Why is Obama Drilling?

Frank Ackerman

Once upon a time, “There’s Only So Much Oil in the Ground” was a popular song that could be heard on the radio. The year was 1974, and Tower of Power, an Oakland-based soul and funk band, was enjoying some commercial success. They made the year’s top 100 with “What is Hip?” In addition to the important topics of being young, hip, and falling in and out of love, they sang about the energy crisis. Following a brief OPEC oil embargo, the price of crude oil (in today’s dollars) jumped from $23 per barrel in 1973 to $41 in 1974. Everyone was thinking about the world’s finite and diminishing supplies of oil. As the song continued, “Sooner or later there won’t be much around.”

Now it’s later. What have we learned in the decades since OPEC, Tower of Power, and others brought the oil crisis to our attention? Back then, the Nixon administration’s energy policy included a big push to open the outer continental shelf to offshore oil and gas production. In 2010, the Obama administration has announced plans to open more of the outer continental shelf to oil and gas production.

We’ve been there, done that. And it didn’t work. Despite plenty of drilling, U.S.crude oil production reached its all-time peak in 1970 and began to fall rapidly and steadily after 1985. By 2008 it was barely half of its 1970 level.

What was the Obama team thinking? This administration is full of people who are way too smart to believe that offshore drilling will supply any noticeable part of our long-term energy needs. In the overly clever mode of partisan triangulation – is there any other mode in Washington? – it smells like a concession designed to get a few Republican votes for a climate change bill. Oddly enough, our national policy is now to increase fossil fuel production, in the hopes of winning support for reducing fossil fuel consumption.

We can learn a painful lesson from the sorry state of energy policy today – and it’s not just that the hypothetical-filibuster rule, allowing 41 senators to effortlessly stop a vote, prevents Congress from taking action on almost everything.

Reflecting on the fact that there’s only so much oil, some environmental advocates have adopted the “peak oil” theory: When the world as a whole passes the peak and production starts to fall (as it already has for the United States), the fast-growing scarcity of oil will create a deeper crisis, forcing us to change our ways. As Tower of Power said, “Soon enough the world will watch the wells run dry.”

Although there’s only so much conventional oil, there is a much larger amount of oil shale, tar sands, extra-heavy oil, and other geological formations from which oil and gas can be extracted – at the cost of vast environmental damage. When oil was readily available at low cost, it wasn’t worth the effort to destroy large areas of Alberta to extract oil from tar sands. With oil currently hovering around $70-$80 per barrel, however, northern Alberta is one of the hot new properties for oil companies.

Counting the oil that could be extracted from tar sands, Canada is second only to Saudi Arabia in oil reserves. Venezuela, which is rapidly running through its conventional oil, has gigantic amounts of very heavy, dirty oil, perhaps exceeding the Saudi reserves. The United States has large oil shale reserves, under the Colorado River basin, and other formations from which natural gas could be extracted – including a big one under upstate New York, Pennsylvania, and West Virginia. If industry is allowed to experience the joy of breaking rocks, along with the resulting air and water pollution, big chunks of the Western Hemisphere could be pulverized to produce more fuel.

Solving our energy problems, without a change in direction, will lead to increasingly costly and environmentally destructive production – either deep offshore, or deep in the rocks below existing communities and watersheds. We need a tax (or a fee resulting from an allowance system) on energy, to keep the cost to consumers high enough to encourage conservation, while holding the price for producers low enough to discourage the pursuit of the worst fossil fuel deposits.

And the real answer to our energy problems? As Tower of Power told us, back in the day, “Alternate sources of power must be found.” It’s got a beat; you could dance to it.

A version of this post appeared in Foreign Policy in Focus.

8 Responses to “Why is Obama Drilling?”

  1. […] what will it mean for greenhouse gas reductions? My colleague Frank Ackerman has a posting on the TripleCrisis blog today on off-shore drilling, peak oil, and how they relate to a carbon tax: Solving our energy […]

  2. T R Nagesh says:

    Alternative sources of Power

    We have been reading and listening to this valid and significant talk about developing alternative sources of power for decades. Again, environment-related conferences get much hype and attention. The fact remains that nothing substantial has been done by either developed or developing nations. Are the policy makers really listening or they atleast follow-up on their commitments made at the International fora ? We often end up playing the blame game. The real issue is however left unresolved and is passed on to next generation.

  3. “Oddly enough, our national policy is now to increase fossil fuel production, in the hopes of winning support for reducing fossil fuel consumption.”
    That is if you think that a cap-and-trade system for greenhouse gases will reduce fossil fuel consumption. I disagree and see carbon trading as a way to continue fossil fuel burning. The recent e-book by Carbon Trade Watch (downloadable on their site) makes this point very clearly. Ironically, some Senators also made the same point, as a way of showing support for the cap-and-trade bills.

  4. Willem says:

    Peak oil theory is not only about ultimately producible quantities, but also about production rates and energy return on energy invested. Oil production from marginal sources has a lower energy return and poses the problem that proportionally higher resources must be directed towards production if similar production rates (compared to conventional oil) were to be maintained. At an energy return of energy investment ratio of one, the production effort only re-circulates energy and does not produce ay excess for use in the economy. This is the cut-off point for classifying a resource as a potential energy reserve.
    This poses a major and imminent energy security risk. My own analysis indicates that the impact on global warming is that the maximum attainable emissions trajectory (based on analysis of supply potential opposed to the more regularly encountered demand projections) compares well with some of the IPCC mitigation scenarios.
    See “Implications of fossil fuel constraints on economic growth and global warming” in Energy Policy journal and “Defining limits: Energy constrained economic growth” in Applied Energy journal for more details.

  5. Guava says:

    President Obama’s offshore drilling proposal may be a non-event in the short-term, says Reuters commodities specialist Christopher Henwood. However in the long-term it may have a positive impact as U.S. dependence on foreign oil may wane…

  6. Emanuel says:

    You miss a very important point here. The amount of oil in the tar sands of Alberta is irrelevant, because the *rate* at which that oil can be extracted (even with the best technology) is miniscule. If the world uses a fire hose of oil, tar sands are a dripping kitchen sink. It doesn’t matter if there is 100 times the amount of “recoverable” oil in Alberta. It cannot add any appreciable amount to production rates. All it will do is make a few people a lot of money as the price continues to rise and rise.

  7. There are many many people that track the crude oil price per barrel. Not only do oil investors keep track of the prices but average people do as well because it affects the price they pay per gallon of gas. Where do you think the price per barrel of crude oil will be heading this summer? Maybe all this crap in Israel will send it through the roof!

  8. Hello there wonderful information. DI has plenty of genuinely fantastic E&P research regarding shale plays with the companies data, thought it can be highly relevant to the write-up. Cheers.