Fox Falsely Suggests Off-Shore Drilling Will Prevent High Gas Prices
Research ››› ››› CHELSEA RUDMAN
The co-hosts of Fox & Friends and their guest, Fox Business host Stuart Varney, falsely suggested that domestic oil drilling could prevent gas prices from rising. In fact, economists and experts, including some in the Bush administration Energy Department, have admitted that offshore drilling would not substantially affect oil prices in the near future.
Fox & Friends Co-Hosts, Varney Suggest Offshore Drilling Could Prevent Gas From "Hit[ting] Five Bucks"
Carlson And Varney Agree: U.S. Should Be "Drilling Like Crazy" To Prevent $5 Per Gallon Gas. On the February 9 edition of Fox News' Fox & Friends, the co-hosts invited Varney on the show to discuss a leaked Wikileaks cable revealing that in 2007, one Saudi official estimated that his country had 40 percent less oil than was previously thought. Co-host Steve Doocy said that the information meant "there's a possibility that...the cost of a gallon of gas in these United States could hit 5 bucks in no time." Later, co-host Gretchen Carlson said that the revelation meant the U.S. should be "drilling like crazy for the oil which we have within our borders." Varney agreed. From the February 9 broadcast:
VARNEY: Wikileaks has revealed cables, diplomatic cables, between Riyadh, Saudi Arabia and Washington, and in it, American diplomats say they believe a Saudi oil official who said Saudi Arabia has 40% less oil than was thought. 300 billion barrels less. So there's two points to be made here. How much oil does Saudi Arabia have? The American diplomats think they've got less than they say. And secondly, can Saudi Arabia ramp up production quickly in the event of a supply crisis? The answer, according to the American diplomats, is no, they can't. But there is another side to the story. The Americans were taking a side here, and there's two sides to the argument. Inside Saudi Arabia, there are other officials who are saying, we have no problem, we've got 900 billion barrels of oil in reserve, and we can ramp up production whenever we want to.
DOOCY: Prove it.
VARNEY: Yes. Well, that might come to pass in the event of an oil crisis.
DOOCY: The problem, though, Stuart, is with this information out there right now, then, there's a possibility that if they can't ramp up production, the cost of a gallon of gas in these United States could hit 5 bucks in no time.
VARNEY: Yes, if the Egyptian situation had blown up in some way, it hasn't so far but if it had, it would be a supply interruption. Could the Saudis ramp up their production, according to Wikileaks and some of these revelations? No, they could not.
CARLSON: We're missing the political part of this discussion, which is, if the United States knows that, why don't we drill here?
VARNEY: Ah, taking the words right out of my mouth, Gretchen. Absolutely right. If America thinks that the Saudis have less oil, and they found this out between 2007 and 2009, why aren't we drilling like crazy for the oil which we have within our borders?
DOOCY: And if that information would have been out, it would have been easier for George Bush to get some oil wells up there in ANWAR.
VARNEY: Yes, and why doesn't President Obama turn around and start drilling in the Gulf? Which he refuses to do. [Fox News, Fox & Friends, 2/9/11]
But Experts, DOE Agree Off-Shore Drilling Won't Substantially Affect Gas Prices
AEI Scholar: "We Probably Couldn't Produce Enough To Affect The World Price Of Oil." The New York Times blog Greenwire quoted scholar Ken Green as saying that because crude oil is a global commodity, the U.S. "probably couldn't produce enough to affect the world price of oil." From the blog post:
If gas prices keep increasing, Republicans probably will make a push on increased fossil fuel production, said Ken Green, resident scholar with the American Enterprise Institute think tank.
But experts disagreed about how much impact additional drilling could have. Crude oil is a global commodity, Green said.
"The world price is the world price," Green said. "Even if we were producing 100 percent of our oil," he said, if prices increase because of a shortage in China or India, "our price would go up to the same thing.
"We probably couldn't produce enough to affect the world price of oil," Green added. "People don't understand that."
U.S. production could be negated by decisions that the Organization of Petroleum Exporting Countries makes, said Philip Verleger Jr., energy economist, and David Mitchell EnCana, professor of management, at the University of Calgary's business school.
"Suppose the U.S. were to boost production 1 million barrels a day," Verleger said. "OPEC has the capacity to cut 1 million barrels."
The oil industry has been able to convince people there is a connection between U.S. drilling and prices, Verleger said. [Greenwire via NYTimes.com, 1/4/11]
Politifact: Experts Agree That Expanding Offshore Drilling "Would Have Little Effect At The Pump Any Time Soon." On December 1, 2010, Politifact evaluated Rep. Debbie Wasserman Schultz's (D-FL) statement that a "5 percent increase in domestic production would increase the world supply by less than 1 percent and do almost nothing to our dependence on foreign oil. This would also have virtually no effect on the price of gas at the pump." Politifact began by referencing its June 2008 research, which fact-checked Sen. McCain's claims about offshore drilling during the 2008 campaign, and went on to rate Wasserman Schultz's claim "true":
The political momentum for offshore drilling has always risen and fallen along with gas prices. But while there are strong arguments that can be made in favor of offshore drilling, reducing the cost of gas "here and now" isn't one of them, according to oil experts and economists -- many of whom support the plan.
For starters, the lead time for oil exploration takes years. Even if offshore drilling areas opened up tomorrow, experts say it would take at least 10 years to realize any significant production. And even then, they say, the U.S. contribution to the overall global oil market would not be enough to make a significant dent in the price of gas.
"Drilling offshore to lower oil prices is like walking an extra 20 feet per day to lose weight," said David Sandalow, a senior fellow at the Brookings Institution, and author of Freedom from Oil. "It's just not going to make much difference."
We ran Wasserman Schultz's claim by Jamie Webster, a senior consultant with PFC Energy, which tracks oil production and demand globally and whose clients are governments, including the United States., [sic] and oil and gas companies. We also heard from Daniel J. Weiss, who has written extensively about oil prices and policy and is a senior fellow and director of climate strategy at the Center for American Progress, which describes itself as a progressive think tank. Both Webster and Weiss agreed with Wasserman Schultz.
Let's review: Wasserman Schultz's math adds up -- Gulf drilling does indeed represent about 5 percent of current domestic production, and a 5 percent increase would barely register in terms of the world supply. And the experts we found for this Truth-O-Meter as well as ones cited in the past about McCain's claim agree that expanding drilling now would have little effect at the pump any time soon. We rate this claim True. [Politifact.com, 6/17/08, 12/1/10]
DOE In 2009: Reinstating Offshore Drilling Ban Would Increase Prices By Merely 3 Cents Per Gallon. A 2009 report issued by the U.S. Department of Energy's Energy Information Administration (EIA) found that lifting drilling moratoria in the Atlantic and Pacific lower 48 OCS regions would increase "total domestic crude oil production" by "7.4 percent," which would prevent an estimated "3 cents per gallon" increase in gas prices at the pump. From the 2009 Annual Energy Outlook:
The U.S. offshore is estimated to contain substantial resources of both crude oil and natural gas, but until recently some of the areas of the lower 48 OCS have been under leasing moratoria . The Presidential ban on offshore drilling in portions of the lower 48 OCS was lifted in July 2008, and the Congressional ban was allowed to expire in September 2008, removing regulatory obstacles to development of the Atlantic and Pacific OCS [57, 58].
To examine the potential impacts of reinstating the moratoria, an OCS limited case was developed for AEO2009. It is based on the AEO2009 reference case but assumes that access to the Atlantic, Pacific, and Eastern/Central Gulf of Mexico OCS will be limited again by reinstatement of the moratoria as they existed before July 2008. In the OCS limited case, technically recoverable resources in the OCS total 75 billion barrels of oil and 380 trillion cubic feet of natural gas.
The projections in the OCS limited case indicate that reinstatement of the moratoria would decrease domestic production of both oil and natural gas and increase their prices (Table 9). The impact on domestic crude oil production starts just before 2020 and increases through 2030. Cumulatively, domestic crude oil production from 2010 to 2030 is 4.2 percent lower in the OCS limited case than in the reference case. In 2030, lower 48 offshore crude oil production in the OCS limited case (2.2 million barrels per day) is 20.6 percent lower than in the reference case (2.7 million barrels per day), and total domestic crude oil production, at 6.8 million barrels per day, is 7.4 percent lower than in the reference case (Figure 13). In 2007, domestic crude oil production totaled 5.1 million barrels per day.
With limited access to the lower 48 OCS, U.S. dependence on imports increases, and there is a small increase in world oil prices. Oil import dependence in 2030 is 43.4 percent in the OCS limited case, as compared with 40.9 percent in the reference case, and the total annual cost of imported liquid fuels in 2030 is $403.4 billion, 7.1 percent higher than the projection of $376.6 billion in the reference case. The average price of imported low-sulfur crude oil in 2030 (in 2007 dollars) is $1.34 per barrel higher, and the average U.S. price of motor gasoline price is 3 cents per gallon higher, than in the reference case. [U.S. Department of Energy, Energy Information Administration, accessed 2/9/11, emphasis added]
Bush Administration Energy Department: Additional Offshore Drilling "Would Not Have A Significant Impact" On Crude Oil Prices Before 2030. In 2007, a report from the Bush administration's EIA found that increased offshore drilling "would not have a significant impact on domestic crude oil and natural gas production or prices before 2030." The report also concluded that "[b]ecause oil prices are determined on the international market...any impact on average wellhead prices is expected to be insignificant." From the report:
The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher--2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant. [U.S. Department of Energy, Energy Information Administration, accessed 2/9/11]
WSJ Suggests Saudi Official Cited In Cable Was Misunderstood
WSJ's The Source: Saudi Official "Has No Dispute With Aramco's Official Reserves Data." A February 9 post on the Wall Street Journal blog The Source reported that Sadad al-Husseini, the apparent source of the Wikileaks revelation that Fox & Friends referenced, is now saying he has "no dispute with Aramco's official reserves data." According to the post, al-Hussein only said that he disagreed with the characterization of Saudi Arabia's "existing 716 billion barrels as 'reserves.'" From the blog post:
[A] conversation this morning with the man whose comments set off the furore, revealed a Chinese-whispers chain that ended up giving the apparent imprimatur of the U.S. diplomatic service to a misunderstanding over oil figures.
The story starts back in 2007 when U.S. diplomats had a chat with Abdullah al-Saif, head of exploration at Saudi Arabian Oil Company, commonly known as Saudi Aramco.
He told them that the kingdom had 716 billion barrels of oil -- a figure that would rise to 900 billion in about 20 years.
Enter Sadad al-Husseini, a predecessor of Mr. al-Saif as Saudi Aramco's exploration head, and pretty much the only company insider ever to speak in public. In the past he has been skeptical of some Saudi forecasts on how much oil it can pump and is regarded within the industry as a careful, knowledgeable man.
Asked by the American diplomats what he thought of Mr. al-Saif's statements, he made what appeared an extraordinary statement: that the reserves figure was inflated by 300 billion barrels.
Deducting that figure from the 716 billion barrels created the idea that Saudi reserves were 40% less than it officially said.
As it turns out, however, Mr. al-Husseini's memory of that conversation is rather different.
He says he has no dispute with Aramco's official reserves data, but disagrees with Mr. al-Saif's projection for the future and with the diplomats' characterization of its existing 716 billion barrels as "reserves".
In fact, he says, that figure refers to "oil in place" which includes both recoverable and non-recoverable oil.
The kingdom's "proven reserves", the oil Saudi Aramco believes it can extract, are officially given as 260 billion barrels (Mr. al-Saif said the actual figure was probably more like 51% of the "oil in place" -- around 358 billion barrels).
Mr. al-Husseini says he has no problem with either Saudi Aramco's official figures on current proven reserves or Mr. al-Saif's estimate, but was simply making the point that to describe "oil in place" as reserves was to inflate the kingdom's figures by several hundred billion barrels.
By that reckoning, the world of energy looks pretty much how it looked yesterday, with Saudi Arabia set to remain the world's biggest producer for some time yet. [The Wall Street Journal, The Source, 2/9/11]
Fox News Has A History Of Hyping False Claims About Drilling
Fox Correspondent Falsely Suggested Off-Shore Drilling Would Prevent High Gas Prices. In January, Fox News correspondent Doug McKelway falsely suggested that increased offshore drilling could lead to lower gas prices. [Media Matters, 1/20/11]
Fox News Repeatedly Misinformed Viewers About the BP Oil Spill. In the weeks and months following the BP oil spill in the Gulf of Mexico, Fox News contributors, guests, and anchors repeatedly spread false information about the spill, the Obama administration's response, and offshore drilling in general. [Media Matters, 6/24/10]
Fox Responded To BP Oil Spill By Calling For More Drilling. In the months following the oil spill, one of the worst environmental catastrophes in recent years, Fox News anchors and contributors also repeatedly called increased offshore drilling. [Media Matters, 5/4/10]
Fox Has A History Of Cheerleading For Offshore Drilling. As Media Matters has documented, Fox News anchors and contributors have a history of calling for offshore drilling and incorrectly suggesting that drilling would quickly lower gas prices. [Media Matters, 4/30/10]