Russ McBee

Revelator, the state veto you're thinking of was included in Pelosi's previous proposal back in August:

http://tinyurl.com/4rs9pc

That state veto would have been a new feature in offshore drilling regulations, and the bill would have also banned drilling within 50 miles of the coast.

This situation, on the other hand, simply lets the existing offshore prohibition expire completely. It would return the law to the way it was worded before 1980. It would permit drilling beyond three miles of the coast, and the individual states would have no right to veto any part of it.

It's now open season on offshore drilling, with the exception of one area in the eastern Gulf of Mexico.

Russ, you write that:

<i>expanded offshore drilling won't make a meaningful difference in oil supply or prices.</I>

You make reference (in the linked post) to the following Energy Information Administration (EIA) report:

<a href="http://www.eia.doe.gov/oiaf/archive/aeo07/issues.html">Annual Energy Outlook 2007 with Projections to 2030</a>.

That report supports your characterization, if you read the conclusions it makes.  But those conclusions appear to be based on an assumption or a projection that oil prices will remain in a $50 to $60 per barrel price range during the years 2007 to 2030. (This assumption is made explicit in the chart that appears in Figure 10 of the report.)

In other words, the report's analysis no longer appears to be valid.  So maybe Speaker Pelosi and Majority Leader Reid are not as bad as you seem to believe, at least not on this particular point.

If I am misreading or misinterpreting the EIA report, please let me know.

Matthew, it's certainly true that higher oil prices make more difficult reserves economically viable. However, as the report points out, the projections estimate that the 2030 additional production due to offshore drilling would only amount to an extra 200,000 barrels per day. Even with oil at $200 per barrel, it is difficult to conceive suddenly viable additional reserves that would substantially increase that 200,000 barrels to something meaningful.

So, if oil is at $200 per barrel, and that price level quintupled the viable offshore reserves, that's still only an extra 1 million barrels per day above current production. Since global consumption is around 84 million barrels per day right now, an extra 1.1 percent doesn't amount to much of anything. It certainly doesn't justify the outlandish environmental risk that comes from drilling offshore.

We could reduce our consumption way more than 1.1 percent just through trivial conservation measures.

Daily worldwide oil consumption is not 25 million barrels; it's 84 million barrels.

You may be thinking of US domestic consumption, which is somewhere around 24 million right now. Are you suggesting that oil drilled from offshore reserves wouldn't be sold on the open market, just like all the rest of the oil? That would only happen if those offshore reserves were nationalized, and I find it difficult to believe that the oil industry would stand for such a thing.

Whatever oil is drilled from offshore reserves would be sold on the open market; given that the US consumes about 25 percent of the world's production, it's a pretty safe bet that we'd only see 25 percent of that offshore oil consumed domestically as well.

Since expanded offshore drilling would only add an aggregate of 200,000 barrels per day, and since 75 percent of it would be sold to other countries, that means we'd only see an increase of 50,000 barrels per day for domestic consumption. That's a pittance.

Your hypothetical 10 million barrels per day is greater than the current production of Saudi Arabia.

Instead of playing semantic games with arbitrary threshold numbers, how about a simpler test: when demand can no longer be reduced through gains in vehicle efficiency, conservation, more efficient extraction of existing (and even abandoned) oil fields, and alternative energy sources, and when offshore reserves can be proven to have a measurable effect on supply, then it's worth thinking about.

Those criteria aren't even on the horizon right now.

You're asking for an arbitrary threshold where one does not and cannot exist.

I'll put it this way, Matthew: if there were even a shred of evidence that a Ghawar-sized field existed in the OCS, I'd be all for drilling it, but that ain't gonna happen. If the geology existed that would suggest such a field, it would have been discovered (or inferred) decades ago. Instead, the remaining OCS areas that were off-limits are going to reveal a lot of very small fields, each one of which will be expensive, slow, and inefficient to produce. Whether those fields produce 200,000 barrels or 1 million barrels per day, they will not make a meaningful difference in the supply side of the equation. Since your hypothetical 5 or 10 million barrels are pure fiction, the chase-the-number game of setting an arbitrary baseline for offshore production is really a fool's errand.

It's also asking the wrong question.

As for your prognostication that "most people" would disagree with me, let's see how strong their disagreement is when rigs start appearing three miles offshore.

On the threshold issue, I refer you to my earlier response about taking other measures first.

As for your suggestion that I am responding based on "emotions or gut calls," I refer you to this:

http://tinyurl.com/3nwnpv

Once the environmental risks from offshore drilling hit home, those hypothetical supporters who live along the coasts will see those rigs three miles offshore without their rose-colored glasses.

I'm not opposed to offshore drilling just because of oil slicks, and I never once said that "no amount of oil could justify the potential damage." I'm opposed to it because the environmental risk is not even remotely mitigated by the pitiful amount of oil potentially available from the OCS (even at $200 per barrel). It's a matter of balancing risks versus potential payoff, and that point should be abundantly clear by now. The 200,000 figure cannot be divorced from the environmental risk associated with its extraction. That's pretty simple to understand.

Pelosi and Reid caved on offshore drilling not because of "logic" (since there is none that would justify the risks versus the potential payoff in this case), but because they lack the leadership necessary to stand up to the GOP and the media on the subject. They lack the spine necessary to combat the fairy tale that OCS drilling will make a measurable difference in fuel costs or supplies. That isn't "listening," it's caving.

That's been their version of "leadership" ever since they took over Congress.

As I mentioned before, oil at a higher price (say $200 per barrel) certainly makes higher production rates possible. As I mentioned before, even if that 200,000 figure from EIA were elevated to 1 million barrels per day with a higher oil price, that is still a trivial amount compared to global consumption. Your 3 million figure is pure fantasy until you can provide some meaningful engineering estimate that suggests it's even possible. As I mentioned before, even 1 million barrels per day from OCS (five times what the EIA estimated in its report) is only 1.1 percent of global consumption. That is not a meaningful contribution to global supplies, and it is ridiculous to suggest that this amount is worth the environmental risk. Your assertion that this is "wrong" is not supported by any shred of evidence you've deigned to provide.

Prove that the OCS can provide meaningful new supplies or have a meaningful effect on prices, and you'll have a point.

The EIA estimate of 200,000 barrels was based (as you said) on a price of $50 to $60 per barrel. If oil were at $200 per barrel (as in my previous comment), it is nearly inconceivable that this price jump would quintuple the economically recoverable rate to even 1 million barrels per day. To suggest that the rate of production could jump from 200,000 per day at $50 per barrel to your hypothetical 3 million per day just defies logic. How in the world could you justify the assumption that a 15-fold increase above EIA projections is even remotely reasonable?

You made an outlandish claim. The burden of proof is on you, not me.

Furthermore, the comparison between OCS and ANWR is apples vs. oranges. The Northern Slope (which includes the 1002 region of ANWR) is typified by larger fields closer together. The previously off-limits portions of the OCS are typified by smaller, scattered fields. Even if OCS is an order of magnitude greater than ANWR in total reserves, that does not mean its likely production is concomitantly greater by the same magnitude. A large collection of small fields are much less likely to be exploited than a smaller number of larger fields.

In other words, a single field of 10 billion barrels (onshore or in shallow water) does not equate to 100 fields (in deep water) of 100 million barrels each, even though they contain the same amount of oil.

The first example is easy to exploit. The second example is not, and would likely not be produced unless oil reached an unfathomably expensive level. So the OCS reserves that would be exploited would be the larger fields (as the EIA report discusses). Even though OCS might contain gobs of oil, much of it won't be economically recoverable even at exorbitant prices. That's why EIA estimated only 200,000 per day at the price level they assumed.

Quadrupling the price of oil does not equate to a quadrupling of economically recoverable reserves. There is a world of difference between proven reserves, technically recoverable reserves, and economically recoverable reserves.

This isn't lowballing; it's typical of the economics of the oil industry.

Read this:

http://www.energybulletin.net/node/46195

See especially Figure 2, which assumes the OCS oil could be produced without regard to price.

Another quickie example is here:

http://tinyurl.com/4rtcs5

See the paragraph spanning pages 37-38, which shows an example of doubling the price of oil corresponding to an increase of economically recoverable oil by about 40 percent.

Finally, see the PDFs referenced in this article:

http://tinyurl.com/6ymgav

It is flatly ridiculous to suggest that a doubling of oil prices from $60 per barrel to $120 per barrel would jump OCS production from 200,000 barrels per day to your outlandish suggestion of 10 million.

"Possible"? Prove it.