energy efficient) ethanol.

Of course, we'd probably end up with a national shortage of sugar. There's always Splenda and the sweet, sweet anal leakage, right?

[Huzurdaddi]

It's worth considering and I think that should happen on a state-by-state basis but it's clearly irrelevant to the greater conversation about energy scarcity.


Let's be clear here. When you say state by state basis do you mean that the decision should be made by the individual states or by the federal government?

[Jakub]

Only because it's been cheaper to import it for some time and the military doesn't need much anymore to support our nuclear arsenal. There are numerous uranium mines around the US that just aren't being worked.
Canada has a 1/3 share of the world uranium market, and that share is growing. I'd say we Canucks are a bit more stable than, say, Nigeria. Australia is sitting on even more uranium, but hasn't developed it.

[Ben Sones]

I've seen this data as well, and it seems like a slam-dunk. You could actually reduce subsidies for corn-based ethanol and shuffle that money over to the sugar growers in the Gulf Coast states in order to promote more US-based cheap (and actually energy efficient) ethanol.

Of course, we'd probably end up with a national shortage of sugar. There's always Splenda and the sweet, sweet anal leakage, right?

The slack would likely be taken up by... wait for it... corn syrup! Everybody wins!

[wisefool]

Alcohol from Brazilian cane is very efficient because it has lots of sunlight and cheap labor. Apparently cane sugar needs a lot of machete-swinging peasants. That could explain why Florida-based cane sugar needs so many subsidies to remain competitive with Latin American sugar.

(Economist article recently refers to a 6 units of energy returned for every 1 consumed for Brazillian cane, whereas US corn ethanol is closer to 1.1 to 1, or even negative.)

Funny thought, the largest producer of cane sugar in Florida was getting bought out by the state of Florida to allow the land to be a wetlands. But some lawyer just sued a couple of weeks ago for some reason:

http://news.google.com/news?hl=en&client=firefox-a&rls=org.mozilla:en-US:official&hs=0of&q=everglades%20sugar&um=1&ie=UTF-8&sa=N&tab=wn

PS Oh yes. Anyway, it seems funny because we're in effect importing cheap labor in a bottle.

[Enidigm]

I lost my whole, very persuasive post. Oh well.

My time is short, so here it is.

Offshore drilling and nuclear restrictions represent a desire to meddle in the market's ability to find alternative solutions. In all seriousness, we cannot - literally cannot - remove hydrocarbons from the energy generation equation, only reduce their importance. The number of serious alternatives is well known - solar, wind, biofuel, nuclear. There really isn't much else.

I'm not certain what you mean, then, by oil drilling being a distraction. What is the debate that needs to be brought to the forefront (asking only half rhetorically)?

[StGabe]

I'm not certain what you mean, then, by oil drilling being a distraction. What is the debate that needs to be brought to the forefront (asking only half rhetorically)?Rather than talking about a change that bring about a small fraction of a % increase in oil supply, in 20 years, we should be talking about stuff like:
Conservation via:
Raising consumer awareness about conservation and potential choices in the market
Giving tax breaks for consumer choices which support conservation
Investing in better mass-transit options
Not subsidizing oil and thus passing the "true" cost of oil on to consumers and allowing "true" market correction to take place
New energy via:
Investing in wind/air/hydro/nuclear
Investing in / incentivizing "plug-in" automobiles that will create a more flexible energy infrastructure
Providing tax breaks for companies and consumers that provide and consume alternative energy sources
Investing in research towards higher-efficiency ethanol solutions These are all things that will have far greater effect on the energy scarcity problem than a marginal increase in oil supply. We can look at the specifics of each one, and debate which will be most fruitful but while oil is our past, these topics are our future. The sooner we start talking about them, the better.

For what it's worth, I believe the market will partially correct on its own. The market is slow, however. Recent oil prices are not that surprising if you look at a graph of oil prices since 2000. We could have been far better prepared. The event horizon for "market correction" is too short. There is a lot we can do now, knowing what challenges we'll face in the next 50 years, to save ourselves pain along the way. The sooner we start to transition, making changes that will need to happen eventually anyway, the less collateral damage we'll see to our economy.