Sunday, March 06, 2011

Time to Get Serious About U.S. Oil, Like N. Dakota

Alaska governor Sean Parnell wrote this week in the WSJ that it's "Time To Get Serious About American Oil," and posed the question: "Why is Washington blocking oil exploration in states like Alaska and Louisiana when the Middle East is such a powder keg?"  Here are some excerpts:

"Over the past several decades, we have allowed ourselves to become dependent on oil from unstable regions that are hostile to our nation. The United States relies on an open Suez Canal, the security of which has been funded by our tax dollars for decades. With gasoline prices surging, and manufacturing and transportation costs rising, the rising cost of goods will soon impact every American, putting our economic recovery at risk.

The U.S. imports more than 63% of its oil. The time is now for our federal government to re-examine its current policy—which severely hampers domestic oil exploration and development—and to learn from our recent history.

Millions of American jobs are directly tied to our energy production. Even as the energy sector necessarily diversifies, oil will continue to be a key piece of our national energy profile for many decades. And yet Alaska and the Gulf states have been blocked from developing America's oil by politically driven federal policy, much of it aided by misinformation. If Americans wonder what our economic Achilles' heel is, they need look no further than the federal regulatory system that delays permits for domestic exploration and production.

As we watch fuel prices rise, inflation take hold, and government debt reach record levels, Alaskans and those in other oil-producing states are frustrated. We wonder why the Obama administration is openly hostile to a sector of our economy that has created hundreds of thousands of jobs, kept the country on an even keel even during the recession, and produces a global commodity we depend on every day.

As residents of our individual states, we desire responsible resource development. We don't want to live and work in a spoiled nest. We also want to create jobs that contribute to our economic recovery. Why should we spend billions overseas for foreign oil when we could spend those dollars here at home?" 

MP: The chart above shows one state's oil success story - North Dakota -  where oil production has almost tripled in four years, from 40 million barrels in 2006 to almost 120 million barrels last year.  Perhaps Alaska and the Gulf states could experience the same dramatic increases in oil production as North Dakota, if more domestic drilling was allowed.  

46 Comments:

At 3/06/2011 11:43 AM, Blogger morganovich said...

while every little bit helps i suppose, 120mn bbl/yr is a drop in the bucket.

the US consumes 21mn bbls/day, roughly 7.7bn bbls/yr, so while ND may be showing a great deal of growth, this is only about 1.5% of US consumption. we could triple it from here and it still wouldn't make much difference or likely even cover the increased use that would occur over that period.

ANWR might be a bit of a different story, but ND is just not material producer even now.

 
At 3/06/2011 12:21 PM, Blogger Che is dead said...

New Study Shows That Offshore Drilling Could Make Alaska the Eighth Largest Oil Producer in the World – Ahead of Libya and Nigeria

"The report -- by the consulting firm Northern Economics and the University of Alaska-Anchorage’s Institute of Social and Economic Research -- says that developing Alaska’s OCS could produce almost 10 billion barrels of oil and 15 trillion cubic feet of natural gas, create around 55,000 new jobs and produce $145 billion in new payroll nationally, generating a total of $193 billion in government revenue through the year 2057."

 
At 3/06/2011 12:25 PM, Blogger SBVOR said...

Conservative estimates suggest the Bakken Formation alone may have almost as much technically recoverable oil as the entire proven reserves of Saudi Arabia.

All told, the USA easily has at least 6 to 7 times as much technically recoverable oil as the entire proven reserves of Saudi Arabia.

Click here for the fully substantiated quantitative facts. Note: that post only outlines a small handful of our untapped oil and oil equivalent resources. It doesn’t even mention our vast natural gas resources.

Click here, read carefully, and note that ANWR alone could have prevented (worldwide) the global oil price spikes of 2008.

Click here and note that the very same circumstances are creating the very same price spikes all over again.

DRILL, BABY, DRILL!

 
At 3/06/2011 12:28 PM, Blogger PeakTrader said...

Yes, it's time to get serious about U.S. oil, including drilling off the coast of California.

Otherwise, we may be setting ourselves up for a double dip, which we can't afford, although we're still in recession (according to Warren Buffett).

 
At 3/06/2011 12:36 PM, Blogger SBVOR said...

PeakTrader,

If an oil imbalance is taking us into a double dip recession, it is too late to avoid that (probable) outcome. But, drilling now can prevent a decades long steady downward spiral.

See my previous comment.

 
At 3/06/2011 12:45 PM, Blogger James said...

There are a number of ways the US could become energy independent such as more drilling, natural gas, or clean coal. I note, however, that the only ones we are spending money on are those that are almost certain to fail: solar, ethanol, wind, for example. These are so certain to fail that the Gulf oil princes will even back them with loans. America spins it wheels on an endeavor that will not threaten their oil income while giving them a way to invest their profits in American debt.

My question is who is responsible for this? Environmental wackos generally get most of the blame but I have a hard time with the concept that they have that much power. Looking at sources that have much more influence in Congress what would be the impact of oil independence on the offshore investments of those oil companies, both domestic and foreign, that supply us with oil. I would expect that those assets would produce far less revenue/profit if we achieved oil independence and that Congress would be receptive to their wishes.

What do you think?

 
At 3/06/2011 12:56 PM, Blogger SBVOR said...

James,

I think the so-called Green Energy cabal is (IMO) the biggest criminal enterprise the world has ever seen. Dim politicians give Green Energy handouts to the likes of General Electric. The recipients of these ill-gotten gains give a substantial portion back to the Dim politicians in the form of campaign contributions.

Developing our vast hydrocarbon resources would deliver quite a blow to this vast (IMO) criminal enterprise.

 
At 3/06/2011 1:04 PM, Blogger Johnster said...

Energy and gas prices have been rising but the CPI shows that inflation is still very moderate and within the acceptable range. WHy increase domestic productionw hen inflation is not a problem?

 
At 3/06/2011 1:10 PM, Blogger juandos said...

" Environmental wackos generally get most of the blame but I have a hard time with the concept that they have that much power"...

Hmmm, I don't know James just how strong the 'tree hugger/root kisser' lobby really is but I've been told that they rank right up there with the NRA, various pharma outfits, and Wall St connected types...

But what if the 'environmentalist whackos' are part and parcel of an adminstration?

Consider the comments of Interior Secretary Ken Salazar...

Consider the bizarre, taxpayer funded actions and propaganda coming from the EPA...

 
At 3/06/2011 1:21 PM, Blogger SBVOR said...

Johnster asks:

“Why increase domestic production when inflation is not a problem?”

Because global demand for oil is greater than the global supply. Anytime that is the case, prices will ALWAYS rise sharply until balance is restored.

This imbalance between demand and supply is what caused the price spikes in 2008. The global recession reduced global demand, balance was restored and prices dropped. The global recovery has once again resulted in global demand exceeding global supply.

Developing our vast domestic resources can keep that global supply in balance with global demand and ensure domestic AND global economic progress. Fail to do so and we will enter a decades long downward economic spiral (domestically AND globally).

 
At 3/06/2011 1:23 PM, Blogger PeakTrader said...

SBVOR, bold action is needed. It's time to mobilize:

Only a recession stands in the way of $200 oil: Jeff Rubin
Mar. 3, 2011

Congratulations to Jeff Rubin, who predicted triple digit oil by the end of 2010 -- he's just a few weeks off (Rubin has a historically great track record in oil price predictions).

The former chief economist at CIBC says... oil is heading to $200 unless the oil spike throws the world into recession.

Wikileaks Reveals Imminent Saudi Oil Peak
02/16/2011
Jeff Rubin

Confidential cables from the U.S. embassy in Saudi Arabia released recently by Wikileaks confirm what others have long suspected: Saudi Arabia has little more to give.

Saudi production is never likely to get to Aramco’s 12.5 million barrel/day level target. Instead the country is struggling to produce even 10 million barrels/day.

Global economy...burns a record 87 million barrels a day.

Global oil industry will have to produce six million barrels/day more oil than last year to offset the four million barrels per day that is lost to depletion...and two million barrels per day of new crude demand. (Last year, Chinese oil demand alone increased by almost one million barrels/day).

 
At 3/06/2011 1:29 PM, Blogger SBVOR said...

"Environmental wackos generally get most of the blame but I have a hard time with the concept that they have that much power"

1) Click here and follow the research money.

2) Click here and realize that tens of trillions of dollars will purchase one HECK of a lot of corruption.

 
At 3/06/2011 1:37 PM, Blogger SBVOR said...

PeakTrader,

No amount of "bold action" will get the oil to market in time to avoid a double dip recession. That's already baked into the cake. The best we can do is avoid a decades long downward spiral.

Click here for the wit and wisdom of Jay Leno.

 
At 3/06/2011 1:50 PM, Blogger SBVOR said...

PeakTrader,

You too can predict the next spike in oil prices (just like I did).

It’s dirt simple -- just follow the supply & demand numbers published by the IEA.

 
At 3/06/2011 1:53 PM, Blogger PeakTrader said...

SBVOR, there's over 720 million barrels of oil in the SPR (Strategic Petroleum Reserve).

That could be used to buy us time to ramp-up domestic production (e.g. 2 million barrels a day added to the 21 million barrels a day the U.S. consumes).

 
At 3/06/2011 1:58 PM, Blogger juandos said...

Well it seems that the administration's 'tree huggers' want to continue to stop drilling and continue to drive up unemployment numbers...

From the Politico:
The Obama administration late Friday appealed a judge's orders directing the Interior Department to act on several Gulf of Mexico deepwater drilling permits

 
At 3/06/2011 2:14 PM, Blogger SBVOR said...

PeakTrader,

Draw down the strategic petroleum reserve in order to compensate for Dim policy stupidity?

Drawing down the SPR would (at BEST) only serve to conceal the real problem and thereby allow the Dims to continue to perpetuate their enormously destructive refusal to develop our domestic resources.

I say we take our short term lumps (courtesy of the willfully ignorant Dims), retain the SPR for some truly “strategic” emergency and open EVERYHING WE’VE GOT for development (so as to ensure longer term prosperity).

To the ignorant Greenies, I say:
Without the economic strength resultant from developing our hydrocarbon resources, we will NEVER generate the private sector capital required to develop a truly viable next generation of energy sources (as opposed to the government follies which ONLY serve to subsidize, promote and encourage ABJECT FAILURE).

 
At 3/06/2011 2:48 PM, Blogger morganovich said...

peak-

the purpose of the strategic reserve is not to smooth out prices but as a last line of defense against a "severe supply interruption".

do you really trust our politicians to use it wisely and well?

they'll just run it down to curry short term favor then wind up with a worse bust when it ends (as gray davis did to the california "rainy day fund".

 
At 3/06/2011 2:51 PM, Blogger SBVOR said...

This comment has been removed by the author.

 
At 3/06/2011 2:57 PM, Blogger SBVOR said...

As a means of updating evidence presented in my post from last January

1) Click here for the latest IEA supply & demand data through Q4 of 2010.

2) Click here for the IEA spreadsheet from which the above chart was created.

3) Click here for the 2/11/11 IEA report associated with that spreadsheet.

 
At 3/06/2011 3:08 PM, Blogger PeakTrader said...

Morganovich, if there's a double-dip recession or depression, the Strategic Petroleum Reserve won't matter.

 
At 3/06/2011 3:14 PM, Blogger Benjamin said...

Why did Governor Jeb Bush (R) lobby for and eventually win a permanent ban on oil drilling off the coast of Florida?

 
At 3/06/2011 3:18 PM, Blogger Benjamin said...

Peak Trader-
We are drilling off the coast of CA. Ever see the Santa Barbara channel? It is dotted with oil derricks. Not so Florida--where Guv Jeb Bush (R) sought and won a permanent ban on oil drilling.

I say you cannot drill for oil anywhere near Palm Beach FL, Sea Island GA, Pawley's Island VA , or Newport Beach CA--anywhere where rich Americans have seaside mansions, in other words.

Fuhgetaboutit.

You think they are going to have oil derricks blocking their $3 million views of the ocean?

 
At 3/06/2011 3:36 PM, Blogger SBVOR said...

Benjamin,

1) Your (typical) class warfare argument primarily relates to Limo-Liberals.

2) Even if wealthy Dims block drilling where their precious views might be altered, there are plenty more sources to develop -- click here and examine just a few.

 
At 3/06/2011 4:11 PM, Blogger Benjamin said...

SBVOR-

Class warfare? I am just telling it like it is. You can't drill for oil off of Sea Islands GA. Try it.

Actually, when the rendering plant is proposed for your neighborhood, then you become a greenie-weenie. End of story.

Try building a high-rise condo in Newport Beach. Good luck. Rich people have more influence than poor people...ergo.

I am big fan of domestic drilling, especially for natural gas. I think we should drill of of AK too.
And add a serious gasoline tax, or at least tax foreign oil, and bring back all of our overseas military installations, downsize the military by 75 percent.

We can have a very prosperous future, if we just try.

 
At 3/06/2011 4:17 PM, Blogger rjs said...

Inadequate infrastructure. One question is whether inadequate infrastructure will prove to be a roadblock to meeting ambitious production goals in five to 10 years. The AP article quoted above mentions that currently oil is being transported to market by rail and truck, and drilling companies have erected camps for workers. If infrastructure problems are already being reached, before the ramp-up really takes place, a person wonders how much of an obstacle these considerations will be in the future.

Inadequate price. What tends to happen when there isn’t adequate transportation for the oil is the selling price of the oil tends to be depressed, relative to other types. As of February 8, the spot price for Brent was $99.25; the spot price for West Texas Intermediate (WTI) was $85.85, and the spot price for North Dakota Sweet was $65.61. The target discount rate relative to WTI is quoted as being 10% (because it is a light oil), but the actual price seems to be much lower.

http://www.theoildrum.com/node/7499

 
At 3/06/2011 4:20 PM, Blogger juandos said...

Gee! I wonder whatever became of the following?

Physics Professor Invents Device to Boost Fuel Economy by 20%

 
At 3/06/2011 4:58 PM, Blogger morganovich said...

peak-

"Morganovich, if there's a double-dip recession or depression, the Strategic Petroleum Reserve won't matter."

that's a ludicrous statement.

first off, you are essentially advocating government set prices, you do know that, right? you want the government to subsidize oil? did you not see what happened when California tried that with electricity?

second, the whole strategic reserve is just 724mn bbls. that's about 34 days of US use or about 1 year of being 10% of use.

if you think we could bring meaningful capacity online in a year, then you know nothing at all about oil and gas development.

so, you plan involves inviting the government to meddle in private markets to pursue a course than cannot possibly work.

you sure you've thought this through?

you sound like all the greedy clowns that raided the social security "trust fund" and left if full of IOU's. if you drain the strat reserve for short term short sighted political pandering, then what will you do if there really is a supply disruption? fill your tank with IOU's?

we have come out of recession and depression before without subsidizing energy. why do you think the world is going to end if we don't do it now?

 
At 3/06/2011 5:10 PM, Blogger SBVOR said...

Dr. Perry’s post gave me incentive to offer an update to my post dated 1/7/11 (wherein I said:

“We may see the price of oil spike sometime during the current quarter.”

 
At 3/06/2011 5:15 PM, Blogger SBVOR said...

Benjamin,

Only uninformed idiots think reduced military spending will solve (or even significantly address) our budget crisis. Cutting defense spending by 75% is nothing short of loony tunes.

Click here for the fully substantiated quantitative facts.

 
At 3/06/2011 5:49 PM, Blogger PeakTrader said...

Morganovich, if there's an oil shock, whether it's supply or demand driven, the result will be higher oil prices, which will slow economic growth, and perhaps tip the country into recession again.

Why take that chance when the economy is already weak with slow growth, high unemployment, and huge budget deficits?

I suggest we quickly expand domestic oil production, and use the SPR to offset higher oil prices, until more production is on-line.

If we do nothing, and there's a price spike, it'll be too late. After the country falls into recession, again, oil prices will also fall (e.g. to $50).

 
At 3/06/2011 5:51 PM, Blogger juandos said...

" If infrastructure problems are already being reached, before the ramp-up really takes place, a person wonders how much of an obstacle these considerations will be in the future"...

The only real impediment to progress is the Obmama administration regardless of what the Obama apologists at the AP or the Oil Drum have to say...


ND Top Officials Tell the EPA to Leave the State Alone


On Monday, Governor Jack Dalrymple, U.S. Sen. John Hoeven, U.S. Sen. Kent Conrad and a representative for U.S. Rep. Rick Berg met jointly with the EPA’s Deputy Administrator and Deputy Assistant Administrator to voice their concerns about the agency’s proposals on restricting “regional haze,” i.e., dust. According to the EPA, North Dakotans need more protection from unsafe levels of dust among other things...

 
At 3/06/2011 7:17 PM, Blogger Che is dead said...

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” -- Steven Chu, Obama's Energy Secretary

 
At 3/06/2011 7:48 PM, Blogger PeakTrader said...

Morganovich says "if you think we could bring meaningful capacity online in a year, then you know nothing at all about oil and gas development."

Perhaps, you didn't notice Dr Perry's chart ("North Dakota Oil Production").

I wonder how fast the U.S. oil industry can increase production without the government?

US oil production revives despite offshore disruption
March 2 2011

US oil production last year rose to its highest level in almost a decade.

The revival of US production has been made possible by a rush of small and mid-sized companies into onshore regions such as the Bakken shale in North Dakota, the Permian Basin in west Texas and the Eagle Ford shale in south Texas.

Domestic production of crude oil and related liquids rose 3 per cent last year...The rise enabled a 2 per cent drop in US oil imports...in spite of rising demand as the economy recovered.

 
At 3/06/2011 11:48 PM, Blogger Benjamin said...

SBVOR-

Perhaps, but then Defense, Commerce, USDA, Labor, Education, the VA and debt eat up 70 percent of federal outlays funded by income taxes.

Read that carefully. The huge welfare programs, Social Security and Medicare, are funded by payroll taxes.

If you want a income tax cut, you have to whack the agencies above.

I can assure you of this: In the next 10 years, the US defense, foreign policy-VA complex will suck $10 trillion of out the productive jobs- and wealth-creating sector.

At the end of those 10 years, DoD officials will talk about escalating global threats, problems with aging equipment, need to pay more to retain personal etc etc etc. No matter how much we spend, it is never enough. We can never throw enough money at the problems.

The war on poverty, the war on drugs and the global war on terrorism and extremism--three wars without end, for the benefit of Congress and bureaucrats, and allied private-sector tax-eaters.

 
At 3/07/2011 12:15 AM, Blogger SBVOR said...

Benjamin,

1) When you make utterly unsubstantiated assertions, I automatically assign them the same level of credibility as the random crap arriving daily in my e-mail inbox.

2) But, it’s utterly irrelevant whether your assertions are accurate or not. Why? Because I don’t merely want income taxes reduced -- I want ALL taxes reduced (including the utterly absurd taxes on my cell phone usage).

Again…
Click here for the fully substantiated quantitative facts on how BEST to achieve those cuts.

3) You sound like a Ron Paul style Libertarian. I prefer Rand Paul’s brand of Libertarianism. Over the last decade the Ron Paul camp have been penny wise and pound foolish. Case in point, Iraq was very much a case of pay now or pay a WHOLE LOT MORE later.

Click here for the fully substantiated facts on that one.

4) As far as the war on poverty and the war on drugs -- I’m with you there -- end both of them NOW! Hell, I would shutdown (in totality) at LEAST 90% of ALL Federal bureaucracies.

 
At 3/07/2011 10:44 AM, Blogger juandos said...

"Perhaps, but then Defense, Commerce, USDA, Labor, Education, the VA and debt eat up 70 percent of federal outlays funded by income taxes"...

Are you delusional pseudo benny since you've already been schooled about this nonsense on several many occassions previously?

 
At 3/07/2011 1:06 PM, Blogger Benjamin said...

SBVOR-

I enjoyed your blog, but I contend defense spending should consume about 1 percent of GDP, not 5 percent.

That would free up 4 percent of GDP to go back into the private jobs- and wealth-creating sector, and out of the coprolitic and parasitic defense sector.

Why is it you have faith in a longstanding federal bureaucracy funded through peacetime for generations by a totally institutionally corrupt US Congress?

Surely, the DoD is right up there with the USDA, Commerce and Education as founts of pure waste?

 
At 3/07/2011 1:45 PM, Blogger Paul said...

Benji,

"Why is it you have faith in a longstanding federal bureaucracy funded through peacetime for generations by a totally institutionally corrupt US Congress?"

And yet you just endorsed a socialist health care system on this very blog a couple days ago.

 
At 3/07/2011 1:46 PM, Blogger SBVOR said...

Benjamin,

Do you understand that:

1) We could eliminate all Federal spending but for Medicare and Medicare ALONE would still bankrupt us?

2) The Italian Mafia have abandoned all their traditional rackets to focus entirely on Medicare fraud?

EACH mobster can make $25,000 per DAY with essentially no risk of being caught. The bureaucrats who run Medicare LOVE fraud -- it adds to their annual budget and justifies more bureaucrats to process more fraudulent claims.

You’re scratching a pimple on your ass while a thermonuclear BOMB is bearing down on you!

 
At 3/07/2011 1:50 PM, Blogger Paul said...

SBVOR,

Benji thinks he will benefit from Medicare so he no real problem with it. His pet issues all have the "what's in it for Benji?" at their core.

 
At 3/07/2011 1:51 PM, Blogger Benjamin said...

Paul-
I do not endorse Obamacare. I might endorse a system that caps health care outlays at 10 percent of GDP or less.

SBVOR-

I totally endorse jailing Mafians who engage in fraud against taxpayers. I also endorse cutting DoD outlays to one percent of GDP, to reduce fraud and waste in that sector.

Why all the ire? I seem consistent.

 
At 3/07/2011 2:01 PM, Blogger Paul said...

Benji a few minutes ago:

"I do not endorse Obamacare. I might endorse a system that caps health care outlays at 10 percent of GDP or less."

Benji 2 days ago:"Might be time to throw in the towel, and go the top-down Euro route, and cut our health bills in half, btw."

In other words, you're a socialist just like your boyfriend, Benji.

It is YOU who has "...faith in a longstanding federal bureaucracy funded by a totally institutionally corrupt US Congress."

 
At 3/07/2011 2:05 PM, Blogger SBVOR said...

Benjamin,

Consistent? You’re about as consistent as Jared Loughner.

One minute you sound like a Ron Paul Libertarian, the next minute you sound like a Classical Marxist (wanting government to dictate how much health care is to be rationed out).

So, you want to prosecute mobsters engaged in Medicare fraud. WOW! That’s just peachy. I want a Unicorn. We each have equal odds of achieving our fantasies. NOBODY has ANY incentive to prosecute Medicare fraud. EVERYBODY involved has EVERY incentive to PERPETUATE Medicare fraud!

Are you STUPID or just a TROLL? Maybe both?

 
At 3/07/2011 2:24 PM, Blogger Benjamin said...

SBVOR-

Why all the ire?

I might you are consistent as well.

You say any federal program must be characterized by fraud and waste (such as Medicare) then you flatly refuse to say that the Department of Defense is also a sludgepot of waste, fraud and ossified lard.


I consistently regard all federal outlays as dubious.

Yes, if we simply cap health care outlays at 10 percent of GDP, at least there is a cap. We have no cap now, and outlays are going through the roof--for Medicare and Defense.

 
At 3/07/2011 3:09 PM, Blogger SBVOR said...

Benjamin,

I am officially through with you.

1) You're flat out lying. I have no doubt that there is fat to cut in the Defense budget -- I never said otherwise. But, our military is undeniably stretched too thin in the conduct of critical missions and defense spending is clearly a pimple on the ass where entitlement spending is a thermonuclear bomb bearing down on us.

2) Your naive confidence in the wisdom of government dictating health care rationing is just plain loony tunes.

3) You are either hopelessly stupid or just plain trolling (maybe both). In any case, you're unworthy of my time.

Buh Bye!

 

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