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When it comes to oil, are they stupid or just lying to you?


Fri, Aug 15th, 2008
Posted in Commentary

The economy is in the basement and, to top it off, energy prices are at all time highs causing increases across the board for all goods and services. This is the worst of all worlds; high prices, stagnant job creation, and low wages.

High energy prices can't be blamed for all of this. The dollar is in the tank also and the unregulated banking industry managed to paint itself into a bankruptcy corner of its own. The problem with energy is the politicians are acting as if there is a simple solution to the problem and the public is starting to buy it.

The energy problem and the time to have started a reasonable energy plan was in 1973 when OPEC limited production for the first time, not when Cheney convened a secret oil and coal executive energy panel in 2001. Denmark did this in the 70's and that little country (along with their territory Greenland) is now energy independent.

Now the politicians tell us if we drill wells in the outer continental shelf (OCS) we can see gasoline and diesel at cheap rates again. It's not so simple.

Some estimates from the U.S. Department of Energy (DOE) are interesting. They estimate it would take 7 to 10 years for any oil at all to be produced and brought to market. There is a waiting list for the oil drilling platforms from the few shipyards that can produce them. There is a shortage of experienced personnel to manage and run these huge machines. There is currently no infrastructure in place (pipelines) for getting the oil to refineries. Our refineries are, for the most part, now running at capacity.

To reach the maximum output from all of the OCS areas thought to contain oil or gas the DOE estimates it would take until 2030. At that point the DOE estimates any influence on the price of gasoline or diesel will be infinitesimal. An article in the New York Times estimates the maximum is estimated to be 200,000 barrels per day versus a current world output of more than 80 million barrels per day.

The oil will not necessarily all be saved and sent to the continental U.S. so we can have cheap gas and diesel. It would be sold to the highest bidder and if things continue as is that would be China and India.

The main concern against drilling seems to be the possibility of an accidental oil spill or leakage. In 1969 one did occur and made a mess of Santa Barbara. The U.S. Department of the Interior points out that all the spills from off shore drilling between 1993 and 2007 released 47,800 barrels of oil or 1 barrel for every 157,000 produced. They also point to new technologies to help alleviate spills.

The Interior Department notes the estimates of the amount of oil in the OCS were made using old technology and much greater amounts of oil were found in the Gulf of Mexico than were found using the same technology. Even if we find 4 to 5 times as much as the current estimates it would not make a dent in world production.

When you hear a politician say drilling will lower your gas costs in the next few years he is either simple minded or lying to you. Hard to decide which is best in case he is elected. The recent drop in oil prices is due to the strengthening dollar and a drastic drop in miles driven in the U.S. If a politician tells you it is because of a threat to drill on the outer continental shelf or ANWAR please refer to the first sentence in this paragraph.

We are stuck for a time with carbon based energy for our cars, trucks, and electricity. This means we are vulnerable to those in the world that have a near monopoly on them. To become energy self-sufficient will require a complicated combination of new technology, conservation, and public policy.

Simple bumper sticker cheerleader-like slogans for complicated involved problems should insult you. It does me.



Robert Sauer lives in Preston. He can be reached at r.sauer@mchsi.com

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