Wednesday, April 26, 2006

Oil snowjob

Dean Baker:
Proponents of drilling in the Arctic National Wildlife Refuge are happy to make whatever outlandish claims are convenient to advance their cause. A few years ago, they were pushing the line that drilling in the Refuge would generate 500,000-750,000 jobs, citing a study by WEFA, one of the country’s leading economic forecasting firms. We did a short analysis showing the faults of this study. When WEFA refused to stand behind its study, this outlandish job claim quickly disappeared from the debate.

But the nonsense continues. President Bush claimed today that the country would be producing another million barrels of oil a day, if President Clinton had allowed drilling in the refuge. He presumably meant this claim to impress his audience, implying President Clinton’s opposition to drilling in the refuge is a major factor behind today’s high oil prices.

A few simple facts indicate otherwise. First, there is a world market for oil. What matters in determining the price of oil is how much oil is supplied in the world, not how much is supplied in the United States. If we were getting an additional 1 million barrels of oil a day, then its impact would be the same on prices in the United States whether the oil comes from Alaska or anywhere else. One million barrels is less than 1.2 percent of world oil supply. That is not trivial, but it will not hugely affect the world price of oil.

The second point follows directly from the first. Iraq’s average oil output is approximately 1 million barrels a day less than it was before the war. In other words, the Iraq war has reduced world oil supplies by approximately the same amount that drilling in the refuge might have increased it.

The third point is that the oil in the Refuge is a temporary fix. According to the Energy Information Agency, it would take approximately 10 years to reach the peak production of 1 million barrels a day. This peak production would continue for approximately 10 years, and then it would trail back down to zero over roughly 10 years. This means that if we had begun drilling in the Refuge the day Clinton took office in 1993, then we would have hit peak production just over three years ago, and we would begin to see a decline in output beginning in 2013. This is not exactly long-term energy security.


Anonymous said...

There is no rationality in political discourse on oil and fossil fuels in general.

Americans pay far less for gasoline than most of the rest of the world.

The amount of petroleum made available by pausing in filling the Strategic Petroleum Reserve is tiny.

Removing taxes from gasoline is exactly the wrong thing to do; gasoline should be more expensive, if anything. It's possible that better uses might be found for the tax money than building a road to nowhere in addition to the bridge to nowhere.

The "free-marketeers" are defending Big Oil, hardly a free-market entity, and Detroit automakers, same.

Bush promotes the nuclear deal with India to decrease carbon dioxide emissions as he denounces Kyoto.

Either the price of gasoline will rise as people use more of it, or the government will put controls on emissions and gasoline use (like CAFE standards). Everything else is a lie.


helmut said...

Agreed, Cheryl. The gas debate is a non-debate. We should be paying higher prices. But what we have is social engineering in reverse - to the benefit of a few. Classic Republican tradition, this.