Will drilling in the Alaska National Wildlife Refuge have any real impact on the price of oil and gas ?
Apparently, the answer is no:
ANWR is estimated to be able to produce two million barrels of oil a day. Since America uses about 20 million barrels a day that a pretty impressive amount. The problem is that that the Alaskan pipeline can only transport 2.1 million barrels a day and its already moving an average of 650k barrels a day which means its remaining capacity for carrying oil produced from drilling at ANWR would be 1,450,000 barrels on average. Thats still a good bit. However the problem is that since crude oil’s price is set by a world wide market that currently consumes roughly 90 million barrels a day. So even if all of ANWR’s oil is used only by Americans (say through a clause in the drilling rights lease) then it would only offset an equivalent amount of imported oil (a good thing) however it would only represent a 1.6 percent increase in global supply thereby resulting in an equal price drop. With gas currently at four dollars a gallon that would only equal a 6.4 cent per gallon decrease in prices.
Remember that the next time a politician tells you that drilling in ANWR is the solution.
H/T: The Moderate Voice
June 12th, 2008 at 9:20 am
Who told you that the AP?
Increasing daily supply by 10% to the US is huge… i.e. every time Iran, Venezuela etc sneezes the price surges on the market. It is threat of interuption of flow to our economy that gives futures trader this excuse.
I thought you were a libertarian? Free the marktets! Cuba is exploiting oil fields 60 miles off our coast because Jimmy Carter let them… but Florida itself?
I can’t believe you are buying into constricting supply?
June 12th, 2008 at 9:30 am
I didn’t say I was against drilling, what I am against are politicians and pundits who think that there are easy answers to issues like this, because they’re aren’t and who tell us that opening up ANWR is the solution to all our problems.
It’s not.
The increased price of oil and gas is more a reflection of the fact that demand is increasing, and will continue to increase, worldwide.
Drilling will help, but it’s not the only answer to what is in fact a new reality and, considering that it will take at least 5-10 years for any such oil to reach the market, it won’t do anything about gas and oil prices in the short term.
June 12th, 2008 at 10:36 am
Here’s an interesting perspective from an Austrian point of view:
http://youtube.com/watch?v=yvCcBILF7ow
Eeden attributes 90% of the rise in the price of oil to inflation — a very interesting and well-backed argument.
June 12th, 2008 at 11:20 am
“Spank:” How is not drilling constricting supply? Obviously the increase in supply is not going to have a “huge” effect on gas prices when demand is still high. Supply is not the problem, we are meeting our needs just fine, we would only be substituting American for foreign oil. The modest price decrease that would result would be even less substantial than that of the proposed “gas tax holiday.”
Also, I don’t know what your view of libertarianism is, but the ad hominem was gratuitous.
Lastly, more oil production is only a temporary “solution” and we will ultimately need to revisit these same questions about alternative energy sources.
June 12th, 2008 at 2:38 pm
Everyone recognizes that drilling would only be a temporary solution to our long time energy goals. We could have taken very seroius measures with our gas taxes if our budget was not so bad. But I think liberals are trying to use non market intervention to make the lives of americans easier, and we all know they are gonna makes things much worse at the pump. Drilling would only make things easier, not worse.
June 12th, 2008 at 3:24 pm
I don’t recall seeing anyone state that drilling in ANWR would solve all our problems. The key is, we keep hearing bogus arguments like this as excuses for not drilling there, or anywhere else, apparently. Now, if we’d have gone ahead and developed those resources 20 years ago, when first proposed, they would be available now. There is no excuse for not developing every drop of domestic oil we can.
As far as Mr. Wilson’s assertion above, this is just more idiocy. It has been estimated that there was 12-13 trillion barrels of oil in the earth. We have, throughout all of human history, used approximately one trillion. The only “emergency” is the self-constructed one we are now experiencing. We have enough oil for many decades.
Enough stupidity, people! Drill here! Drill now!
June 13th, 2008 at 12:40 am
I do not concur that adding 10% to America’s supply of oil would lead to a 6.4 cent decrease in the price of oil.
Let me give you an example.
Lets say that we currently have a supply that meets 95% of our needs. Prices are high because demand outstrips supply. But if we had 105% of demand, causing stockpiling, the price might go down significantly more than 10%.
Whoever published those numbers does not have a grip of statistics or economics. I suspect that the supplier of these numbers has a political agenda. Also, it completely ignores the role of speculation. I call those numbers flawed propaganda. We must take steps NOW to increase domestic oil supply, both in Alaska and offshore.
June 14th, 2008 at 1:53 am
Walt:
Thank You for that observation. Newt Gingrich was on Fox last night, and he is right, if we released 25% of the strategic oil reserve tonight, the speculators would be crushed on Wall Street.
Venezuela would be screwed because those reserves are in Louisiana, and we those refineries there would substitute that oil for Chavez’s… for quite a while…
Those reserves were originially created in WW1 for use by our naval forces so we would never be put in a crisis…. the problem is our lack of refineries which is directly related to the Democrats refusal to allow more to be built.
We have ways of fighting back, and number 1 is opening ANWR, and offshore drilling. We in VA have a refinery in Yorktown, and we should be using it to refine Va oil found off of our coast…
Along with bringing on line a bunch of off shore windmills to supplement our electrical energy needs that currently are fed by natural gas…. Ted Kennedy be damned! We crank up nuclear, off shore drilling and ANWR, and the speculators would be crushed in short order…..
Think about it folks, we have nuclear subs and carriers for a reason…a foreign blockade of oil doesn’t stop them from projecting our power abroad to those who would cut off our supplies…
Bottom line it’s time to strike, and we should strike now!
June 14th, 2008 at 6:36 am
STD,
If we release 25%, or 50% of the strategic reserve today, then, yes, the price of oil will drop.
Temporarily.
The market will adjust to the changed circumstances and then the factors that are driving prices up — increased demand from places like India and China, limited supply, and the fact that the majority of the world’s oil comes from the most politically unstable part of the planet — will still be there.
And then what ?
Prices will start going up again.
It would be a move as phony and as short-term as McCain’s gas tax holiday
June 24th, 2008 at 7:24 pm
The idea that ANWR is the solution to our problem is ridiculous. According to the USGS, we should be able to extract somewhere between 4.3 and 11.8 billion barrels of oil, with a maximum projected rate of extraction around 0.75 billion barrels a year. Hey, that sounds good. But the whole picture requires a deeper view.
Let’s look at the Trans-Alaskan Pipeline System (TAPS). I’ve been up there, the pipeline looks impressive and has an optimal peak flow is 1.0 million BPD (barrels per day) and is currently operating at 72% of that capacity. TAPS is capable of operating up to 2.1 million BPD but that requires the addition of a drag reduction agent, which of course would need to be removed at the other end.
For the sake of argument, let’s ignore the DRA and that the pipeline already has maintenance problems from companies not wanting to address the thinning walls until they are well outside of operating specs. Even so, TAPS constrains us to a maximum addition of 500 million barrels per year.
That still sounds like a lot. Let’s compare that with increased global demand by the time oil from ANWR hits the system. If ANWR was opened today and everything went perfect (which it never does) we could see oil from ANWR reaching refineries by 2015.
Our worldwide annual oil consumption was at 84.9 billion barrels for 2007 and by 2015 that annual demand is projected to increase by another 1.25 billion barrels. (Oil is a global commodity, so we need to compare it to global demand.) As you can see, another 500 million barrels per year doesn’t even match the increased annual demand of 1.25 billion barrels.
Now ANWR could be *part* of a solution, but on its own, oil from ANWR doesn’t even keep up with the problem let alone solve it.
[My take on the situation? I think we could spend our money more effectively in other ways, particularly ones that help us out sooner than 2015, but that's an entirely different conversation.]
August 6th, 2008 at 11:24 pm
ANWR is only one part of the equation. It may only reduce the price at the pump by 6.4 cents. That I do not know, but concider this.
The Alaskan pipeline has the ability to carry 2 million barrels a day (BPD). It is presently flowing at 1/3rd capacity because oil companies need access to more areas to drill in. Close by is ANWR an area the size of South Carolina. The oil companies have requested permission to drill in a tiny corner of this wasteland, about 2,000 acres, about the size of a golf course. This is the largest undeveloped oilfield in the Northern Hemisphere, containing an estimated 10.4 billion barrels of oil. It could easily produce 2 million BPD and keep the Alaska pipeline flowing full at 1.4 million BPD. America imports 14 million BPD of oil, and this one congressional decision could decrease our oil imports by 10 percent. At $130 per barrel, this would reduce the American trade deficit by over $62 billion per year and keep the money here instead of sending it to counties hostile to our freedom, our way of life.