Wednesday, June 18, 2008

ANWR Factoid

I would have normally reserved this for a snide comment in a right wing blog, but none of the ones I read have brought up Bush's speech this morning. In it, Bush entreats Congress to relax restrictions of offshore drilling, because oil prices are too darn high.

You will recall a few days ago I blogged about ANWR, and I just saw another factoid about it. If we approve drilling off the coast of Alaska (which can't possibly hurt the environment because they're really, really careful with this stuff nowadays) the price of oil will drop 75 cents. That is, per barrel of crude oil. Today a barrel of light sweet crude runs $132.50. So you can look forward to a corresponding drop at the pump. In about five years, once they put all the equipment in.

The source of this statistic is a Department of Energy study commissioned by Rep Ted Stevens, of Alaska. I bet if we also drill off the coast of Florida and California, we can conservatively put enough extra supply in the pipeline to drop the price of a barrel by $5.00. So presumably that's, what, almost 4 cents a gallon? That oughtta help! Five years from now, of course.

And of course, thats assuming that OPEC doesn't compensate by raising the price of their oil. And that the Governers of California and Florida (both Republican) don't fight the plan tooth and nail because, you know, they get a lot of income out of those unspoiled beaches.

But hey, I got plans for that four cents - there are stamps to buy.


PS - the communists at the Wall Street Journal say it would take 20 years to go fully online and the price of a barrel of oil might drop 75 cents by 2025. Of course, since the Supreme Court says we have to give enemy combabtants rights and everything, we'll all be dead long before then. We might as well leave the wildlife alone.


Skot said...

Bush's response to $4 gas-- "DRILL!--" is not only the least surprising Administration position they could have taken, it's also the most obvious. Since Dick Cheney is the true source of White House policy, how could their response be any different?

There may be some long-ball logic to it, though.

This all highlights the difference between the GOP and the Dems in terms of measured response. Bush's call to action is intrinsically illogical, favors big business, and is the most... well, conservative response, not involving such hippy-dippy ideas as conservation or alternative energy.

The Dems, following Diane Feinstein's lead, would cut to the heart of the problem: investigating and possibly regulating speculation in the commodities market. Fund managers are buying $150-per-barrel futures, and trading-floor groupthink is magically making this future a grim reality. Proof: the Saudis and even Iran's Ahmadinejad are increasing crude output and complaining the downstream market makes no sense.

Now, the strange logic of Bush's call to drill is that by doing so, the Administration may be trying to calm the oil markets, hastening the bubble to burst without interfering in capital markets directly. The Dems would (and should) probably launch investigations and, if they were so inclined, set mandatory price caps. Hard to say which approach will work better, but the Dems approach will work faster.

wamk said...

Using your same logic-it will take many years to develop the fields, and the price of oil will only drop a few cents per barrel-the cost of adding solar panels to my house (in an area that is near-perfect for solar, by the way) won't reach the "break even" point for about 7-9 years on my home energy savings. And that's assuming I am able to secure one of the limited matching funds grants available from the power company.

So we shouldn't use that technology either, right?

Danielk said...

A valid question - however, the solar panels will provide useful energy indefinately and produce little or no waste product, thus making it a much better investment. In other words, once you pass the break-even point the solar panels are a gift that keeps on giving, while the derrick out there has a more limited lifespan and ruins previously un-ruined ecosystems. So all things being equal, install the Solar panel.

Skot said...

So the problem with solar cells, WAMK says, is:

"the cost of adding solar panels to my house won't reach the "break even" point for about 7-9 years on my home energy savings"

Yes, quite the thorny problem for a house you most likely have a 30-year mortgage on.

wamk said...


How many derricks "ruined" the ecosystem in the Gulf, when Katrina hit?

Surely there must be a multitude of stories out there on the 'net, showing how poorly those rigs did in a massive hurricane.

wamk said...

You are also assuming that the solar panels will be working on day 1500 as they were on day 1. I imagine there is some upkeep and expense required to keep them running at peak output.

I know the solar lights i havve around my patio aren't as bright as they were two years ago when I installed them. I recognize that the quality of the solar light isn't the same as the rooftop solar panels, but components of the system do need upkeep.

Look, I'd use solar panels tomorrow, if it was cost effective. I've researched them a few times, and just can't justify the outlay. Much the same way that I can't justify the premium on a hybrid, when driving a manual small Honda/Toyota would produce similar milage at a better cost.

ANWR and off-shore drilling is a band-aid. It would provide us cheaper oil, while we wean ourselves off the foreign stuff.

Danielk said...

I'm going to defer to you on both the solar panel and hybrid car costs; I confess I have neither and haven't seriously priced out either. There will come a tipping point where either the oil will cost more than the alternative or the alternative price will drop below that of oil. We both know this is just a matter of time.

I actually wasn't assuming solar panels last forever, and that's why I put the "little or no waste product" caveat in there. You'll have to switch out parts and sensors over the life of the panel but it's still considerably less impact to the environment than oil. And perhaps much less expense as well. And if you have a plug-in electric car that you can charge off the panels... well, bonanza!

Hydro-electric power and wind power are great uses of the same kind of thing - leveraging natural phenomena to produce energy as opposed to burning stuff that's gone forever once you're done. It just makes sense.

This "weaning off foreign oil" thing is a specious point. It's not like we're sitting on top of enough oil to supply the US. The untapped veins represent a mighty small fraction of the world oil supply. And Just because the oil companies pump it from here doesn't mean they're obligated to give Americans a break on it. They may not even choose to sell it to us. China needs oil too.

The most probable outcome of allowing offshore drilling is a reduction in the cost of producing oil, which is great if you're an oil company. Whether they pass the savings on to you and me is entirely at the whim of Mr. Exxon and Mr. Mobil.

wamk said...

One of the major reasons of the increase in the cost of a barrel of oil is based on oil speculation. There are futures traders that are "betting" on the price to continue going up, which then makes the Market follow suit.

If the US announced on Monday that we were opening up ANWR, and drilling offshore, the speculators would then bet on the price of oil coming down. Merely announcing we are relaxing our drilling regulations would cause a huge ripple in the World oil market.

As long as the traders see that the US is doing nothing to change the volume of oil coming into the market, prices will stay high. The head of OPEC has said they won't change their production levels, based entirely on the unwillingness of the US lawmakers to do anything.

At what point would you say that it's ok to open ANWR? If gas hits $10 a gallon this summer? $15?

What is your immediate short term solution to the high price of gas, while the Country gets onboard with solar, wind, etc?

Danielk said...

You make a good point that if speculators ignore the widely-held belief that opening up ANWR will be of minimal help to the world oil supply, their efforts would drop the price of oil far more than opening ANWR itself. So there would be that benefit, IF the speculators don't do research before they invest.

I don't think there is a good reason to EVER open up ANWR, given the minimal benefits. If gas prices rise to $20 a gallon, the relative help ANWR provides would be even less. Besides, High gas prices encourage alternatives.

My immediate solution? Ain't got one. ANWR isn't one either (it's a long time before the derricks go online) and therefore your solution is to hope for ill-informed investment. A good short term strategy, actually; but it won't be long before that pendulum swings back.

Danielk said...

by the way... you asked about oil spills in the gulf when Katrina hit?

I'm sorry I didn't find out about this right away; I guess there were other fish to fry, bad-things-going-on-with-Katrina-wise.

wamk said...

Hard to gain any information from that image. Are the dark spots oil? I don't know. The person who put the image up says they are, but how do we know?

They make a big point of the long "strand" of dark spot, but make no mention of the gigantic spot in the lower right hand corner. Is that one oil, or something else? It looks the same to me, yet isn't mentioned.

Also, did the oil slicks (if that's what they indeed are) in the picture come from the offshore rigs, or from inland LA? I would expect to see oil coming from inland, as they are designed to handle the elements the way the rigs are.

Did you find anything that shows rig damage?

wamk said...

So you are "giving up" on doing anything related to oil and it's production?

Danielk said...

More links to Katrina-based oil damage:

Sources include MSNBC, the EPA, Dallas News, National Geographic and the UK Guardian Newspaper.

In response to your other question, yes I'm "cutting and running" from opening up new oil production. The price is artificially high. Oil companies set it. Skot brought up the specter of price caps; I'm not sure I even like that idea because it will limit tax income. And unless you think our roads are too well-maintained, you don't wanna limit money to 'em.

Skot said...

Actually, opening up for ANWR and offshore drilling doesn't HAVE to solve the crisis we're in. This is all a form of political theater: IF the Gov't makes moves to shore up domestic oil reserves, the act of doing so should (hopefully) remove the fear and panic from the oil commodities market, which will ratchet down prices (or make the bubble burst).

This strategy doesn't have to work, it just has to appear to be happening to achieve the desired effect.

And I hate to say it, but oil sitting offshore and under the caribou herds in Alaska is gonna get extracted some day. It's a depressing but inevitable fact. Once cheap oil starts to seriously run out, sometime in the next few decades.

Factoid: did you know that California is essentially self-sufficient in petroleum production? The amount of petroleum products we use is roughly equal to the amount of crude we pump out of the ground. Interesting, huh?

Danielk said...

Well that just can't be true Skot, because Gas prices in California are among the highest in the nation! Considering that oil companies don't need to spend as much to transport, well, you know.

High gas prices will go down of course, because people will gradually start using less gas, and oil companies will lower prices as an incentive. Or keep them high to maintain their profit margins. Either way, we'll be spending less on oil.