Eschew Obfuscation

Is the Solution to High Oil Prices to Open Up More Drilling in the US?

Posted by Max Dunn Wed, 04 Jun 2008 15:07:00 GMT

There is a lot of talk floating around that if the US would just end the ban on drilling in environmentally sensitive areas, we would find plenty of oil and prices would go down. Let’s look at this more closely to see if it is true.

First, the bodies that provide oil reserve estimates don’t have a good track record. For instance, in 1995 the United States Geological Survey (USGS) estimated that onshore in the lower 48 states, the US had 82.8 Gb of recoverable oil. However the latest numbers indicate that only 34.8 Gb will actually be recoverable, so the USGS overshot the mark by 2.4 times in this case.

Likewise, the Minerals Management Service (MMS) estimated in 1999 that the undiscovered recoverable oil in the Gulf of Mexico was 37.1 Gb. However it now appears realistic to expect only 10 Gb, so the MMS projection was almost 4 times higher than what turned up.

Looking at the National Petroleum Reserve-Alaska (NPR-A), the USGS estimated that this area has 3.1 Gb of recoverable oil. However, after 4.6 million acres were opened to oil exploration and development in the late 1990s, only about 330 million barrels have been discovered. So in this case, the USGS was off by a factor of 10!

Secondly, contrary to common thought, a lot of federal onshore and offshore areas have been opened for oil exploration and development in recent years. However, not much oil is being found. For instance, Bristol Bay in Alaska was explored several years ago without finding any significant oil.

Lastly, even if all areas were open for development it is very unlikely that any massive oil fields would be found that would make much difference. Even if a couple of large oil fields of 1 Gb each were discovered, they would only satisfy the equivalent of several months worth of US oil consumption.

So it turns out that estimates of how much oil might be found in environmentally sensitive areas in the US are almost certainly grossly overstated, and even if we did find some large fields, it would hardly make a dent in the oil supply or the price of oil.

(Reference: EVWorld: America’s Oil Illusions)