Sunday, September 28, 2008

Gas Prices Explained

More and more of that conventional wisdom is going around that the reason we have to give up oil and ride bikes to work is that even if we return to exploring America for our own oil, it will be "years" before it does any good at the gas pump. The idea is there is so little oil left, and the technical problems involved with getting it out of the ground are so great, that it's hardly worht the effort. By then, as we're being promised, taxpayer money can easily solve the much simpler technical problems of coming up with an alternative to petroleum in maybe 10 years.

But the slow process of getting our own oil has nothing at all to do with any technical problems in finding oil or recovering it. The problem lies somewhere else entirely.

The following news article highlights the key factors explaining higher gas prices in the United States, and why getting the oil we need from our own resources is such an uphill battle.

WASHINGTON -- The welcome sign is going out to oil and gas companies off the Atlantic and Pacific coasts.

A quarter-century ban on offshore exploration expires in this coming week, but don't expect to see a chain of drilling platforms from the beaches anytime soon.

It will take a couple of years, at least, before any oil or natural gas leases are issued, years more before any oil is found and perhaps a decade before any of it begins to flow to refineries.

And what if Congress, after completing a bill Saturday that removes the freeze, changes its mind next year and again puts some of the coastal waters off-limits?

For 26 years, Congress has issued an annual directive barring the Interior Department from issuing any leases for oil and gas drilling in federal waters on both coasts. It omitted the directive this time after public opinion swung in favor of drilling in response to $4-a-gallon gasoline this summer.

The prohibition has blocked access by energy companies to what the government estimates to be 18 billion barrels of recoverable oil and 76 trillion cubic feet of natural gas beneath the country's Outer Continental Shelf.

While the freeze ends Wednesday, the start of the new budget year, oil and gas companies won't be revving up their seismic monitoring boats -- much less their drilling rigs.

"We do think ... the reserves are significant, so we're very interested in having those areas open for exploration," said Marvin Odum, president of Shell Oil Co., a dominant player in deep-water oil exploration in the Gulf of Mexico.

The available data "shows good resources on both coasts," Odum said in a recent meeting with reporters, adding that other companies as well as his own would be interested in pursuing those areas. But he also said he is "keeping a close eye" on what the government does next.

Where the oil might be is one big question.

The government's estimates are 30 years old. Modern 3D seismic studies pinpointing where the oil lies will not be possible until the Interior Department establishes leasing plans that include the newly available areas, industry executives say.

Democrats already are saying they will try next year to carve out coastal buffers and other areas such as the Georges Bank off New England for special protection. Republican leaders promise to fight any new bans on drilling, but also want to assure states they will get a share of the billions of dollars in royalties.

"Where the oil might be is one big question."

I don't see how that's the big question. In all these years, I've never seen an article reporting that the latest studies show there's less oil out there than we thought before. The government has simply forbid oil companies from getting it. It sounds to me like the only big question that matters is how to get the government out of the way to let the energy companies do what we all need them to do.

1 comment:

Anonymous said...

Just this weekend I heard a report that an oil deposit under North Dakota is now thought to be 25 TIMES LARGER than originally thought.