Professor Morris Coates and another professor recently conducted a study to examine what the impact of opening up ANWR would be on today's oil prices. Their conclusions speak for themselves:
"We find that oil that is expected to reach the market some years hence has an immediate impact on oil prices," and that "if oil firms were allowed to drill in ANWR and many of the other areas that are currently off limits to oil production, it is possible that these areas together might have a significant impact on world oil prices."That is, "will lower prices." When these two authors - both economics professors - submitted their findings for publications to a prestigious energy journal, what was the response from the rarified world of economists? It was rejection -- but not for the reasons opponents of opening up new areas for oil and gas exploration would like to believe. No, their study was rejected because their conclusions were so obvious and so well-known - since the 1960s in the field of economics -- that the two authors were not offering up anything new that merited publication.
Although the referees, and I, are in agreement with your basic argument, I regret to say that we will not be able to publish this work. Basically, your main result (the present impact of an anticipated future supply change) is already known to economists.All the economists know it. How about distinguished Senator Maria Cantwell?
If Hotelling didn't exactly spell this out in his original article, certainly Herfindahl and others had done so by the 1960s. It is our policy to publish only original research that adds significantly to the body of received knowledge regarding energy markets and policy.
Cross posted at Economic Freedom.
Via Newt Gingrich.The Democrats are clearly on the wrong side of this. It's their election to lose and if they keep obstructing oil drilling, their margin of victory in November will be increasingly less.
Posted by: KS on July 22, 2008 09:21 PMThe Democrats are clearly on the wrong side of this. It's their election to lose and if they keep obstructing oil drilling, their margin of victory in November will be increasingly less.
Posted by: KS on July 22, 2008 09:23 PMThis sounds remarkably like Dave Reichert's position on ANWR, which I received in an email on July 7th:
"Furthermore, drilling for oil in ANWR would not result in lower gas prices, or even increased domestic oil supply in the near future. According to estimates by the Energy Information Administration, it would take anywhere from 8 - 12 years for production to begin if ANWR was opened tomorrow. As you can see, simply drilling in ANWR will not affect gas prices in the short term, and it definitely will not address our nation's energy woes in the long term."
I am not a Democrat and I do not agree with my Congressman on this issue. Are any Reichert supporters interested in commenting on this?
Posted by: Tod on July 23, 2008 05:38 AMI saw and read every comment.
Posted by: Ron Hebron on July 23, 2008 05:57 AMOh, and hand-wring declarations that "the sky is falling" is not, by most definitions, "Leadership".
Posted by: Rick D. on July 23, 2008 07:04 AMJust the threat of drilling, including ANWAR would lower prices and burst this speculative bubble. You don't have to wait 10 years.
And, Hewitt or Prager had an Indian on to discuss energy. Their solution is that the US should lower its standard of living so they can improve theirs- aka the Obama Doctrine, instead of everyone improving their standard of living.
Posted by: swatter on July 23, 2008 07:20 AMhttp://oilismastery.blogspot.com/
Posted by: John Bailo on July 23, 2008 08:20 AM
We are becoming what this country was formed to get away from. Massive taxes and overregulation.
Posted by: GS on July 23, 2008 08:38 AMAs long as Democrats control Congress, and even when they didn't, they successfully blocked drilling there. Yes, it's a $4 a gallon world, thanks to Democrats. It doesn't have to be.
Posted by: Palouse on July 23, 2008 08:57 AMIf America is truly "addicted to oil" as Bush says, isn't recommending offshore drilling and drilling in ANWAR the equivelant of telling a crack addict that he has a problem, and his problem is he doesn't have enough crack?
For the record, I'm not necessarily against offshore drilling, or at least giving individual states the right to do that if they want... I'm just not convinced it will really matter much in the long run.
Posted by: Splinter on July 23, 2008 08:59 AM& I suspect that Rossi is a DINO & that Gregoire is a WINO.
Posted by: Gregoirian Chant on July 23, 2008 09:13 AMisn't recommending offshore drilling and drilling in ANWAR the equivelant of telling a crack addict that he has a problem, and his problem is he doesn't have enough crack?
Sorry, bad analogy. The American economy is dependent on energy, not just oil, and until we start building more nuclear reactors, solar and wind isn't going to cut it. Conservation efforts are all well and good, but until other forms of energy are viable alternatives, we need oil. The American public is realizing this, but the Democrats don't.
Think the economy is bad now? It will get much, much worse if we don't drill for our own oil. The cost of everything has gone up, because of the price of oil. Had drilling off-shore and in ANWR been approved years ago, that absolutely would not be the case now.
Posted by: Palouse on July 23, 2008 09:30 AMCongressman Reichert believes that weaning America off of her dependence on foreign oil is crucial for our energy future as well as national security. Allowing unstable governments to dictate America's supply of energy is dangerous. Additionally, it is crucial that America emphasizes the importance of and incentivizes the development of renewable forms of energy.
That's nice, but in the mean time the Americans that Reichert pretends to represent are suffering. His solution...
Reichert voted against a bill that would have allowed oil and gas drilling off of American coasts. Currently, 80% of federal waters are already open to drilling and this bill would have needlessly overridden many important environmental laws.
HUH! To which 80% is Reichert referring? The 80% where no oil exists? Inland lakes? Niagra Falls? If Reichert is against drilling, I can hardly wait to see what he thinks about actual production.
Reichert voted for and the House passed the Federal Energy Price Protection Act of 2006 (H.R. 5253). This bill would require the FTC to come up with a set definition for price gouging and put in place strict penalties for those found guilty of price gouging at the gas pump.
Wow, maybe now the FTC will put something in place requiring that Democrats and Republicrats like Reichert and Bush #41 get out of the way and stop being responsible for the price gouging we are already getting at the pump. This is just at ploy to make it look like Reichert actually cares.
Then there is my office mate who says there are hundreds of capped wells ready today to be uncapped and pumped. I haven't heard of this; has anyone else?
Posted by: swatter on July 23, 2008 10:04 AMPoster on training wheels: I will update this entry when I know how to avoid creating duplicate entries. I lost some comments when I deleted two duplicate entries last night.
Posted by: Ron Hebron on July 23, 2008 10:05 AMThe truth is...that Bush from day 1 has talked about the need for more production. If the RATS had done anything but obstruct, we'd be reaping the benefits now.
Posted by: Das Baron Von Zippee on July 23, 2008 10:18 AMThen there is my office mate who says there are hundreds of capped wells ready today to be uncapped and pumped.
I have a friend who says he inherited shares in one of these. He has been complaining for years about the money he could be making if the wells were producing.
Posted by: NW Denizen on July 23, 2008 10:24 AM"Much of the world’s easy-to-access oil and gas has already been located and is under development. What remains is in harsh frontier environments, such as deep ocean or the Arctic, where it is more difficult and more expensive to extract. Or it is in deposits like oil sands that we tend to lump under the term “unconventional”, which basically means it takes special technology to produce it. There the hurdle is not so much locating resources - in many cases we already know they are there -- but rather inventing cost-effective and environmentally responsible ways to extract them." - Shell Exec. Jeroen van der Veer
More difficult and more expensive to extract = lower prices? Even big oil knows the future is in efficiencies now, and that further extraction will not meet future demand.
Make no mistake: the only reason entities are pushing for drilling in ANWR and other protected areas is to set legal precedent to allow resource extraction from any protected areas they want ot get into. Period. ANWR is not economics, it is ethics and legal precedent. Anyone care to introduce mining and production in your National Parks? Then support removing protections and let it flow.
I quote the footnote below from Page 10 of Coats' own unpublished "paper":
1 To the extent that opening ANWR to development signals a shift in U.S. energy policy, making it appear more likely that other off-limit areas would also be developed, the impact of opening ANWR might then be enough to have an impact on future and current prices.
Posted by: Acid Brain on July 23, 2008 10:30 AMThe article you link to has a lot of the same information I had heard about, and some that I had not, so thanks. But what is interesting is that many of the tapped wells that are not producing, we have no idea if they would be productive because, as the article states, the results of the drilling are kept very secret due to the competitive nature of the industry. So why should we continue to open up new areas, if there is no requirement or incentives to actually harvest the resources that we may have already identified?
I would disagree that my crack addition analogy is a bad one. Drilling for oil can be part of a solution for the intermediate future, but it will never be a long-term solution because it is not a renewable resouce. The emphasis, in my opinion, should be on developing the renewable resources (including nuclear) through various incentives, and reducing demand for non-renewable resources through dis-incentives.
Finally, I don't really think blaming the Democrats for high gas prices is any more effective or true than the Democrats blaming the Republicans for the same thing due to the instability due to the mismanagement of our middle east policies. If we are going to be honest about it, the high cost at the pump is a result of many factors, including both supply issues (drilling, OPEC, etc), increasing demand, political instability as well as speculation.
Posted by: Splinter on July 23, 2008 10:43 AMHere is a section addressing Splinter's comment at #18:
"Still another distracting argument is that the oil companies already have millions of acres in oil leases, so why don't they just produce more oil from those areas? The oil companies pay for those leases for exploration. There is no guarantee that any leased areas will actually hold producible oil. Given that the oil companies must pay rent for the term of those leases regardless of whether any oil is produced, and that the price of oil is at record, unprecedented, historic levels, any oil company that was not producing all it could from any of its leases would be subject to shareholder lawsuits for waste of corporate assets. It is just like liberals to demand that oil companies produce more from areas that do not hold any more oil while denying access to areas with massive proven reserves."
Using this logic, we should be able to safely assume that every tapped well not producing oil during this time of record high prices must be due to them being non-productive holes. So then why is the oil industry "very secretive" about where they are drilling and what they are finding on lands already leased?
Posted by: Splinter on July 23, 2008 11:17 AMhttp://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html
Again, I don't think this is really a bad idea, but it looks like the overall impact is fairly small. If the residents of a state want to allow this, I don't have a problem with it, but it really doesn't make that much of a long term impact, and should not be a substitute for developing renewable resources and finding creative ways to reduce demand.
Posted by: Splinter on July 23, 2008 11:28 AMBut, believe me, the oil companies' goal in life is not for you and me to have lower gas prices. They like the high prices. It wouldn't surprise me they are not drilling just so the bubble of high prices stays up there. In fact, I'll go so far as to say oil would be $100/barrel if they drilled those wells.
Posted by: swatter on July 23, 2008 11:29 AMThe US could be 100% energy independent - not importing a single drop. We could export the other 8 million barrels we produce, meaning exports on the order of Saudi Arabia. Sales (at $120 a barrel) of a BILLION dollars a day. And the Government makes 25% of that in taxation. Imagine another $80 billion annually in tax receipts.
It would take 3 years to start, and within 10 we could produce those 20 million barrels a day.
And our gasoline prices at $1.30 a gallon, and heating oil at $1.00 per gallon.
But the Democrats don't want that. A damaged economy is good for them because they think they can spin it to their own political advantage. They will not put the needs of the country ahead of the needs of the Party. They are of the Donks, For the Donks, and By the Donks. Americans be damned... You are either a Democrat or you're nothing.
By their actions they are destroying the US. And many in this thread - the supporters of the Democrats - are completely complicit in the meltdown of our economy.
Posted by: Shanghai Dan on July 23, 2008 03:50 PMDepends on your definition of "long term". ANWR and off shore drilling could supplement our imports for the next 50 years, and this would do alot to ease prices. The big lie that Democrats like to use is that there's only a "few years" worth of oil in ANWR. That would be true if that was the only source we used, which is ridiculous on its face.
Combine ANWR, off shore or even oil shale, and you have gas under $2 in less than 10 years. During that time, we can develop the alternate energy that everyone wants - nuclear, solar, wind, whatever. We don't need high oil prices in order to do that. We need the political will and tax dollars. Those tax dollars will be more available with lower oil prices and a robust economy.
Posted by: Palouse on July 23, 2008 04:46 PMBut drying clothes? Heating homes to 80 degrees in the winter?
Do you know how many clothes dryers run on oil, or or are powered by oil? How about homes? Any clue there?
My guess is none, since you would not have made those comments if you really knew the amount of oil used for electricity generation or heating...
Posted by: Shanghai Dan on July 23, 2008 04:47 PMIn the same way that you are not addicted to food and water.
Posted by: Jeff B. on July 23, 2008 04:53 PMRead this and weep!
"Arctic May Hold 90 Billion Barrels of Oil, U.S. Says"
By Joe Carroll
"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."
Read this entire article at the Bloomberg.com site, and wonder what the sheer opening of the Artic Drilling would do to your pocketbooks.
http://www.bloomberg.com/apps/news?pid=20601082&sid=aqEDMhrCvp28
And this is just in the Artic!
But the Russians are hot on the trail to take all of this oil over, going to the UN for permission, while the Democrats in this country are sitting on their fat ass salaries, and their fat ass pensions, and Cantwell leading the pact, and doing NOTHING!
I just ask, where will this country go if Russia controls all the oil?
It will be the 2nd Cold/Hot war!
Brought to you by the democrats, and the idiots in this country and state who vote for them.
Their ignorance on this issue will not in any way reduce any so called global warming, we and the rest of the world will be buying Oil (sucked out of our land) from the Russians.
Imagine the price!
Congratulations Obama and other democrats!
Posted by: gs on July 23, 2008 08:36 PMThrow the bumsout, or you will be paying $200 to $300 per tank in 4 years. Obama wants to hire Gore to be his gas czar.
No damn way.
Posted by: gs on July 24, 2008 04:21 PMYet we're being told that new production will have little, if any, affect on price...
The truth is, when dems say "but it will take 10 years to get new drilling going, etc", they really mean they wish it would take 20. The truth is, they don't want it at all. So the "it's going to take too long " argument is just blowing smoke and should be completely ignored...
I'd challenge them to their faces that they seriously believe that.
After all, the argument is that there's no guarantee how much oil we'll find, and it will take 10-20 years of oil company expense before we have any production. If these two factors overpower any possible outcome...
Let's apply the same logic to Sound Transit. Is there any guarantee? Yes, that money will be spent...at the current count, twice as much as originally proposed, for half as much rail...and no end to the tax, which we were told would run 20 years.
We originally approved ST in 1996, and we may have our first rail by next summer...13 years after. The new proposals anticipate actual ridership in 13-20 years. And...they're spending our money.
If I apply the same analysis to ST, I have to conclude most leftys (meaning most of Seattle) wouldn't support it.
There's no doubt their argument is disingenuous; they're lying to you. They want you out of your SOV, period; having lost that argument, they're taking a different approach.
The article you link to has a lot of the same information I had heard about, and some that I had not, so thanks. But what is interesting is that many of the tapped wells that are not producing, we have no idea if they would be productive because, as the article states, the results of the drilling are kept very secret due to the competitive nature of the industry. So why should we continue to open up new areas, if there is no requirement or incentives to actually harvest the resources that we may have already identified?
Those whose fly the twin flag of contempt and ignorance of markets really can't understand how they stand out...like roadkill at the salad bar.
I think you just asked...what incentive/requirement do oil companies have to produce oil they've already located?
I think you're serious...
Posted by: Das Baron Von Zippee on July 25, 2008 10:16 AMThe Sun will burn out in about 8 billion years. Until then we will have plenty of energy; the Earth is bombarded by it daily. Use sunscreen so it doesn't injure you.
Posted by: Ron Hebron on July 28, 2008 04:17 PM