Palin: “The Solution Is To Drill Here And Drill Now”

Palin: The “Solution” To Rising Gas Prices “Is To Drill Here And Drill Now.” From the March 5 edition of Fox News' Justice with Judge Jeanine:

JEANINE PIRRO (host): Summer is not that far away from us and it seems like those oil prices are spiking and the gas is going up every day. What do you think the government should do about these rising prices? Should they start tapping into the strategic oil reserves?

PALIN: That's not the solution. The solution is to drill here and drill now and the Obama anti-oil agenda has got to be stopped now. He needs to realize that back in '08, our US crude also was traded at about $100 a barrel as it is today for about six months and that was right before our world economy imploded. And now here we are back again so his timing, his destructive timing of locking up 97 percent of our offshore and not allowing ANWR to be touched, not allowing domestic drilling to take place to the degree that it should, it is terrifying where he is leading us in terms of being at the mercy of foreign regimes that would seek our demise to produce energy for us. [Fox News, Justice with Judge Jeanine, 3/5/11]

Palin Claims Tapping Arctic Resources Could Make U.S. “Energy Independent.” From the show:

PALIN: We have these God-given resources here and we have the manpower and we have the ingenuity to be energy independent. Right above our Arctic Circle, we have 90 billion barrels of technically recoverable oil. We have hundreds of trillions of cubic feet of clean, green natural gas. God has provided these for us. It's our responsibility to responsibly tap into them and use them for mankind and not rely on foreign regimes to do it for us. [Fox News, Justice with Judge Jeanine, 3/5/11]

Experts, DOE Agree Domestic Off-Shore Drilling Won't Substantially Affect Oil, Gas Prices

AEI Scholar: “We Probably Couldn't Produce Enough To Affect The World Price Of Oil.” According to a Greenwire article published by the New York Times:

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.” From PolitiFact's evaluation of 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.”:

Background on drilling and gas prices

PolitiFact wrote:

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, 12/1/10, emphasis original]

DOE In 2009: Reinstating Offshore Drilling Ban Would Increase Prices By Merely 3 Cents Per Gallon. From the Department of Energy's 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 [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, Energy Information Administration, accessed 3/7/11]

Bush Administration Energy Department: Additional Offshore Drilling “Would Not Have A Significant Impact” On Crude Oil Prices Before 2030. According to a 2007 report by the U.S. Energy Information Administration:

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 3/7/11]

EIA Analyst: Total Offshore Production Would Amount To “Less Than 1 Percent Of The Total Projected International Consumption” In 2030. From a September 2008 Scientific American article:

So are promises of U.S. oil independence real--or rhetoric? The issue is not whether the U.S. can significantly reduce its reliance on oil imports with domestic, offshore oil, say both [oil expert Robert] Kaufman and [energy researcher Ian] Nathan, but whether there is enough that is recoverable to significantly lower the price of a barrel of oil on the global market.

Even by 2030, offshore drilling would not have a significant impact on oil prices, according to [EIA analyst Phyllis] Martin, because oil prices are determined on the global market. “The amount of total production anticipated--around 200,000 barrels a day--would be less than 1 percent of the total projected international consumption.”

And disruptions to the global supply affect the price of every barrel of oil the U.S. purchases, whether it be from Saudi Arabia, Venezuela or off the New Jersey coast. “Suppose the U.S. got all its oil domestically, and the price was $100 a barrel. Then the Saudi family was deposed,” disrupting that country's oil exports, Kaufman says. “The Saudis produce about 10 million barrels a day of the world's 85 million, so clearly prices would go up, because now there is this big shortfall of oil.”

“Do you think oil companies are going to sell [U.S. oil] to U.S. consumers for anything less than top price?,” he asks. “The answer is no.” [Scientific American, 9/12/08]

Newsweek: Oil Prices “Determined By Global Supply And Global Demand.” From a March 31, 2010, Newsweek commentary by Ben Adler:

Oil, you see, is a fungible global commodity. The oil that one drills for in Texas powers a car the same way that oil from Kuwait does. So the price that Texans pay for oil is determined by global supply and global demand, not how much oil is drilled on the Gulf Coast.

In a market economy such as ours, opening an area for drilling does not mean that the U.S. government controls its destination. Shell and Chevron will be perfectly happy to sell their oil to China if Chinese drivers are willing to pay more than Americans. The U.S. could produce exactly as much gasoline as it consumes and it would still feel the effects of, say, a decision by Hugo Chávez or Vladimir Putin to stop selling any oil. If global supply drops precipitously, global prices will rise, and unless we plan on nationalizing the oil industry--a move I doubt either Democrats or Republicans will endorse--the fact that we are drilling for more oil near our shores won't protect us from the price shock. [Newsweek, 3/31/10]

Other Nations Lay Claim To Arctic Oil And Natural Gas

Bloomberg: One-Third Of The Estimated 90 Billion Barrels Of Oil In Arctic “Is In Alaskan Territory.” From a July 2008 Bloomberg article:

The Arctic may hold 90 billion barrels of oil, more than all the known reserves of Nigeria, Kazakhstan and Mexico combined, and enough to supply U.S. demand for 12 years, the U.S. Geological Survey said.

One-third of the undiscovered oil is in Alaskan territory, the agency found in a study released today. By contrast, a geologic formation beneath the North Pole claimed by Russian scientists last year probably holds just 1.2 percent of the Arctic's crude, the U.S. report showed. [Bloomberg, 7/23/08]

43 Of The 61 “Significant” Oil And Gas Fields In The Arctic Are In Russia. According to the New York Times:

The Arctic holds one-fifth of the world's undiscovered, recoverable oil and natural gas, the United States Geological Survey estimates. According to a 2009 report by the Energy Department, 43 of the 61 significant Arctic oil and gas fields are in Russia. The Russian side of the Arctic is particularly rich in natural gas, while the North American side is richer in oil. [New York Times, 2/16/11]

Russia Would Control The “Greatest Share Of Arctic Resource Wealth.” According to the Winnipeg Free Press:

The first detailed scientific analysis of potential oil and gas deposits in the Arctic confirms that significant resource wealth could accrue to Canada, the U.S. and other northern nations, but identifies Russia as the biggest winner in the polar petroleum sweepstakes.

The study, headed by the U.S. Geological Survey, follows a high-profile announcement last year by the same agency that the Arctic realm holds almost one-quarter of the world's undiscovered hydrocarbon reserves -- some 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas.

Russia will end up with the greatest share of Arctic resource wealth, though key offshore deposits in boundary waters shared with Norway are already a source of friction between those two countries.

“The largest predicted deposits of undiscovered gas in the region are located in areas of overlapping territorial claims by Russia and Norway,” the study states. [Winnipeg Free Press, 5/29/09]

Drilling In Arctic Much Riskier, More Expensive

EIA: “Arctic Oil And Natural Gas Resources Will Be Considerably More Expensive, Risky, And Take Longer To Develop.” According to a report on the potential of Arctic oil and natural gas resources prepared by the Oil and Gas division of the U.S. Energy Information Administration's Office of Integrated Analysis and Forecasting:

The Arctic presents a “good news, bad news” situation for oil and natural gas development. The good news is that the Arctic holds about 22 percent of the world's undiscovered conventional oil and natural gas resources, based on the USGS mean estimate. The bad news is that: (1) the Arctic resource base is largely composed of natural gas and natural gas liquids, which are significantly more expensive to transport over long distances than oil; (2) the Arctic oil and natural gas resources will be considerably more expensive, risky, and take longer to develop than comparable deposits found elsewhere in the world; (3) unresolved Arctic sovereignty claims could preclude or substantially delay development of those oil and natural gas resources where economic sovereignty claims overlap; and (4) protecting the Arctic environment will be costly. The high cost and long lead-times of Arctic oil and natural gas development undercut the immediate importance of these sovereignty claims, while at the same time diminishing the economic incentive to develop these resources.

[...]

The bottom line for Arctic oil and natural gas potential is that high costs, high risks, and lengthy lead-times can all serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world. Also, the less abundant Arctic oil resources will be more readily developed than the Arctic's natural gas resources. [U.S. Energy Information Administration, “Arctic Oil and Natural Gas Potential,” 10/09, emphasis added]

Drilling In The Arctic Can Be Several Times More Expensive Than Drilling Elsewhere. According to The Independent:

The vast frozen wastes of the Arctic are one of the few areas not yet fully probed for oil and gas. But not because they lack potential. The US Geological Survey estimates that there are at least 90 billion barrels of oil waiting to be discovered there, and 1,670 trillion cubic feet of natural gas - some 22 per cent of the world's estimated undiscovered resources, equivalent to the entire hydrocarbon reserves of Kuwait.

That said, the region is not entirely new to prospectors. More than 400 oil and gas fields have already been discovered north of the Arctic Circle, between them accounting for some 40 billion barrels of oil and more than 1,100 trillion cubic feet of gas. By far the biggest is the North Slope, in Alaska, which includes the vast Prudhoe Bay field, which has disgorged some 11 billion barrels worth of its estimated 25 billion barrel of oil equivalent (BOE) since it was discovered in the late 1960s. There is also a string of producing fields at Snohvit, in the Norwegian side of the Barents Sea. But the discoveries are clustered together, and numberless tracts of ice and sea remain unexplored.

Much depends on economics. With an unimaginably harsh climate and a bare three-month drilling season, it can be several times as expensive to explore in Arctic regions as elsewhere. As a result, many companies hold licences in areas such as Greenland, but have not pursued them. The recent glut of gas, particularly from US shale, has also slowed developments, putting Russia's plan for a liquefied natural gas (LNG) plant at Shtokman in the east Barents Sea on hold, for example.

[...]

Part of the reason Arctic exploration is so expensive is simply that it takes so long. Where the entire cycle from exploration to production in a relatively benign region such as the North Sea might take four years, in the Arctic the lead times stretch to more than a decade. [The Independent, 1/18/11, emphasis added]

Ice In Arctic Poses “Various Threats To Drilling Rigs And Crews.” According to the New York Times:

After the BP accident in the gulf last year highlighted the consequences of a catastrophic ocean spill, American and Canadian regulators focused on the special challenges in the Arctic.

The ice pack and icebergs pose various threats to drilling rigs and crews. And if oil were spilled in the winter, cleanup would take place in the total darkness that engulfs the region during those months.

[...]

The waters of the Arctic are particularly perilous for drilling because of the extreme cold, long periods of darkness, dense fogs and hurricane-strength winds. Pervasive ice cover for eight to nine months out of the year can block relief ships in case of a blowout. And, as environmentalists note, whales, polar bears and other species depend on the region's fragile habitats. [New York Times, 2/16/11]