McKelway Falsely Suggests Offshore Drilling Is Solution To High Gas Prices

McKelway Ties Rising Gas Prices To Offshore Drilling Permits. From the January 19 edition of Fox News' Happening Now:

JENNA LEE (co-host): Bush hasn't been in power for two years now. So has anything changed in the Obama administration when it comes to this and gas prices going higher?

McKELWAY: Well, the United States still has no comprehensive energy policy. Critics of the Obama administration say since the gulf moratorium on oil ended three years -- excuse me -- three months ago, only two new drilling permits have been issued. New drilling permits are down 88 percent from their historical average. But is there oil available for drilling in the U.S.? Listen to this.

JOHN FELMY (AMERICAN PETROLEUM INSTITUTE): There's a vast amount of oil available to drill for, well in excess of 100 billion barrels. So you could produce a lot more oil with that.

McKELWAY: That's enough oil according to the petroleum institute for about 30 years at the present level of usage in the United States. [Fox News' Happening Now, 1/19/11]

In Fact, Expanding Offshore Drilling Won't Protect U.S. From Price Increases

Politifact: Experts Agree That Expanding Offshore Drilling “Would Have Little Effect At The Pump Any Time Soon.” On December 1, 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 rated Wasserman Schultz's claim “true,” saying that experts agreed that such drilling would not have much effect on gas prices in the near future:

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., 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, 12/1/10]

Energy Department In 2009: Reinstating Offshore Drilling Ban Would Increase Prices By 3 Cents Per Gallon. From the 2009 Annual Energy Outlook produced by the U.S. Department of Energy's Energy Information Administration:

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 [56]. 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, accessed 1/19/10]

Bush Administration Energy Department: Additional Offshore Drilling “Would Not Have A Significant Impact” On Crude Oil Prices Before 2030. Earlier, in 2007, when President Bush was in office, the Energy Information Administration said:

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, accessed 1/19/10]

Experts: Recent Rise In Gas Prices Is Due To Speculation And Boost In Global Demand

WSJ: Rise In Oil Prices “Has Been In Anticipation Of Improving Supply And Demand Conditions.” The Wall Street Journal reported on December 30: "The 12% rise in crude oil since mid-November has been in anticipation of improving supply and demand conditions. Demand in China and better-than-expected data on the U.S economy helped push oil to fresh two-year highs this month. Now, investors appear more cautious heading into 2011." [Wall Street Journal, 12/30/10]

AEI Scholar: “We Probably Couldn't Produce Enough To Affect The World Price Of Oil.” From a January 1 Greenwire report:

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]

FoxNews.com: Experts Say “Consumption Growth In Developing Countries,” Rather Than Drilling Policies, Caused Increase In Oil Prices. From a December 3 article on FoxNews.com:

The rise in oil comes on the same week that the Obama administration announced it will not allow offshore drilling in the eastern Gulf of Mexico or off the Atlantic coast for at least seven more years because of the Deepwater Horizon oil rig explosion in April that killed 11 workers and unleashed about 5 million barrels of oil into the Gulf.

That decision was cheered by environmental interests and Democratic lawmakers along both coasts but slammed by Republicans and the oil and gas industry who say the move will kill jobs and make America even more dependent on foreign oil.

Energy analysts though did not blame the announcement for the surge in oil prices. Instead, they pointed to consumption growth in developing nations.

[...]

Kevin Book, managing director of Clearview Energy Partners, told FoxNews.com that his firm sees oil rising to $107 a barrel in 2013 “if economic growth follows its current trajectory.”

Book explained that his firm's forecast implies that there is substantial non-OPEC slow downs at the same time as there is significant demand growing in emerging economies in Asia and other places.

“What it does is draw inventory down and lowers capacity in the system,” he said. “It also pulls more OPEC oil into circulation.”

The Obama administration's announcement reversed it's decision to hunt for oil and gas that the president himself announced three weeks before the largest offshore oil spill in U.S. history. The oil and gas industry and many Republicans say the Obama administration is stifling domestic oil production and contradicting the will of recession-weary voters eager for new jobs.

But Book says that announcement was not a surprise and had no effect on the rise of oil. While the U.S. has an abundant supply of its own oil, environmental concerns go hand in hand with domestic production, he said.

“We're going to use OPEC's oil,” he said. “The problem isn't doing business with OPEC. The problem is doing business in a world where OPEC is becoming less relevant.”

“The true value of OPEC from a price stability standing to its members is predicated on the idea it has to do what it has to do or Saudi Arabia will flood the market with cheap oil,” he said. [FoxNews.com, 12/3/10]