New Math?

Yesterday Congressional Democrats introduced a bill that would have required president Bush to release 70 million barrels of oil from the Strategic Petroleum Reserve. The President objected to this, as he felt it would leave us less prepared during a national security crisis (please refer to the word “strategic” in the title of the reserve).

As fate would have it, the Dems were not able to achieve the required 2/3 vote needed, so the bill died a merciful death.

What were they really trying to do? What would be the effect of a one time addition of 70 million barrels of oil to our supply?

In 2007, the US comsumed around 20 million barrels per day! So we’d release 3-1/2 days’ worth of oil?

Why did the bill fail? It’s because the Congressional Democratic leadership is so out of touch with not only their constituents, but even the rank and file of their own party. Americans overwhelmingly are in favor drilling for oil domestically. Most Democratic voters are in favor of drilling. Obviously several Democratic representatives understand this as well.

. . .

I have twice had the opportunity to visit Australia. This wonderful continent is home to some of the most pristine beaches in the world. The reefs also contain an amazing array of fish and sea creatures of all kinds.

What many people don’t realize — in fact can’t even see from the beaches — is the fact that the country is literally ringed with offshore oil platforms. In fact, Australia produced almost 600 million barrels of oil in 2005 — 2/3 of their own need. Why can’t we do this?

I’m proud to live in Florida and love our beaches and wildlife. In fact, I’m headed to the beach later today with my kids for the weekend. I would never put our lives or ecology at risk.

Maybe it’s because I’m a technologist, but I trust technology! Less oil is spilled during production than seeps naturally out of the Earth every day. We need to take control of our energy needs in this country now! It’s rediculous to argue that we put ourselves, our beaches or our tourism at risk by drilling offshore.

“But wait,” you say! “Oil companies already have many acres of oil leases with no drilling. Use those first!”

I’ve never claimed to be a genius (and plenty of people are willing to back me up on this), but don’t you think if it was economically viable and the oil was plentiful on those leases that companies would already be drilling? You have to figure that they secured the leases when oil was only $30-$40 per barrel. So why didn’t they drill at $100 per barrel? Or $140 per barrel? Or when the chief minister of OPEC was hoping for $200 per barrel?

Oil companies earn margins of only about 4% (i.e. 4 cents per dollar on a gallon of gas). Given those slim margins, you can bet that they know when to place their bets and when not to. Drilling is expensive and financially risky. If those leases contained economically accessible oil, you’d see wells there now.

Remember supply and demand? I found it interesting that the week after the President lifted the executive order banning offshore drilling that oil fell below $123 per barrel. Keep in mind that it’s still barred by law (thus Congress must act), but the mere thought of an increase in supply has been hinted. Also, Americans are driving less, buying smaller cars, etc. Demand is shrinking naturally as though it is being guided by some invisible hand…

We’re allowing the free markt to work on the demand side. Why don’t we allow it to work on the supply side?

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2 Responses to New Math?

  1. CL Jahn says:

    We can’t have a ring of offshore drilling platforms fulfilling 2/3 of our oil needs because we don’t have enough oil there to meet 2/3 of our oil needs.

    At best, when we bring all those oil fields up to full production, we can meet 1.8 percent of our current oil needs, according to the DOE and the USGS.

    That’s why so many of us are opposed to drilling; because it won’t reduce either our dependency on foreign oil, or the price of gasoline.

  2. Will says:

    CL,

    The figures showed at best that the oil around our shores could be 1.5 million barrels a day. That is 1.8% of WORLD consumption, but 7.5% of US consumption.

    Second, if we drilled in ANWR, the AVERAGE case scenario gives this location 1.5 million barrels a day. Add that to the offshore oil production, and we would have 3 million barrels per day additional. That is 15% of US consumption. That is HUGE, more than what we import from the middle east.

    Third, add in the currently banned areas in the oil shale mountain west part of the US, and production capabilities there are well above the 3 million barrels a day by itself.

    We have plenty to go around to plummet prices back to earth in the medium term (5-10 years) to around $50-$80 a barrel. ($2 to $3 gas)

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