The Truth about Offshore Oil Drilling

The Truth about Offshore Oil Drilling

04 Aug 08 | Commentary, Conservation, Environment

You have been hearing all sorts of things about drilling for oil offshore. The White House insists that it is the answer to at least some of our energy problems. Various news organizations have put out some interesting, if not slightly contrary and confusing stories on the subject.

I thought I’d boil it down to U.S. product vs. U.S. consumption.

Oil is a world wide market commodity, which means just because it was produced in the U.S. doesn’t mean it will be used here. Think of it as a huge jug with a bunch of straws stuck in it. Everyone sucks out what they need and then pays for it. That being said, I am going to analyze this as if it where only a U.S. problem, e.g. all oil produced, including the new offshore oil, will only be used in the U.S.

The offshore oil facts:

The U.S. Department of Energy (DOE) proven non-producing reserves are 5.2 billion barrels (5,147,000,000) of oil. Some estimates show about 18 billion barrels (18,000,000,000) of recoverable oil in the offshore areas currently closed to drilling. Other estimates are much higher, about 78 billion barrels. For sake of argument, we will use The President’s numbers (18 billion).
The U.S. currently uses 20.68 million barrels (20,680,000) of oil per day. This is projected to rise at 1.4% per year (source: DOE).
The U.S. currently produces 5.064 million barrels (5,064,000) of oil per day. This is decreasing by about 1% per year (source: DOE)
At current use rates, drilling in the offshore areas currently closed would provide about 2.4 years of oil (18,000,000,000 bl ÷ 20,680,000 bl/day = 870.4 days or 2.4 years ).
It will take at least 10 years to bring the first oil well on line, by that time we will be using 23.77 million barrels per day and producing 4.58 million barrels per day. By this math, the new reserve could supply 938 days (18,000,000,000 bl ÷ (23,770,000 bl/day - 4,580,000 bl/day = 19,190,000 bl/day) = 938 days) or ~2.6 years of oil including current production.

Any way you slice it, clearly we have a problem. Drilling in offshore areas will give us 2.6 years of oil. The Arctic National Wildlife Refuge (ANWR) is though to contain about 10.4 billion barrels of oil. If drilling were allowed there, it would add 503 days (~1.4 years) to our oil supply.

Thus, the total Bush energy plan would add ~4 years of crude oil to our dwindling supply. Clearly not a long term plan. Even if we allow for reduced consumption due to higher prices, the outlook does not look good. During the first part of 2008, gasoline usage dropped by 1% over the same period in 2007. Overall demand for light sweat crude fell by about the same amount. For all the hullabaloo about high prices, not much of a dent.

Start thinking about this, plan ahead and be prepared. Perhaps nothing bad will happen, perhaps somehow energy use will be properly managed and everything will be okay…

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