The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

WSJ: Obama, Pelosi, and Kerry Lying About Oil Leases

Posted by iusbvision on June 30, 2008

UPDATE: ANWR information below.

In what is a nice relief to those of us who study energy policy, a big news outfit has finally stood up to the lie from the Democratic leadership (and every leftist pundit on the talk shows) that we could double US oil production by just drilling more on existing leases.

 

The WSJ puts ink to paper on the obvious…just because you have a lease to explore and drill doesn’t mean that you will find oil that you can extract economically.

 

Today’s WSJ has the details:

 

“I want you to think about this,” Barack Obama said in Las Vegas last week. “The oil companies have already been given 68 million acres of federal land, both onshore and offshore, to drill. They’re allowed to drill it, and yet they haven’t touched it – 68 million acres that have the potential to nearly double America’s total oil production.”

Wow, how come the oil companies didn’t think of that?

Perhaps because the notion is obviously false – at least to anyone who knows how oil and gas exploration actually works. Predictably, however, Mr. Obama’s claim is also the mantra of Nancy Pelosi, Barbara Boxer, John Kerry, Nick Rahall and others writing Congressional energy policy. As a public service, here’s a remedial education.

Democrats are in a vise this summer, pinned on one side by voter anger over $4 gas and on the other by their ideological opposition to carbon-based energy – so, as always, the political first resort is to blame Big Oil. The allegation is that oil companies are “stockpiling” leases on federal lands to drive up gas prices. At least liberals are finally acknowledging the significance of supply and demand.

To deflect the GOP effort to relax the offshore-drilling ban – and thus boost supply while demand will remain strong – Democrats also say that most of the current leases are “nonproducing.” The idea comes from a “special report” prepared by the Democratic staff of the House Resources Committee, chaired by Mr. Rahall. “If we extrapolate from today’s production rates on federal lands and waters,” the authors write, the oil companies could “nearly double total U.S. oil production” (their emphasis).

In other words, these whiz kids assume that every acre of every lease holds the same amount of oil and gas. Yet the existence of a lease does not guarantee that the geology holds recoverable resources. Brian Kennedy of the Institute for Energy Research quips that, using the same extrapolation, the 9.4 billion acres of the currently nonproducing moon should yield 654 million barrels of oil per day.

Nonetheless, the House still went through with a gesture called the “use it or lose it” bill, which passed on Thursday 223-195. It would be pointless even if it had a chance of becoming law. Oil companies acquire leases in the expectation that some of them contain sufficient oil and gas to cover the total costs. Yet it takes years to move through federal permitting, exploration and development. The U.S. Minerals Management Service notes that only one of three wells results in a discovery of oil that can be recovered economically. In deeper water, it’s one of five. All this involves huge risks, capital investment – and time.

Yet companies are not allowed to explore where the biggest prospects for oil and gas may exist – especially on the Outer Continental Shelf. Seven of the top 20 U.S. oil fields are now located in analogous deepwater areas (greater than 1,000 feet) in the Gulf of Mexico. In 2006, Chevron discovered what is likely to be the largest American oil find since Prudhoe, drilled in 7,000 feet of water and more than 20,000 feet under the sea floor. The Wilcox formation may have an upper end of 15 billion barrels of recoverable oil and should begin producing by 2014 – perhaps ushering in a new ultradeepwater frontier.

Likewise, in April, the U.S. Geological Survey revised its estimate for the Bakken Shale, underneath the badlands of North Dakota and Montana. The new assessment – as much as 4.3 billion barrels of oil – is a 25-fold increase over what the Survey believed in 1995. Such breakthroughs confirm that very large reserves exist, if only Congress would let business get at them. http://online.wsj.com/article_print/SB121478199392114387.html

 

The other rediculous talking point from the Democrats is “Drilling wont give an immediate reduction in fuel prices so increased domestic energy production should be opposed”. They give some similar rhetoric on expanding nuclear power.

So lets examine their logic:

Don’t go to college because it will be at least four years until you can get a degree to get some good money out of the investment.

Don’t irrigate lands in starving nations because it will be a season or two before you can get any food.

Don’t start the Manhattan Project in 1939 because it would not yield a nuclear weapon by 1940.

Dont invade France in on June 6th 1944 because it would not result in an immediate end to the war.

 

Of course such idiocy speaks for itself which is why the latest polls say that Americans want to drill by a 67% to 18% margin. What is even more ironic is that expending domestic energy production would very likely lower prices within weeks. Why?… I thought that you would never ask.

Part of the price we pay for oil comes from the futures commodities market. Energy traders buy future oil contracts for a set price depending on how the market for supply and demand looks. If we started working on expanding production of energy today two things would happen:

1. OPEC would lower the price of oil in an effort to make expanding oil production here less financially appealing.

2. The futures traders would know that future oil demands will be met by increased supplies and the high prices they are paying on futures contracts now would start to fall over time.

 

Of course both candidates oppose drilling at ANWR, which is park that is 1/3 the size of Great Britain and the area that has the oil is a moonscape like tundra obove the arctic circle where the oil producing facilities would be about the size of an airport.

Alaska Governor Sarah Palin on ANWR Drilling:

California Representative Nunes talks about his visit to ANWR – you can see what the place looks like in this video:

For a more scholarly approach to everything ANWR please visit the following link:

http://www.anwr.org/

 

Chuck Norton

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One Response to “WSJ: Obama, Pelosi, and Kerry Lying About Oil Leases”

  1. […] More on why there’s not drilling today on those leases and why drilling in ANWR *will* bring prices down now. Also, in 2005 I posted some research done by a fellow-blogger and engineer (Alton Foley) about how the footprint of ANWR drilling is equivalent to scale of a tic-tac in a football field. The idea of environmental impact is laughable based upon scale alone, not to mention a host of other factors. […]

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