Entries tagged with “oil” from Reality Window

I had an email from someone I know and among the other things this person said, there was this statement to which I devised the following reply.

"We need to drill along the coasts and including ANWAR."

We actually do drill along the coast; in fact, most of it is available. The US Interior Dept's Minerals Management Service tells us that about 80% of fossil fuels available in offshore are currently available for development.

The U.S. Energy Information Administration (EIA) recently did a detailed study of the likely outcome of offshore drilling for their Annual Energy Outlook 2007, "Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf (OCS)." The report was issued in May 2008.

I should first note that the term, "ban on off-shore drilling", is misleading and erroneous. There is authorized off-shore drilling in most of coastal mainland US. There is a moratorium on off-shore drilling in certain specified areas including the Florida coast, certain areas off the Atlantic coast and certain areas off the Pacific coast. These areas include vital fisheries and marine resource areas as well as coastal tourism areas.

Per the report mentioned above, in the area open to off-shore drilling, permits and leases have already been issued and only 17% of the area ALREADY leased is in production. In other terms, 33 million acres of offshore coastal areas are already leased, available for immediate drilling and are not being drilled.

Combine that with the onshore acreage which is already leased but not being drilled and per Sen. Feingold in the Milwaukee Journal-Sentinel:

Oil companies collectively are not producing on 68 million acres, or about three-quarters of the federal lands and waters they have under lease.

Also per the EIA report, between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361%. Over 10,000 permits are currently 'stockpiled' by industry. What does that mean? Stockpiled as in permits were taken out but no drilling activity is underway.

It has been estimated that if all of those currently inactive leases were drilled, the USA would produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas EVERY DAY, accounting for a doubling of US oil production and a 75% increase in US natural gas production.

Now why are all those permitted leases just sitting there inactive? Because the oil companies that hold them can list them as untapped assets, adding significantly to their financial statements, particularly as the limitations on the amount of oil and gas actually available on the market drives up the price per barrel. There is no requirement from the federal government forcing the companies to actually do anything with the land that they've leased. And then the leases can be renewed without any commitment to actually drill.

Let's set that aside for the moment and talk about what would be available from drilling in ANWR.

This chart about the impact of drilling in ANWR can be summarized in a different way. Based on an EIA analysis done for Alaska Sen. Ted Stevens, the price of a barrel of oil would drop between $0.50 and $2 over a 30-year time horizon. Since all oil is sold on a global market, impact on price at the pump is estimated to be 1-5 cents lower in 2025-2035. Not very timely and not much payback for all the investment and the desolation of a pristine wilderness area.

Okay, now combine the information about the inactive already-leased acreage and the minimal impact of ANWR with this piece of news that came out on July 3rd of this year.

While the U.S. oil industry wants access to more federal lands to help reduce reliance on foreign suppliers, American-based companies are shipping record amounts of gasoline and diesel fuel to other countries.

A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department. [...]

The 1.6 million barrels a day in record petroleum exports represented 9 percent of total U.S. refining capacity of 17.6 million barrels a day. However, with refiners operating at 85 percent of capacity during the January-April period, the shipments represented a much a larger share of total U.S. oil products produced.

The exports were also equal to half the 3.2 million barrels of gasoline, diesel fuel and other petroleum products the United States imported each day over the 4-month period.

The US oil industry is not being operated for the benefit of US citizens but for the benefit of the shareholders of those companies. Those companies currently hold active, viable permits to drill that would produce 4.8 million barrels of oil PER DAY and they choose not to exercise them at this time.

Anyone who calls for drilling in the areas affected by the moratorium without first addressing all of the currently leased but unused acreage is not playing it straight with the American public. In fact, if you wanted to be cynical about it, you could say that the oil companies are simply using the energy crisis to force open the protected areas without regard to impact on other industries, knowing full well that the access will make no difference to the overall energy costs.

In any case, it should be made clear that action now will NOT have a significantly measurable effect on energy prices, either now or in the future as anything that we do gain, will be bought and sold on the global market and the additional amount will be a drop in the bucket compared to the total amount in the global market.

Those aren't Democratic facts or Republican facts. They're just facts.