Drill, maybe, drill
July 7, 2010 - Jim Anderson
Drill, baby, drill?
It’s a cute chant. But putting the risks and paybacks of aggressive oil drilling in perspective is a difficult, case by case problem.
Up until the Horizon blowout, deep-water projects in the Gulf of Mexico appeared to hold the most promise for a great leap in U.S. productivity. Now, of course, deep-water drilling faces an uncertain future. But because the deep-water Gulf holds high potential, the question probably isn’t whether exploration will resume, but what kind of new requirements will be put into place. (That's not an endorsement, just a realistic observation.)
Here’s an attempt to put oil production in perspective.
The U.S. consumes more than 7 billion barrels of oil per year, about two-thirds of which goes towards transportation. We import nearly 60 percent of the petroleum we consume. Total oil consumption across the globe is about 31 billion barrels per year.
Since the U.S. produces less than 10 percent of what’s consumed worldwide, even major increases (percentage-wise) in American oil output have only a marginal effect on the global market.
The potential for “drill baby drill” to lower prices at the pump is also limited by the amount of domestic oil available for extraction. A 2008 report from the Department of Interior’s Bureau of Land Management estimated that there are 117 billion barrels of oil on lands that are managed or owned by the U.S. government.
Of that, about 86 billion barrels is offshore, including an estimated 40 billion barrels in the deep-water Gulf of Mexico.
Areas of the Atlantic and Pacific Oceans that have been off limits for decades contain about 18 billion barrels of oil, according to the U.S. Energy Information Administration (EIA). That represents about 20 percent of the total recoverable offshore oil in the lower 48.
In 2009, when the Outer Continental Shelf ban cited above was being reviewed, the EIA offered an analysis. The agency projected the impact of making no changes in offshore access, as opposed to lifting the entire ban. If the ban were kept in place, the study said, by 2030 the average price of a gallon of gasoline would be 3 cents higher than if the ban were lifted.
In other words, the EIA says could we open the entire Pacific coast, the entire Atlantic coast and the entire Gulf coast of Florida to “drill, baby, drill” and save 3 cents a gallon at the pump 20 years down the road.
As for onshore sites, the biggest untapped deposit lies within the Arctic National Wildlife Refuge in Alaska, where there’s an estimated 7.7 billion barrels of oil. Though its oil might be easier (a relative term) to extract, ANWR probably wouldn’t have a huge impact at the pump, either.
Of course, there’s also the Great Lakes, where there’s less than a billion barrels of “American” oil.
Yes, gas pumps have decimal points for a reason. (And maybe we should thank God there isn't more oil in the Great Lakes.)
OK, I don’t mean to belittle the resource. Everything counts. And there could be more oil than previously known in areas where industry has been unable to fully explore. (We are very rich in oil shale, but that resource’s day appears a long ways from arriving.)
As it stands, even with some impressive offshore reserves, our ability to influence the global oil market through increased production only goes so far. U.S. oil demand represents about 23 percent of what’s consumed worldwide and, again, we produce less than 10 percent.
Beggars can’t be choosy, the saying goes. In the deep-water Gulf, the beggar also got reckless.