Once again we have arrived at a familiar place of rising oil prices and once again we can see the momentum building behind the line of oil companies as the discomfort for high gas prices sets in. Only days ago the House of Representatives passed a bill to expand offshore drilling and expedite new permits with proposed legislation right behind it to open access to new reserves in ANWR and the Outer Continental Shelf. These familiar conversations also have familiar anticipated repercussions that all point to new drilling wells having no affect on short term pricing and the expanding of drilling outside of current federal areas having miniscule long term affect on price and supply.
Some would like consumers to believe that expanding our drilling capacity offshore will keep short term gas prices from getting higher. Clearly this is the most intuitive answer. It is also the one that the largest number of proponents would like us to buy into. Ultimately, this is no more true now than the last time we got the same song and dance. By the economic laws of supply and demand, more oil supply should help mitigate the rising price of gasoline, but the actual production of oil from newly leased sources is a decade away.
How much oil there is left to recover always gets plenty of face time in the sales pitch for more drilling, but they rarely include the fact that even if new permits were handed out tomorrow, it takes up to 10 years for oil to actually start flowing in a steady volume for refining. On March 17th, Richard Newell of the Energy Information Administration (EIA) gave a speech before the Committee on Natural Resources in the U.S. House of Representatives, and he pointed to the number of steps it takes to actually draw oil out of the earth and how long that takes.
“This [ten year] timetable reflects the time required to obtain leases, drill an initial exploratory well, develop a production development plan if a commercial oil reservoir has in fact been discovered, construct the feeder pipelines, fabricate oil separation and treatment plants and transport them… by ocean barge, construct drilling pads, drill to depth, and complete the wells.”
Any affects of new drilling would not be felt by anyone on the road any time soon.
There is also the steady call for opening leasing access to federal lands in Alaska’s Arctic National Wildlife Refuge and more offshore areas in the Outer Continental Shelf. Newell also points out that when it comes to offshore reserves, most of the recoverable oil (up to 95%) exists in tracts already open to federal leasing. Even if we opened up ANWR and the entire OCS for drilling the EIA does “not project additional volumes of oil that could flow from greater access to oil resources on Federal lands to have a large impact on prices.” The EIA estimates only a 1-2% change in price—all of that work for 4 to 8 cents off at the pump.
Are we drilling because oil companies are short on cash? Not so much. Many have recently noted that the end of the most recent earnings season on Wall Street revealed the top five oil companies reported more than $36 billion in profits in the first quarter of the year. Though it is not surprising that these corporations would want more product to sell, the fact is that House Democratic leader Nancy Pelosi summed it up accurately in saying, “Republicans have brought to the floor another ‘drill only’ bill that would not bring down prices at the pump. It’s a boon to Big Oil that would make another catastrophic oil spill more likely.”
So what will the results be from more drilling? The oil companies will earn more money. We will continue to raise the risks of new oil spills and their damaging affects on the complex and fragile ecosystems. The growth in international demand, especially from emerging markets, will continue to push oil prices higher. The results will be a lot more of what we already have.
This situation demonstrates a reoccurring, ironic American truth: the markedly inverse relationship between daily comfort and foresight. One could think that when problems are the greatest we would spend the most time thinking about how to fix them rather than simply defer them to a later date. Though contrary to this line of logic, when economic and social forces increase their pressure the daily lives of Americans the strength of our foresight dwindles. Sustainability and shortsightedness are not good bedfellows.
If mitigating the demand and price of oil was the goal we have no shortage of ways to do it: Expediting the integrating of bio-polymers to offset our economy’s use of plastics; Continuing to raise the demand for fuel efficiency in our car fleet; Integrating geothermal heating and cooling to a larger portion of residential America. When legislation turns more towards changing direction rather than just stepping on the gas we will know that we might be at the point of making progress.
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