posted May 3, 2008
Tuesday, President Bush spoke on the state of our recessive economy. He discussed falling credit markets, the housing slump and soaring gas prices. Given the opportunity to address real problems or propose tangible solutions, he chose to lay the blame at the feet of a Democratic Congress on all fronts. On the subject of rising gasoline prices, the President painted a Utopian portrait of ANWR drilling and its positive effects on gas prices.
He said, "[Democrats in Congress] have repeatedly blocked environmentally-safe exploration in ANWR. The Department of Energy estimates that ANWR could allow America to produce about a million additional barrels of oil every day, which translates to about 27 million gallons of gasoline and diesel every day. That would be about a 20% increase of crude oil production over US levels and it would likely mean lower gas prices."
What should one make of a “20% increase of crude oil production over U.S. levels?” For all intents and purposes, he is correct. If drilling in the Arctic National Wildlife Refuge occurred, domestic production would increase by 20%. The U.S. produces 5 million barrels of oil a day. An additional 1 million barrels from ANWR *would* represent a 20% increase in domestic production.
Unfortunately for the President, the price of oil is not dictated solely by U.S. production. Domestic crude oil production is only a drop in the bucket of global oil supplies. Price is the result of the global aggregate, and we are not the only country in the world facing high prices. We just happen to be the largest buyer.
The U.S. currently imports 13 million barrels of oil per day. 72% of our oil comes from OPEC countries. The President and proponents of increased domestic drilling (namely Big Oil lobbyists and Conservative pundits) argue that the price of gasoline will plummet if ANWR is opened to “environmentally-safe exploration.” I wish this were the case.
Theoretically, the price of gas would decrease by 5% in the above scenario. At today’s gas prices ($3.50/gallon), the savings would come to 17 cents a gallon. Not bad, but a magic bullet it is not. Furthermore, an increase in domestic oil production does not simply lead to lower prices at the pump, and given the realities of current oil refineries, market forces and the development of infrastructure in ANWR, these theoretical savings quickly diminish.
The first challenge is time. The legislative process to allow ANWR drilling takes time. Excavation to determine the best drilling sites on the refuge takes time. Implementing an infrastructure to support drilling and transportation takes time. Waiting on increased domestic production to make an impact on global prices takes time. Refining said oil into gasoline and diesel takes time.
According to the Department of Energy’s EIA, we will have to wait until the year 2025 before we can expect ANWR oil to make an impact on gas prices.
The second challenge is cost. The cost of drilling cuts into these theoretical savings. So do transportation and refinery costs. Oil companies have to make a profit. They get a share. Likewise, the government will continue to tax gasoline. It gets its cut too.
All told, the Department of Energy expects ANWR oil to lead to a savings of 1 cent per gallon by the year 2025. Know that when the President says ANWR drilling “would likely mean lower gas prices,” he means it. He just doesn’t say by how much or when it will happen.
Much has been said on the negative, environmental impact of ANWR drilling. Most of us can agree that there is at least some harm in drilling there – however small it may be (or large depending on your perspective). Given today’s gas prices, I would fully support ANWR drilling if it did in fact lead to considerable savings. But according to the President’s own Department of Energy, the savings are beyond negligible.
I’m disappointed that the leader of our country spent so much time and energy playing fast and loose with the facts on this issue – especially when you consider how hard 'all' Americans are getting hit at the pump, conservatives and liberals alike.
Tuesday, we deserved a President with real solutions and real empathy. We deserved a President who would increase political pressure on OPEC to raise production levels. We deserved a President who would look at oil company revenue and say, “how about cutting us a break?” At the very least, we deserved a President who was candid about the challenges we face as a nation.
Instead, we got a failed oil executive, babbling about ANWR drilling, Democrats in Congress and the promise of penny savings in 2025.
David Morton
Chattanooga
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