01 June 2008

ANWR is a Distraction


This evening, for the second time in about a month, I heard conservative friends and family decry the ANWR (Artic National Wildlife Reserve) fiasco, where environmentalists were standing in the way of oil that would allow us to stop buying from Saudi Arabia and the Middle East. This makes about as much sense as re-electing George Bush.

If we pumped out ALL the oil from ANWR in one year, it would meet about 30% of global demand. In one year. This might halve oil prices. For one year. And then we would be back to our current situation. More reasonably, the output from ANWR would dribble out in smaller quantities - probably increasing global supply by about 1 or 2% over a period of 10 to 20 years and have a negligible impact on oil prices.

Further, the oil from Alaska does not change our dependence on oil from the Middle East. Oil is a global market. The Saudis will still sell oil, as will the folks in Russia, Iran, China, Mexico, Canada, UAE, Venezuela, and Norway (which, along with the US, constitute the list of the top ten oil producing countries). Imagine water being pumped into one pool by ten hoses. The level of the water is determined by the collective efforts of the ten hoses, but you cannot swim in just one hose's water. You swim in the pool or do not. Oil markets are made up of output from many countries: once the oil is on the market, it is all sold at the same price (adjusting for different refining costs, etc.) and goes into the same pool. Using a bit more oil from Alaska does not hurt existing oil producing countries that much.

Oil prices have gone up by 6X in the last decade. (From less than $20 a barrel to $127 a barrel.) It is hard to believe that a price relief of, say, even 5% would be noticed much in the context of 600% oil price increases.

The truth is that ANWR would supply oil for about 6 to 25 months of US consumption. The problems of oil supply and climate change are problems that will play out over decades. I'm working with one client now who is developing a new drug from a molecule: they are currently projecting a launch date for the drug in 2017. This is, by comparison with energy, a very simple project for which only one team in one company is responsible. Energy and climate change are problems that will take decades to address and, ultimately, coordinating the activities of millions of people. In this context, the 6 to 25 months that ANWR could buy us is noise. And to the extent that it mitigates the problem of oil supply, it exacerbates the problem of climate change. It is, in short, a non-issue and this will be the last time that R World addresses this issue. (And if that does not settle it, well then ...)

In truth, we could flip a coin on the issue of ANWR. I think it would be a mistake to drill there, but it won't make much difference whether we leave it alone or exploit. What will make a difference is if we move past oil and aggressively into alternative energy sources. If we could harness even 1/10th of 1% of the solar energy that hits the planet every day, we could replace all the oil we are now using. Unlike the distraction of ANWR, that is a promising possibility worth pursuing. To waste more political time and effort on an issue like ANWR is like re-arranging deck chairs on the Exxon Valdez.

Meanwhile, as long as oil companies can convince people that high prices are because of environmentalists they can distract us from the real issues. In that sense, ANWR is a distraction.

10 comments:

ThomasLB said...

The oil company came through a few years back and put a pipleline through our property.

They knocked down a stretch of fence and refused to fix it, and our horses got out. We had to buy wire and fenceposts and make the repairs ourselves.

They left mounds of earth so high that the tractor couldn't mow over it. Again, we had to take shovels and wheelbarrows and fix it ourselves.

GWB has said that the oil companies will leave behind "nothing but footprints," but I've seen firsthand the things they leave behind.

ThomasLB said...

The oil company came through a few years back and put a pipleline through our property.

They knocked down a stretch of fence and refused to fix it, and our horses got out. We had to buy wire and fenceposts and make the repairs ourselves.

They left mounds of earth so high that the tractor couldn't mow over it. Again, we had to take shovels and wheelbarrows and fix it ourselves.

GWB has said that the oil companies will leave behind "nothing but footprints," but I've seen firsthand the things they leave behind.

Gypsy at Heart said...

Thomas, how awful. I've too seen some major size and un-erasable footprints left behind by oil companies. Namely in Azerbaijan. Those were the kinds of marks that nothing will erase. Sorry this has happened to you.

Ron: Loved how you put the ANWR issue in proper context. Too bad your common sense deductions will likely be ignored. Great post.

Ron Davison said...

thomas,
I can tell that you are not making up the story about dealing with the oil companies; your experience of dealing with bureaucracies comes through when you leave comemnts in duplicate. Seriously, though, Bush saying that something will go smoothly seems like a guarantee that it will not.

Milena,
Thanks for the compliment, but just for clarification, in the interests of journalistic integrity, these were not mere deductions: I flew north this weekend just to talk to two native Alaskans before leaping to my conclusions. (Okay, so now I'm just making things up, but it may be that creativity is just logic without any initial premise.)

Lifehiker said...

Facts. They are so "non-applicable" to politicians.

Bush drones on about ANWR.

Hillary proposes a gas tax holiday.

McCain says we are at pre-surge troop levels and likes the gas tax holiday.

All are wrong or useless ideas, but politically useful if the electorate is deemed stupid.

ThomasLB is right that we need a revolution. We need to hold our government accountable for complete and truthful information.

I'd be the first to admit that "truth" is somewhat subjective...there are few absolutes. But there is the concept of "preponderance of evidence", and that, if applied without obvious bias, is ususally good enough for directionality in decision making.

We have "good enough facts" about most of America's problems. What we need is "good enough politicians" to deal with them.

Anonymous said...

Google "oil gull island" and see what you find.

Jennifer H said...

I've been against that drill for the same reasons. There's not much point in debating a thing that has no long-term benefit.

You mention solar energy. I live in Arizona where we average between 300-325 sunny days per year. The technology to take advantage of all of this energy is available. But until contractors and homeowners see some sort of incentive (tax incentives, or a law) to build houses that include a solar installation (or to add one on an existing home), I don't think people will make the change very quickly.

PaulHunt said...

I agree with Jennifer H, we do need to take advantage of the most abundant forms of free energy where we use energy. Like Jennifer H said, Arizona would be great for solar panels or wind generators in windy places. I was reading this article named The U.S. Oil Supply - A Look at Our Future Needs and it talks about our oil situation until we do get these free energy sources harnessed to work for us. Its expert opinion is trustworthy and a great article to read in addition to this one.
Thanks

Jennifer H said...

One more thing...I read an article in Outside magazine (June issue,pg 52) that states that "North Dakota's wind energy could meet one-third of the country's electricity needs. But it currently provides only 2 percent of the state's electricity needs."

One imagines that if advocates of alternate energy sources could out-talk the oil and coal industries, those facts could become relevant.

Ron Davison said...

LH,
The facts of the situation do not always accord with the facts about what sells at the ballots.

Jennifer,
Just think - AZ could become the Saudi Arabia of solar energy. And what a stat about No. Dakota.


Paulhunt,
Thanks for the tip. I'll click through on that.