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Is Drilling the Answer?
The United States has an estimated 112 billion barrels of potentially recoverable oil. Sounds like a lot, doesn't it? Well, actually, it's not all that much.
In an earlier post, we showed that if we could access all of our recoverable oil, it would provide enough fuel to power all our cars for maybe 15 years -- a far cry from sustainable energy independence.
Still, that's something, so, some argue, let's get started drilling now and get it out of the ground and into our cars ASAP. Some of the nation's untapped oil resources are believed to be located offshore on the outer continental shelf (OCS). So, many want restrictions on offshore drilling lifted so that we can access this oil. Others oppose drilling because of environmental and economic concerns. Perhaps because this is an election year, the debate on offshore drilling has become heated and even, at times, emotional.
All politics aside, I would like to share with you the information I have been able to gather with regard to the amount of oil we might be able to get from offshore drilling.
Offshore Drilling Would Provide a Drop in the Bucket
The impact on oil supplies from additional offshore drilling on the U.S. OCS looks to be very small indeed. The graphic below -- adopted from Architecture 2030 -- provides a great illustration of the veritable drop in the bucket that offshore drilling will bring to our gas pumps. (The yellow sliver indicates how much bang we'd get out of our drilling bucks.)
According to an analysis and data from the Energy Information Administration (EIA), the earliest this oil would start dribbling in would be around 2017, and the initial rate of production would be about 10,000 barrels of oil per day. At their peak in the mid-2020s, the wells would yield about 20,000 barrels per day.
To put these numbers in context, consider that we bring in about 15 million barrels of crude a day. If we keep on our present course, U.S. consumption of oil will increase moderately in the next couple of decades reaching about 17 million barrels of oil per day by 2030. In that case, OCS drilling will supply:
- about 0.06 percent in about 9 years and
- about 1 percent at its peak in the mid-2020s.
Clearly, offshore drilling is not going to get us to energy independence, not even close.
What about the price at the pump? Analyses, including the government's own, predict that any price reduction will be in the neighborhood of pennies and not dimes and certainly not dollars. But keep in mind that price impact is difficult to predict because oil prices are influenced by speculation -- and hence investor's assessment of future trends -- as well as supply and demand.
Fuel Efficiency and Mass Transport Are Real Cost-Reducing Solutions
By comparison most studies show that a very significant reduction in our dependence on foreign oil and in gas prices would arise from decreasing our demand for oil -- for example, by investing in technologies to increase the fuel economy of our cars and in mass transport. (See here [pdf].) That's why so many of us see a great benefit from these types of investments.
Nevertheless, some folks still favor OCS drilling. They argue that we need to do everything we can to advance energy independence, insisting that every drop counts and we should therefore drill regardless of how much it will yield. Such an argument is not in my view entirely without merit. But others, usually environmentalists, argue cogently against OCS drilling because of its environmental costs.
So, what's the bottom line? Should we allow new offshore drilling or not? I suspect that your answer largely depends on your politics. But the facts are the facts, and if someone tells you that offshore drilling is going to make more than a dent in our dependence on foreign oil or the price at the pump, he or she is trying to sell you shares to a bridge to nowhere.
Sources
EIA - Forecasts and Analyses - www.eia.doe.gov/oiaf/forecasting.html
EIA - Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf - www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html
Dr. Bill Chameides is a member of the National Academy of Sciences and the dean of Duke University's Nicholas School of the Environment. He blogs regularly at www.thegreengrok.com.
Follow Bill Chameides on Twitter: www.twitter.com/theGreenGrok
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Has anyone noticed that for the most part, the oil companies did not do extensive exploration in many of the proposed offshore areas when they were open 10-15 years ago and are not showing any great interest in expending exploration dollars now. This should be at least a small indication of their thoughts on the value of these potential leases.
I have been screeching about his fact for months on this site. It seem nobody is interested in discussing energy issues in terms of rational quantitative facts. People seem to latch emotionally on something that sounds plausible and actually accuse anyone who disrupts their daydreams with real information of actually being a part of a conspiracy! They'll say that you don't have the latest research or facts. Challenge them to produce better facts? CRICKETS! What a way to create an energy policy!
Please do not disrupt my daydreams.
See my profile for a plan to switch to Wind Solar Plug in Hybrids, natural gas for awhile. No nukes, coal or shale. Oil saved for plastics, and aviation.
Glad to see you can make up your own facts
Heres one every expert including the Dems say we have enough oil reserves in the US to provide energy for the next 60 not 15 years.
They always fall back to it will take a minimum of 10 years to get it out of the ground, process it and get it to market...Truth is 2-5 years not 10
"The United States has an estimated 112 billion barrels of potentially recoverable oil. Sounds like a lot, doesn't it?"
It sound like 5 times what we have.
It looks like you used the North America Oil reserves numbers instead of the United States.
http://www.eia.doe.gov/emeu/international/reserves.html
Good point! That is a large misstatement. Unless Bush has plans for war with Canada and Mexico on the drawing board.
See Bill Chameides's Profile
Research, Potentially recoverable oil refers to the United States' undiscovered oil resources *not* our proven reserves which, as you point out, are much smaller. Most estimates of the United States' potentially recoverable (conventional) oil are about 112 billion barrels. See our earlier post (http://www.nicholas.duke.edu/nicholas/insider/thegreengrok/wsj) for a fuller discussion.
Thanks for the link
The Undiscovered oil?
Well that's COULD BE infinite?
Pure fantasy.
And now that the truth is on the table, I invite everybody to observe how irrelevant it is to the public discourse. Most people are not interested in the truth. They don't want to hear that domestic oil can not bail us out from our home made energy crisis. All they want to hear is that someone, somewhere does something, no matter how irrelevant, how wrong or at what cost.
And this is where politicians are at their best: they can do something, somewhere, no matter how irrelevant or even counterproductive and spin it so they get away with it and even look good (at least to those who don't dare to look at reality).
In reality the market will take care of this problem for us. The next winter will be hard on those who are heating with oil and they will reduce their consumption. Next year more people will replace their cars with more efficient models and there will be an equilibrium price for transportation fuels that will just be intolerable enough to make the changes necessary on the consumption side to stay ahead of the curve. And that is about the best I would expect as a solution.
Your analysis does not include a resource which has been recoverable for quite some time, albeit by methods I would consider unacceptable, namely mining and retorting, nevertheless, these are economically revoverable if oil is over $95 per bbl. When the now functioning In Situ Retorting technology is applied, oil shales production costs drop to $37.75 per bbl making this profitable at any price over $65 per bbl. There are an estimated 800B bbls recoverable in the US western Oil Shale formations.
http://ostseis.anl.gov/guide/oilshale/index.cfm
http://federalregister.gov/OFRUpload/OFRData/2008-16275_PI.pdf
Even allowing the omission of oil shales, to say that 112 Billion bbls recoverable is not a lot is simply misleading if not downright intellectually dishonest. The proven reserves of the number 3 and 4 players in the world oil market, Iraq and Iran, are only slightly larger at about 115 and 138 B bbls respectively. http://www.eia.doe.gov/emeu/international/reserves.html
So if 112 B bbls of oil is not a lot, then most ceratinly 115 B bbls of oil is also not a lot. This cuts right to the quick of one of the left's most popular anti-Iraq-war arguments: The war was fought primarily for oil. If Iraq's oil is not a lot, then it is unlikely this was the motivation for war.
NL, do you really believe that one can predict the cost of a production technology for oil shale down to the 25 cents level? Because that is what you are implying by throwing arbitrary numbers like $37.75/barrel around.
If so, I have half a dozen bridges to sell to you. They are all available for three easy payments of $199.99. Plus shipping that is. One of them is in Alaska. Or will be if Sarah becomes Queen.
If, on the other hand you want a serious discussion, I would suggest you start by saying that we can guesstimate the marginal cost of these resources at best to within about half an order of magnitude. And in layman's terms that's about a factor of three.
I agree that oil even at $200/barrel is still cheap. At least for those of us who are not junkies and make good use of the energy it contains.
See Bill Chameides's Profile
NL207: With regard to oil shale, see my earlier post (http://www.nicholas.duke.edu/nicholas/insider/thegreengrok/oilshale/ or http://www.huffingtonpost.com/bill-chameides/with-gas-pump-crunch-is-o_b_110557.html)
Getting the oil shale out fthe ground requires the heating of the rock around the shale. Thus, it requires more energy to get the shale out of the ground then we will get from its extraction. It also requires a great deal of water.
"Water consumption in producing oil shale is about 3 barrels per barrel of oil."
http://www.rand.org/pubs/research_briefs/RB9143/index1.html
According to the RAND Corporation, “An operation producing 100,000 barrels per day requires approximately 1.2 gigawatts of dedicated generating capacity.” This is a very large power plant, equivalent to the combined capacity of Colorado’s largest power plant at Craig, Colorado, shown above. Production of a million barrels a day would then require ten such power plants, plus five new coal mines to feed them.
http://www.aspencore.org/images/pdf/OilShale.pdf
With an EROI of about 4-5 it would take gasoline prices north of $20 a gallon to make it worthwhile even LOOKING at shale oil, not to mention that next to petroleum it's a big looser on the 'green' side of things as well. Yes folks there are plenty of energy sources worse than petroleum and this is one of them.
As your facts indicate, the issue isn't about drilling - it's about greedy oil companies trying to grab America's public oil resources on the cheap.
The offshore deposits are our public assets, and belong to the American taxpayers. If companies want the right to exploit our oil holdings, we should be absolutely certain we're getting the better end of the deal.
The recently passed House bill, which approves limited offshore drilling, also demands payment in exchange - provisions that oil companies will lose leases they don't drill in a reasonable period of time; extension of the soon to expire renewable energy tax credits for consumers; ending billions in tax subsidies to oil companies awash in profits; and more.
If the oil companies don't like the deal - and their Republican apologists are already shrieking - tough. Take it or leave it. If it's not worth paying Americans what we think the oil is worth, go find it somewhere else.
Meanwhile, we'll be watching our asset increase in value, in the ground, where we can keep an eye on it.
To clarify a common misconception . . . All current federal leases have provisions that stipulate release of the land and resources back to the government after five or ten year periods, if the leasing company makes no effort to develop any resources contained within. The 68 million acres that is a talking point for many politicians fall under these 5 or 10 year terms.
I think you make some good points. Leases should definitely be structured to maximize the government's return. Finding the balance between an oil companies risk tolerance and royalty levels is a difficult task, that we as taxpayers, should make sure the government is paying close attention to.
Keeping resources in the ground for posterity is one of only two arguments I accept against the merits of additional offshore drilling (the other being legitimate concern over environmental impact). If we think our kid's will need it, by all means we should leave it for them. I could only counter that there is a lot of value in using the revenue generated from oil royalties to generate cash to subsidize alternative investment.
See Bill Chameides's Profile
mtj218 - I have heard that argument before -- drill for oil to generate revenue for subsidies for alternative energies. It is interesting, but I am not particularly enamored of it because it puts the government in the role of picking and funding the winners of the renewable energy sweepstakes. I would much prefer to allow the marketplace to do that. How? By creating a market for low-C energy through sensible climate policy.
The recently passed house Bill is a joke- it is nothing more than a ploy by Pelosi to act like she has done something when in fact she has sabotagued offshore drilling by providing no sharing of royalty with the states. Without a piece of the pie the states will have no reason to approve offshore drilling. The logical place to start is in the shallower waters close in to begin building infrastructure (pipelines and platforms). MJT218 explains the current laws and regs in effect quite accurrately to restate them in the new legislation is just grandstanding, it is nothing new. Senator Landreau has announced the House bill to be dead on arrival at the senate, thank God we have Senators like her who put country before party. As for our oil deposits that are increasing in value in the ground, we simply do not know what the resource base is since we are not allowed to explore while our dtrade deficit soars, prices increase, our economy goes to hell and Pelosi plays politics but she does support getting off "fossil fuels and instead using natural gas?".
Yeah, I guess that it sucks when the shoe's on the other foot, huh?
The fact of the matter is that politics are played the way that they are played, and right now Pelosi played the republicans! They've based everything on their "drill baby drill" lies, and she's given them the appearance of allowing that!
See Bill Chameides's Profile
TxAggie - The current estimates of our oil resources suggest we might get a little more than 1 percent of our needs. How much larger do you think these resources might actually be? A factor of 2? Maybe a factor of 10? Unlikely but possible. Even at either of those levels it would not be enough to get us to energy independence. And by the way, if you tune into our next post, you can find out about an alternate simple practice that can probably save us as much oil and without doing all the extra drilling you advocate. As I said in my post, what you prefer to do probably depends on your priorities and politics, as it should be. But the facts are the facts.
There is a possibility that facilities off the East Coast could use shuttle tanker systems. All the facilities off New Foundland (Hibernia, Terra Nova, eventually Hebron) in Canada have shuttle tankers and not pipelines.
Also, the estimates are just that--based on statistical analysis and probability studies compared to known producing areas. There is no oil proven in the OCS and some other disputed areas. There may be no oil at all in these areas. Or there may be some significant reserves. Betting the farm on something that may not exist is not sound public policy.
We can make large improvements in conservation (up to 100%) so it makes more sense to focus on an area where significant improvements can be expected.
I've been to a house around where I live (friend of a friend) where he's insulated his house so well that it is heated with his hot water heater.
Any idea of his R values in roof or walls?
Agreed . . . However, oil companies have money to invest and they have spent a great deal of money building organizational capability to develop oil and natural gas resources. They are not likely to invest in alternatives but are likely to invest in oil development. I don't think letting oil companies invest in offshore drilling in new areas will detract much from alternative energy investment. Even though oil companies call themselves "Energy Companies" most of the investment we need for alternatives will come from other sources.
You can expect oil companies to build niches for themselves in alternative energy in areas where they leverage their expertise. For instance, liquid transportation fuel marketing and distribution (biofuels), natural gas, etc.
It is intersting that some folks think oil companies have the "obligation" as the BP adds go to develop some other form of energy other than oil and gas.
Oil companies do what they do do well, why is it their "obligation" to do anything else? They (the cos) are made up of engineers, landmen, geologists, accountants and marketeers who know oil and gas, they exist to make money, find reserves and produce oil and gas, not really complicated but difficult nonetheless.
"There is no oil proven in the OCS and some other disputed areas. There may be no oil at all in these areas"
Then it should be no threat whatever to you or any other of these Greens and neo-Luddites to collect some lease money for the treasury from the oil companies for drilling there.
"Betting the farm on something that may not exist is not sound public policy"
This is absurd. No one is proposing putting a dime of public money into any of this drilling. In fact, the government will collect a royalty on every bbl of oil produced in addition to a fee for letting the lease in the first place. The Oil companies are certain enough that oil is present they are willing to invest their own money in this venture.
Prohibiting production of energy at competitive prices is not only unsound public policy, it is also insane.
"Then it should be no threat whatever to you or any other of these Greens and neo-Luddites to collect some lease money for the treasury from the oil companies for drilling there."
Please mind your language. Personal attacks do not foster your argument. They do show your mindset, though.
"This is absurd. No one is proposing putting a dime of public money into any of this drilling."
The argument is that handing out drilling rights is nothing but political opium for the people who naively believe that we are making progress in our energy policy while in reality nothing substantial has been achieved as long as we are not kick-starting some serious conservation efforts (which none of this does).
Are you deliberately trying to confuse the issue? I think you are.
"Prohibiting production of energy at competitive prices is not only unsound public policy, it is also insane."
As compared to lying to the people about energy sources that do not exist? None of this will power the nation either in the short or the long term. You know it, the GOP knows it, the oil companies know it. It's just spinning our heels to avoid the really hard decisions.
See Bill Chameides's Profile
NL207 - Your point of view is welcome, but ad hominem attacks on other members of our blog are not. Folks, please keep it civil.
We are giving oil companies billions in tax breaks for exploration and for other reasons and you claim that no one is "proposing to put a dime of public money into any of this drilling." Cheney met alone with oil company executives to formulate the Bush administration energy policies. It resulted in billions in tax breaks for energy companies. Our oil prodeucers are heavily subsidized by the public as is the price of gas that we pay at the pump. NL is hallucinating.
I will admit, I don't think that drilling more will help us. In fact, I go farther than anyone I hear on the news. All that hear is "weaning us from foreign oil." I would like to wean us from OIL, period!
Having said that, I don't see the problem with a compromise bill (such as the one already passed by the House of Representatives earlier this week) which not only attempts to give us alternatives to fossil fuels in general, but allows some increased drilling.
What I find most disturbing about this issue is the fact that many republicans who have been calling for more drilling "as part of a comprehensive plan" are OPPOSED to this bill. You cannot have it both ways! Senator Obama came out earlier in the campaign and said that while drilling was not the answer, he would be willing to allow it in a compromise situation. He was right. Those who claimed that we NEED to drill need to now step up to the plate and admit that all they wanted was more drilling!
This bill does not encourage drilling, it in fact prevents it- there is nothing in it for the states- this will either be rectified by the senate or as usual, nothing will happen and pelosi will blame the Republicans when in fact that is her desire, i.e. that nothing will result.
And anything that the republicans were suggesting would either not help, or actively harm alternative energy research. This is a way for them to allow it (without encouraging a soon to be dead technology) while actually ensuring that we will have alternatives to oil!
Bill, maybe you can either confirm or refute this aspect: It's not even really 'our' oil anyway; it will belong to the multinational corporation that recovers it, and they will sell it on the world oil market. The notion that it will be given to the citizens of the U.S. at reduced cost doesn't mesh with reality. Am I correct in this line of thinking?
The US government (and perhaps states) would collect a portion of the produced oil and gas's value through royalties (think of the MMS Royalty in Kind program in the news last week in Colorado). The government should structure additional leases such that they attain maximum royalties while providing enough of a pay-off for oil companies to develop oil that they are willing to accept the inherent risks.
Crude oil produced off the East, West, or Floridian coast could be sold on the world market, but this is not likely. Oil costs money to transport and it would likely be sent to the closest US refineries. Natural gas will be entirely consumed within the US, since we are unlikely to find commercial amounts great enough to warrant the investment required for LNG export facilities.
Refined products from this crude oil may end up being exported since not every carbon molecule within a barrel of oil can be efficiently made into a product that US regulations accept for transportation fuel (sulfur content of diesel).
Very little oil from the US ever makes it to another country. Oil is traded and accounted for at world market prices, even it if it produced in the US. The time for the taxpayer to get it "cheaper" is at the lease stage and even there the income goes into the federal budget and is therefor can not be considered as an offset for taxes. At least not as long as we have a government that can not stop itself from spending more than it takes in.
Therefor the notion that somehow domestic oil should be or would be cheaper to US citizens than oil from other producer countries is basically invalid on all counts.
You ignore an obvious truth: Domestic energy production has a significant effect on the United States' balance of payments. Every bbl produced domestically is one less that is purchased from a foreign supplier.
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