Drilling for oil in the US isn’t that easy
Fred Barnes of The Weekly Standard has a piece out calling for increased domestic oil production. He makes the case on the grounds of national (economic) security saying that producing oil in the US would stop the flow of petrodollars overseas and relieve prices at the pump. The first point is undeniably true. The second is wrong. Drilling for oil in the US is not economical; most of it is not even crude oil.
Barnes says that “we’re awash” in oil. That’s extremely misleading. While we do have oil deposits, they are prohibitively expensive to extract and process considering their location and form. For example, Colorado is “awash” in shale oil deposits, which is a substance found in rock that can be processed into oil. The US Department of Energy divides shale oil into two categories: resources and reserves. Stuff that’s there vs. stuff that can be profitably extracted. We don’t have much of the latter.
Yet there is no mention of these problems in Barnes’ assessment. Since we have so much oil says Barnes, the only thing holding us back from developing them is silly environmental laws.
Eighty-five percent of the untapped domestic sources of oil have been put off-limits. There’s a federally mandated moratorium on drilling offshore, and huge roadblocks to exploiting the oil on the vast federal lands have been erected.
Everyone can agree that oil companies have a lot of sway in government. Certainly they lobby, but they are also profitable. So if there is a lot of money to be made by digging up Colorado or Alaska, you can be sure state and federal government is going to be pushing for some reform of the laws on behalf of the oil companies. The problem is that there is not a lot of money to be made. There’s also not a lot of oil.
Take ANWR for instance. Bush advocated opening up ANWR to oil exploration a few years back. The oil companies didn’t want to do it. Shell was even opposed to it because the cost-benefit analysis was so unfavorable. Using the conservative estimate, the field would supply 5% if US daily oil consumption for 12 years. Shell concluded that it wasn’t worth investing in such a large project for such a short term reward.
There are offshore prospects that are promising and probably should be explored. In some cases, restrictions do block that from happening. There is federally mandated moratorium on new offshore drilling off the California coast. For a state that is particularly dependent on oil, that should be reconsidered.
Meanwhile, the land based prospects are not promising. We would be tearing up huge tracts of land for short term relief. The prices would remain the same because it so expensive to extract and process oil located in North America. For reference, the US actually imports most of its oil from Canada today, obviously its proximity has had no bearing on the current exorbitant prices.
The crucial ratio here is Energy Returned on Energy Invested. In Saudi Arabia, 10 units of oil are produced for every 1 unit used to extract, process, and transport the oil. In the Alberta tar sands, the same ratio is 2 to 1. The EROEI ratio for Colorado’s oil shales would likely be closer to 1 to 1, meaning that it’s a purposeless venture barring the development of new technology
So Fred Barnes’ logic ignores reality. It’s not economical to produce oil in the US considering the costs required to actually get and process it, let alone for the land and workers. America’s oil supply peaked in the 1970’s, so we’re not going to able to substitute OPEC suppliers or even specific countries by producing locally. We can reduce the extent to which we are dependent on foreign supplies though. To that end, Barnes is correct.
See also:
+ Tar sands reaping reward and havok in Alberta
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