Thursday, May 22, 2008

Want Lower Gas Prices? OK, Let's Increase Supply

World oil prices might decline if there were more spare oil production capacity. But the control of world oil prices is not in the hands of investor-owned oil companies in the United States, which control just 6% of worldwide oil reserves (national oil companies of foreign governments own 80% of the world's oil reserves).

Even if the control of oil prices were in American hands, which it is not, Congress refuses to allow access to plentiful oil and natural gas deposits beneath federal lands and U.S. coastal waters. It's hard for our government to ask the main oil-producing foreign countries to increase their production when 85 percent of the U.S. Outer Continental Shelf and the Arctic National Wildlife Refuge are closed to domestic energy production. All too forgotten is that these areas hold billions of barrels of oil, enough to strengthen U.S. energy security and support our economic growth for many years.

Opening oil exploration in areas that are off-limits would be an encouraging sign that our elected lawmakers are acting in the best long-run interests of our national security and our continued economic prosperity.

From my editorial in today's Detroit News

10 Comments:

At 5/22/2008 9:48 AM, Anonymous Nick said...

Does the massive amount of people who live along the coasts have anything to do with the prohibition of drilling? I'm sure not many people would like an oil rig in their backyards. If you have a nice, rich yuppie community along the coast, would you want to be the congressman who voted to allow drilling?

 
At 5/22/2008 10:43 AM, Anonymous Anonymous said...

We shouldn't question what President Bush is doing about oil.

If he is ok with me paying $4.00/gallon then he obviously knows something about the situation that I don't.

After all he is the President and I support everything my President does.

 
At 5/22/2008 1:05 PM, Anonymous Anonymous said...

We must never blame the Demorats for the high costof oil, even if they have stopped any new drilling. After all, we have GWB to blame!

Nick - most of the offshore rigs would not be visible from shore. But that does not matter, the yuppies would KNOW they were out there.

 
At 5/22/2008 1:50 PM, Blogger matt said...

Fellow commenters, please double check my figures below, as I am only citing facts I just googled.

"The total quantity of technically recoverable oil within the entire assessment area is estimated to be between 5.7 and 16.0 billion barrels (95-percent and 5-percent probability range), with a mean value of 10.4 billion barrels..." - from This .gov 1998 survey.

"Total world production/consumption (as of 2005) is approximately 84 million barrels per day (13,400,000 m³/d)." - from wikipedia - facts sourced.

At 84 Million barrels a day globally, and assuming 10 billion barrels in the ANWR, it works out to almost exactly 120 days worth of total global production.

Fine, fine, 120 days is the 'chicken little' scenario, as not all other oil fields will go dry immediately, so that gives us 5-10 years worth of oil at best?

From an immediate, RIGHT NOW standpoint, yes, we could use this additional oil production, and yes, it would certainly impact supply vs demand curves, but will it solve the current crisis? No, it'll put it off for a decade, max, while killing Caribou in the process.

Now, I'm not a tree-hugging hippie. I love my car and my vinyl siding, too, and I honestly only like the Caribou because they're DELICIOUS (seriously, have you had caribou?), but face it folks, with rising international demand and declining availability, cheap oil is OVER. Accordingly, the lifestyle that cheap oil has afforded must change, too.

Prof Perry, what do you think of Hubbert Peak Theory?

 
At 5/22/2008 2:43 PM, Anonymous EJ said...

matt,

With regards to your numbers, you have to understand what the technical definition of oil reserves is. It is not the total amount of oil available. It is the total amount of oil economically viable given current technology and current market price. Technology has improves signifigantly since 1998. And in a perverse way, as the market price goes up, more sources are viable, and therefore reserves increase. In 1998, oil was around $20 a barrel. At $125 per barrel, reserves go up. So the numbers you stste would be much larger now. Also, oil fields only extrat about 40-60 percent of total oil because as the pressure drops extraction becomes more expensive. But as said, new technology mixed with higehr prices adds theses spent fiels back into reserves. For instance, there are fields in western pennsylvania producing oil now after being dormant for 80 years.

 
At 5/22/2008 3:25 PM, Blogger matt said...

EJ,

Thanks much for your comment. Give me a minute to twist your words to support my thesis :)

Oil is not going burn up in our carburetors and simply be gone forever. I didn't mean to imply that in my previous post. However, the supply vs demand curve is Econ 101. We all assume demand has nowhere to go but up, so we have to increase supply or suffer ever higher prices.

To increase our supply, we need to drill for more oil. The easiest oil has already been drilled. Now we're looking at more difficult oil, miles below the ocean's surface, in shales and and slicks, and pressurizing wells. All this oil has high extraction costs so the price won't go down even as we can increase supply.

What I think needs to happen is we need a reason to NOT have such high oil DEMAND. I don't know if that's a cultural shift, a massive depression, or a new energy invention, but any way, I can't believe drilling in the ANWR will do anything but temporarily alleviate prices a little bit.

 
At 5/22/2008 5:41 PM, Anonymous Anonymous said...

18 Months Until Custom-Made, Oil-Pooping Bacteria

 
At 5/22/2008 11:12 PM, Blogger juandos said...

Yet another bitter loser suffering from Bush Derangement Syndrome...

You came from the public school system obviously: "We shouldn't question what President Bush is doing about oil."...

What can the President any President do about the price of oil?

This is something you should've learned in high school social studies...

A silly bit of socialist thinking from matt: "What I think needs to happen is we need a reason to NOT have such high oil DEMAND. I don't know if that's a cultural shift, a massive depression, or a new energy invention, but any way, I can't believe drilling in the ANWR will do anything but temporarily alleviate prices a little bit"...

There's more than a few flaws in your thinking matt...

First of all ANWR isn't the only place where there is abundant crude or other forms of hydrocarbon based energy sources...

Look at Figure 2. America’s Endowment of Solid and Liquid Fuels Resources on page 13 to see what else is usable IF free market forces are allowed to do their magic...

Ever heard of the Bakken Formation?

This is in addition of what's already known but prohibited for use by our politicos...

Exxon Mobil Says Peak Oil Unlikely in the Next 25 Years

 
At 5/22/2008 11:40 PM, Blogger sbvor said...

Find my comments here:
================================
Domestic Energy Potential
================================

 
At 5/23/2008 8:28 AM, Anonymous Is said...

18 Months Until Custom-Made, Oil-Pooping Bacteria

Thanks for the link! Manmade species enhanced by forcing evolution. Coolest thing I've read in a while. No offense, Dr. Perry.

 

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