Supply and demand: the current oil crunch provides a refresher course on these market drivers. As rising demand for petroleum has begun to outstrip supply, prices have skyrocketed. The demand-side approach to addressing the problem involves more fuel-efficient cars, driving less (and less aggressively), and enhancing mass transit — in other words, to paraphrase President Bush, kicking our oil "addiction." Recent trends suggest that Americans are moving in that direction. Then there's the supply-side approach, also being courted, which may seem attractive on the surface, but the environmental costs would be huge.
Because prices rise with demand, bigger oil supplies boost profits and so oil companies want to increase the flow to the pumps. That of course requires getting more oil out of the ground — and preferably from American reserves instead of foreign ones.
ANWR Clearly Would Not Fix the Oil Crunch
So, how can we increase American oil production? One approach is to ramp up exploration and exploitation of U.S. oil reserves. The Bush administration along with a host of politicians has proposed lifting environmental restrictions, for example, on drilling offshore and in the Arctic National Wildlife Refuge (ANWR). This seems short-sighted to me — a simple back-of-the-envelope calculation shows that American oil reserves are insufficient to meet America's long-term energy needs.
In fact, even the Wall Street Journal's "Real Time Economics" blog suggests the folly of the idea, quoting a government study [PDF] that finds "ANWR oil production is not projected to have a large impact on world oil prices."
So why sacrifice the environment for a short-term fix?
Oh, and why put the kibosh on alternative energy sources in the name of environmental protection? Ironically, at the same time that the administration is proposing to lift restrictions on oil exploitation, it is freezing solar projects on federal lands to assess their environmental impacts. (See "Citing Needs for Assessments, U.S. Freezes Solar Energy Projects," New York Times, June 27, 2008) (Note: Since this piece was written, the administration reversed itself and lifted the freeze on new solar projects. See "U.S. Lifts Moratorium on New Solar Projects," New York Times, July 3, 2008.)
Oil Shale: There's Lots of It but What About the Environmental Costs?
While debate has focused on U.S. reserves, oil companies are tooling up to exploit a much larger and far more environmentally damaging source of oil — oil shale.
Oil shale is a rock that contains a significant amount of carbon in the form of kerogen — a fossilized deposit buried millions of years ago. Kerogen is a precursor of oil — if you heat it up enough, the kerogen breaks down into char, oil, and gas. (Details on oil shale production.)
U.S. shale deposits are enormous. The world's largest oil shale deposit is located in Colorado, Utah, and Wyoming along the Green River basin. By some estimates, the United States has enough shale to provide more than 1 trillion barrels of oil — ten times the total U.S. reserves of oil, or enough to keep America floating on a veritable river of oil for a century.
Because oil companies are still testing the economics of commercial production, it's too early to tell just how much, or if, oil shale could give consumers a break. At any rate we should take a long, hard look at environmental costs before going the oil shale route, but it looks like we're getting ready to pounce anyway.
To jump-start the commercialization of oil shale, the U.S. Energy Policy Act of 2005 directs the Department of Interior to develop an R&D program of oil shale resources and to lease federal lands for shale mining. Landowners in sleepy farm communities are being offered multi-million dollar deals by drillers wishing to mine shale from the huge Marcellus formation that stretches from West Virginia to New York. ("Gas Drillers in Race for Hearts and Land," New York Times, June 29, 2008)
Trading One Problem for a Host of Others Makes Little Sense
All this sounds great, doesn't it? We don't have to kick our oil habit after all. Well, depending on how you feel about protecting vital resources like clean water and the climate, you might think that developing oil shale is somewhat akin to making a deal with the devil.
The environmental costs of using oil shale would be enormous:
➢ Damage to landscape too great - Mining oil shale, like coal, will scar the landscape, destroy habitat, and leave huge amounts of material to be disposed of. According to the Energy Information Agency, producing 1 million barrels of shale oil per day (5 percent of our current rate of consumption) would "require mining and remediation of 500 million tons of rock — about one half of the annual tonnage of domestic coal production."
➢ Toxic byproducts would pollute water and air - Producing oil from shale is a high-temperature process that produces toxic byproducts that would pollute our water supply, dirty our air, and create huge quantities of solid waste.
➢ Too much of a water guzzler - The production of oil from shale requires large amounts of water — by some estimates, five gallons of water per gallon of oil. Suppose we got 50 percent of our oil from shale: that amounts to a little less than 4 billion barrels of oil per year but would require about 800 billion gallons of water per year — roughly equivalent to the amount needed for 1.5 million Americans. At a time of growing concerns about the adequacy of water resources to meet growing demands in the face of climate change, do we really want to make a commitment to a new technology with such water demands?
➢ The biggest drawback: upping global warming pollution - Finally, and in my mind most importantly, using shale oil would greatly increase our greenhouse gas emissions. The estimated increase from a gallon of shale oil relative to conventional oil ranges from about 30 percent to more than 100 percent. Switching to shale oil doesn't just keep us in the same place with regard to climate change — it takes us in the wrong direction.
The sad truth is that there are no easy answers to the current oil quandary. We missed our chance to head off this problem 30 years ago when we faced the first oil shock. We could have addressed our growing thirst for oil by cutting demand, but we chose not to.
Now once again we are at a crossroads. Is oil shale the answer? Though others disagree, I think not. Regardless, Americans should at least be aware of painful tradeoffs associated with oil shale before they find out that we have blithely taken that route while they weren't paying attention.
Energy Policy Act of 2005 - www1.eere.energy.gov/femp/about/legislation_epact_05.html
James J. MacKenzie, "Estimated Ultimately Recoverable (EUR) Oil," Oil As a Finite Resource: When is global production likely to peak?, World Resources Institute (2000) - archive.wri.org/item_detail.cfm?id=380§ion=pubs&page=pubs_content_text&z=
Research and Development to Support National Energy Policy, National
Academy of Sciences (2007) - www.nap.edu/catalog.php?record_id=11977