Tuesday, May 18, 2010

The Gulf accident doesn’t justify
reducing domestic oil production

Commentary by James H. Shott

Last month’s Deepwater Horizon oil rig explosion sent oil gushing into the Gulf of Mexico, creating a crisis for coastal states and Mexico. In its aftermath there is a lot of finger-pointing and blame-fixing, but exactly what happened and who bears responsibility has yet to be precisely determined.

The incident has been a boon for opponents of fossil fuels in general, and of oil in particular. One enemy of domestic oil is Sen. Maria Cantwell (D-WA), who used the opportunity to call for a total ban on offshore drilling. Appearing on the Rachel Maddow show on MSNBC she said, "We see now just how dangerous this can be in the Gulf of Mexico and how important it is to protect the pristine shorelines of Washington, California and Oregon. These are vital economies and we don't need to keep drilling for oil."

Protecting the nation’s pristine beaches and vital economies is certainly important, but Ms. Cantwell is perhaps too eager to stop offshore drilling. This is the first bad oil accident in 30 years, a result of the industry developing generally safe and reliable equipment and techniques. Furthermore, we don’t yet know the extent of the damage, or just how seriously the oil will affect wildlife and shorelines.

Casting some needed light on the nature of oil spills, Merv Fingas, of McGill University and Environment Canada, wrote a piece published on the Minerals Management Service Web site, explaining that a lot of the spilled oil isn’t going to be a problem. “Evaporation is the most important change that most oil spills undergo. In a few days, light crudes can evaporate as much as 75 percent of the starting oil mass and medium crudes up to 40 percent.”Some of the rest of the oil is absorbed by seabed sediment and never reaches the surface or shorelines.

Sen. Cantwell said that “the United States has only 2 percent of the world’s oil reserves, and so the notion that we are going to affect gasoline prices, or [become] a world oil supplier; we are not,” and so “it’s time to start migrating off of oil and on to other sources of energy,” she said.

However, two percent of the world supply is a good bit of oil, approximately 21 billion barrels. The American Petroleum Institute’s (API) Energy Tomorrow blog says, “The government estimates our federal lands hold enough oil to power more than 65 million cars for the next six decades,” and went on to say that today's technologies can locate previously unknown deposits of oil. For example, the Gulf of Mexico initially was believed to contain 9 billion barrels of oil, but new estimates predict 45 billion barrels, an increase of 500 percent. There’s more U.S. oil around than she thinks.

This crisis has provided the enemies of oil the opportunity to throw gasoline on the fire to try to shut down domestic oil production. But now is not the time to abandon domestic oil or cease increasing the production of domestic oil to reduce our dependency on foreign suppliers. As appealing as the idea of renewable energy replacing fossil fuels may be to some, the fact is that solar and wind, so-called “green” technologies, are incapable of filling the gap because they are insufficiently developed; and, the sun doesn’t always shine and the wind doesn’t always blow. Even if these technologies were able to pick up the slack left by stopping the use of fossil fuels, electricity from these technologies is far more expensive than electricity from coal, oil and natural gas.

In the wake of the Gulf catastrophe, a congressional proposal would raise the liability limit on producers from $75 million to $10 billion, and Energy Tomorrow says that "could threaten the viability of deepwater operations, significantly reduce U. S. domestic oil production, and harm U.S. energy security." API believes a $10 billion-per-well insurance policy would drive small and mid-size offshore operators out of the market, and even if such humongous policies were available, their cost could potentially increase oil production costs by 25 percent.

This is just what the enemies of domestic oil production want, of course. If we can't drill for oil because of a slight chance of disasters like Deepwater Horizon, and if regulations produce high production costs that drive small producers out of business and raise the cost of electricity, gasoline and heating oil, then the only alternative will be new green energy technologies, which will have to be shoved down our throats like health care reform was.

"Now we have a very visual, damaging situation and we now know that the risk is far greater than anybody ever realized,” Sen. Cantwell proclaimed. “But I know that this [crisis] is going to be something that is going to be helpful to my colleagues ..."

Critics of oil just have to face the fact that is isn’t possible to abandon fossil fuels anytime soon, or even make a significant reduction in their use, so we had best move to develop our own resources and wean ourselves off foreign oil, and at the same time work to make oil drilling safer without imposing crippling, cost-raising regulations.

Cross-posted from Observations

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