Sunday, April 12, 2009

Why Drill Elsewhere if We Can Drill Here?

An article on a recent Newsweek magazine wrote about the artificial energy crisis created by bad policies. America has been increasingly dependent on foreign oil for the past 3 decades, spending trillions of dollars to countries that sometime might have caused us a little bit of a problem. It is very obvious that America is not an energy deficiency country. In fact, we have lots of oil in here. According to Newsweek, we have more coal than any of other country in the world. There are 86 billion barrels of oil and 420 trillion cubic feet of natural gas lying undeveloped offshore [1]. Shale-oil in Colorado and Utah could hold upwards of 1 trillion barrels of oil (more than three the proven reserves in Saudi Arabia). So now the question is why we drill elsewhere if we can drill here?

From every U.S. President in the last couple of decades, we always hear them saying that we need to find an energy alternative so that America will become more energy-independent. But the fact that there were no single significantly successful attempt by our government to overcome the energy problem concludes that the energy crisis in America is artificial and it was caused by bad government policies. Newsweek provides example that until September 2008, congress still banned drilling activities for oil and natural gas in most area of the U.S. Coast. The article also mentioned that congress still prohibit the development of the vast shale-oil reserves in the Rocky Mountains even though there has been developed a technology that can make the process economically competitive. If we are thinking about clean energy, nuclear energy produces zero carbon emission and it already generates about 20% of America’s electric power. A law that banning the recycling of spent nuclear fuel has helped advancing the development of a safer nuclear power plant.

Cap-and-trade policy has been proposed by President Obama lately. The cap-and-trade program will have a general impact on energy-tax of every American. The article in Newsweek said that the Obama administration budget director is predicting that the price of energy for the average American will increase as much as $1,300 if this policy is imposed. This means that at some point our electric bill will be rocketed. Now, the question is: Can our government come up with some good solution that can reduce the cost of energy but at the same time protect the environment?


[1] Gingrich, N. (2009, April 13). Our Tanks Are On Fuel. Newsweek, CLIII(15), 43.


Nate said...

First, An article written by Newt Gingrich is always an article full of holes.
The Outer Continental Shelf contains an estimated 60-80 billion bbls of oil, of which about 20 billion bbls is within the moratoria area. That means that over 2/3 the oil in the OCS is already open, not blocked by government, to exploration and production. Government policies to overturn the moratoria areas to oil companies would not significantly increase our energy dependence given that the U.S. uses about 8 billion bbls/year.
In regards to Oil Shale, I think it is important not to allow the shock of such huge estimated quantities (which was recently increased to 1.6 trillion bbls)to imply we should access the oil. The process that claims to be "economically competitive" is one developed by Shell that claims to be able to produce at $30/bbl. One look at this process, that includes establishing a freeze barrier around in ground retort(long term underground heating)areas to prevent groundwater contamination, reveals the huge energy requirements. With such highly unfavorable Energy Returns on Energy Invested, estimated to be between 3:1 and 5:1, oil shale is not an intelligent option to pursue. The sensitivity of the Rocky environs in which oil shale exists needs to be noted as well. The water intensity, water production (1 bbl water for every bbl of Oil), and potential water resource impacts to millions of downstream farms just adds to the unattractiveness of producing this resource.
Renewable energy and an electrified transportation system is a better way to spend our money and energy, and is a much better long term option.

Brodie Black said...

Gingrich makes an interesting argument, but I would have to agree with Nate that it is lacking in many ways.

Your post concluded that the lack of a successful energy independence policy in recent decades is proof that the problem is actually artificial. I would have to disagree on this point. I believe the problem is very real, and very complex. As we have seen throughout the semester, each source of energy comes with its own set of pros/cons, and finding the right mix is a daunting task. The fact that U.S. energy policy has failed to achieve independence provides insight on the difficulty of the goal.

To the point that congress is prohibiting oil-shale development, I would reference a study by RAND in 2005, which concluded that "oil shale has not been exploited in the U.S. becuase the energy industry...decided that develop[ment] was economically unviable."