Why we aren’t and won’t ever be oil independent

12 Jun, 2008 by McQ

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William Yeatman, an energy policy analyst for the Competitive Enterprise Institute asks:

“How long can America, on the one hand, say, ‘We’re sick and tried of high gasoline prices,’ and on the other hand say, ‘We’re not going to do anything about it; we’re not going to tap our own resources?'” Yeatman said. “We’re going to be the only industrialized nation that keeps itself from its own resources.'”

Or more succinctly:

“We’ve got the supply,” Yeatman said. “Why not tap into it?”

Well there are all sorts of excuses and they’ve been used to do a number of things over the decades. Stop drilling, derail nuclear power and prohibit the building of new refineries.

Here’s an example of argument which claims to explain away drilling in ANWR:

ANWR is estimated to be able to produce two million barrels of oil a day. Since America uses about 20 million barrels a day thats a pretty impressive amount. The problem is that that the Alaskan pipeline can only transport 2.1 million barrels a day and its already moving an average of 650k barrels a day which means its remaining capacity for carrying oil produced from drilling at ANWR would be 1,450,000 barrels on average. Thats still a good bit. However the additional problem is that since crude oil’s price is set by a world wide market that currently consumes roughly 90 million barrels a day. So even if all of ANWR’s oil is used only by Americans (say through a clause in the drilling rights lease) then it would only offset an equivalent amount of imported oil (a good thing) however it would only represent a 1.6 percent increase in global supply thereby resulting in an equal price drop. With gas currently at four dollars a gallon that would only equal a 6.4 cent per gallon decrease in prices.

Of course it would never occur to this person that perhaps an upgrade of the capacity of the pipeline is possible or that 2 million barrels a day is 10% of our daily total, of which about 60% is imported. There’s also the argument which claims ANWR wouldn’t be on line for 10 years an our crisis is now. Of course that’s the same argument that was made 10 years ago and our crisis is worse isn’t it?

Consider as well that ANWR would be only part of the solution. So the argument that it would only equal 6.4 cents on a gallon isn’t a particularly convincing one. It is the cumulative reduction from a number of sources that would bring oil prices down.

For instance couple ANWR’s contribution with what is available on the Outer Continental Shelf (OTS):

The Interior Department’s Minerals Management Service determined in February 2006 that approximately 85.9 billion barrels of “undiscovered technically recoverable” oil could be found on the Outer Continental Shelf.

Do you think recovering 80+ billion barrels of oil might cut our foreign oil dependency a bit and lower oil prices?

Of course nothing is going on toward that recovery because Congress, in 1981, passed the Outer Continental Shelf (OCS) Moratorium, which has prevented leasing for the purposes of recovering fossil fuels.

And oil shale?

America’s oil shale reserves are enormous, totaling at least 1.5 trillion barrels of oil. That’s five times the reserves of Saudi Arabia! And yet, no one is producing commercial quantities of oil from these vast deposits.

There, sitting under Wyoming, Utah and Colorado, is enough oil for complete oil independence for this country for decades … while we get our “alternative energy” act together.

Yet it continues to just sit there. Shell has developed a method to remove it and as even told Congress about it, back in 2005:

But a new technology has emerged that may begin to tap the oil shale’s potential. Royal Dutch Shell, in fact, has recently completed a demonstration project (The Mahogany Ridge project) in which it produced 1,400 barrels of oil from shale in the ground, without mining the shale at all.

Instead, Shell utilized a process called “in situ” mining, which heats the shale while it’s still in the ground, to
the point where the oil leaches from the rock. Shell’s Terry O’Connor described the breakthrough in testimony before Congress earlier this summer (And Congress may have an acute interest in the topic, since the U.S. government controls 72% of all U.S. oil shale acreage).

Got that last little point? 72% of all the acreage in which shale oil exists is controlled by the federal government.

It is a complex process which is described at the link. And because of the complexity of the process, there is more work to be done to make it commercially viable. But, given the vast amount of oil available coupled with the high price of oil and the promise of oil independence (if properly exploited), it would seem the incentive – for both industry and government – to make that process commercially viable already exists.

But that doesn’t seem to be the case, does it? Congress still has its collective head up its posterior.

Yesterday Congress again voted down OTS drilling. Democrats – who had previously supported OTS drilling – changed their minds and voted with their party to nix the possibility of such drilling:

Rep. John Peterson, R-Pa., spearheaded the effort. His proposal would open up U.S. waters between 50 and 200 miles off shore for drilling. The first 50 miles off shore would be left alone.

But the plan failed Wednesday on a 9-6, party-line vote in a House appropriations subcommittee, which was considering the proposal as part of an Interior Department spending package.

Of course I can promise you it will be these very same Democrats who will jump in front of the first camera available and lament the high price of oil, all the while being directly responsible for it staying in the $130 a barrel area.

And, as noted before, we get the usual argument from the environmentalists:

“It would take anywhere from seven to 10 years to bring those resources to shore — to have any measurable impact on supply,” Binns said, advocating renewable energy sources.

The same song and dance we’ve heard since 1981. Imagine what shape we’d be in if we’d been bringing a few million barrels a day of those 85 billion OTS barrels available for the past few decades?

So what can you expect from your presidential candidates?

Well, Barack Obama is easy – no drilling. He’s into ethanol:

Obama explained why he opposed domestic oil drilling in his bestselling book, “The Audacity of Hope.”

“We cannot drill our way out of the problem,” Obama wrote, adding, “over the last 30 years, countries like Brazil have used a mix of regulation and direct government investment to develop a bio-fuel industry; 70 percent of its new vehicles run on sugar-based ethanol.”

The problems of such a switch get nothing more than a hand-wave from him. He essentially ignores the available for the unavailable and apparently thinks that we have “30 years” in which to make such a switch. What we do in the interim, apparently, is suffer. He has absolutely no short-term solution.

And McCain? Well he’s a bit harder to figure out.

Recently, speaking of McCain, Lindsey Graham said:

On ABC’s “This Week -with George Stephanopoulos,” Sen. Lindsey Graham (R-S.C), a McCain friend and supporter, said the Arizona Republican would be open to talking about looking for oil and gas “in our own backyard.”

“John McCain would allow offshore explorations, if the states consent,” Graham said Sunday.

That apparently is the same position that McCain took on a League of Conservation Voters last year. Of course it really puts the decision in the hands of the states instead of the Federal government and gives McCain the ability to shrug off any refusal as their right to do so (but I have to wonder what state claims and enforces the 200 mile limit now in force).

At a town hall meeting in Michigan last month, McCain said he believed the United States should expand its domestic oil drilling operations, but said the states ought to have the right to make the decision whether to drill or not to drill, Reuters reported.

It is difficult to gauge McCain’s past voting record on domestic drilling, mainly because in many instances he did not vote.

In March 2008, McCain did not vote, either for or against, on an amendment to increase spending levels on energy-related programs, including the development of oil and natural gas resources in coastal areas not covered by presidential or congressional moratoria. On the same day, McCain did not vote regarding an amendment to increase spending levels on programs to develop natural gas off the coast of Virginia and to develop oil shale resources on public lands.

In June 2007, McCain did not vote, either for or against, on an amendment to allow the governor of Virginia to petition the secretary of the Interior Department to permit natural gas exploration and extraction off its coast.

But McCain did vote in 2005 in support of an amendment to keep the Arctic National Wildlife Refuge (ANWR) closed to oil drilling.

So there you have it – a short-term energy solution right in front of our faces. Yeatman’s question of “we’ve got the supply, why not tap into it”, remains unanswered. And, as a consequence, oil prices continue to rise, consumer prices continue to rise, and the economy begins to falter. All of it a condition of our own making.

Congress has made foolish decisions over the years by prohibiting exploitation of vast oil resources within our borders or control. And we have one presidential candidate who refuses to consider tapping into them (instead he’ll institute “windfall profits taxes” which will only drive gas prices higher) and another who is so wishy-washy you have no idea if he’d actually push exploitation if he were elected.

Instead we’ll hear a lot of promises about the coming revolution in alternative fuels – the same promises which have been made since Jimmy Carter was president. Meanwhile expect the price of oil to continue to climb while those that can afford it the least suffer the consequences of our nation’s inept politicians and their brilliant energy policies (and don’t get me started on nuclear energy and refineries).