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June 9, 2008

Oil from ANWR? Too Little, Too Late


I’ve got some numbers to throw at you – 10; 20; 675,000; 20 million; 3.3; 10.4 billion; 500; 50. Okay, now let’s start explaining. It has to do with oil and ANWR.


Ten is the rough number of years it would take, if Congress authorized drilling in ANWR tomorrow, for oil to reach the market.


Why a decade? It takes time to build the necessary infrastructure – regarding ANWR, through a hostile environment – and also for oil companies to figure out the most profitable places and ways to drill and pump. Because, like with everything else, it takes a while for production to ramp up, it would take probably another decade for ANWR oil recovery to hit its peak. That is, it’d be about two decades from the day the president signs legislation authorizing it to the time when it is expected to start having its most meaningful impact. Once it reaches peak, according to the Energy Information Administration, about 675,000 barrels of oil would hit the U.S. market per day.


Demand for petroleum in the United States is currently about 20 million barrels oil a day, which means that at peak production, oil from ANWR would account for about 3.3 percent of demand.

There are estimated to be about 10.4 billion barrels of petroleum in the reserve. Based on today’s rough estimate of demand that means by all estimates there is in ANWR enough oil to satisfy America’s demand for petroleum for about 500 days.


The problem with that kind of math is that it doesn’t account for diminishing returns. Typically, that is something that enters into the picture when about 50 percent of the oil has been removed. After the halfway mark, the question becomes, “at what point is there no profit to do this?” Alternatively, “at what point are we expended more energy to remove this oil than what we get from it.”


Oil companies have been encouraged by high prices to use new technology to reopen abandoned wells. Once the profits run out, the wells will be recapped. So, you can cut the number of days’ worth of oil available in half, and add a question mark.


You can apply all of this to oil recovery from the nation’s coasts, too. Although the specifics are different (there is more oil in deposits off the Gulf Coast than in ANWR), the generalities remain the same – it’ll take years for the oil to work its way to gas pumps.


The closest ANWR came to being opened to exploration was in 1995, when Bill Clinton vetoed legislation that would have done it. If he’d signed it, we’d be getting about 3.3 percent of our oil from ANWR today, which would have translated into a negligible impact on today’s price of gasoline.


About the same time, a book came out that suggested that we could move away from the internal combustion engine in 25 years, if we put our minds to it. At the time, with the world glutted with oil, the idea was laughed at, and the book’s author – Al Gore – was mocked right up through the 2000 presidential election for it.


Today, the nation’s auto companies are racing to be the first to put the first plug-and-drive electric and hydrogen fuel cell cars on the market, what with demand for fuel economy for the first time since the early 80s driving the market.


Numbers, because they’re mostly estimates, could easily change, but the underlying reality is that it’ll take a very long time for ANWR oil to hit the market, and won’t be more than a trickle for about two decades.


I leave to the individual to sort out whether this is a smart, long-term way to address transportation. But, I will suggest that by the time production in ANWR is about to hit its peak, American motorists might no longer care, having had their needs satisfied by forces today the market.


© 2008 North Star Writers Group. May not be republished without permission.


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